Sales v. Alzona
REITERATIONFacts
The Antecedents: Bernardo and Maria Sales, husband and wife, were the registered owners of a parcel of land with a house thereon, which they occupied until their deaths. Maria acquired the property through a free patent. They had twelve children, eleven of whom are the petitioners, and one, Estela Sales Pelongco, is a respondent. On January 29, 1990, a real estate mortgage contract was purportedly executed by Maria (deceased at the time) and Bernardo in favor of Dominador Alzona, with Estela Sales Pelongco signing as a witness. Ernesto Alzona was a co-mortgagee. The mortgage was foreclosed, and Ernesto Alzona became the highest bidder in the sale on December 20, 1990. Consequently, a consolidation of ownership was executed in Ernesto's name, and a new title was issued, cancelling the original title in Maria Sales' name. Procedural History: On December 17, 1992, the petitioners inscribed an adverse claim on the property's title. Subsequently, on October 15, 1993, they filed a complaint before the Regional Trial Court (RTC) of San Pedro, Laguna, seeking the annulment of the mortgage and auction sale, reconveyance of title, and damages. The RTC dismissed the complaint against Dominador and Ernesto Alzona, finding them to be mortgagees in good faith, but ordered Estela Sales Pelongco to pay damages and attorney's fees to the plaintiffs. The complaint against the Register of Deeds was also dismissed. Aggrieved, the petitioners appealed to the Court of Appeals (CA). The CA affirmed the RTC's decision with modification, deleting the attorney's fees awarded to the petitioners. A subsequent motion for reconsideration by the petitioners was denied by the CA. The Petition: The petitioners are seeking a review on certiorari under Rule 45 of the Rules of Court, assailing the decision and resolution of the Court of Appeals. They argue that the principle of a purchaser or mortgagee not being obligated to look beyond the certificate of title is inapplicable when the mortgagors are not the true owners, and that mortgagees, especially those in the lending business, are required to exercise due diligence. The petitioners contend that the mortgagors in this case were impostors, not the real owners, distinguishing it from cases where the mortgagors were indeed the owners. They question whether Ernesto and Dominador Alzona were truly mortgagees in good faith, given the circumstances of the purported mortgage executed by a deceased person and the subsequent foreclosure and sale.
Issue(s)
Whether the principle of "innocent purchasers for value" and the doctrine of "mortgagee in good faith" apply when the mortgagors are not the absolute owners of the property. Whether respondents Ernesto and Dominador Alzona acted as mortgagees in good faith.
Ruling
The petition is DENIED. The assailed decision and resolution of the Court of Appeals are AFFIRMED in toto.
Ratio Decidendi
On whether the principle of "innocent purchasers for value" and the doctrine of "mortgagee in good faith" apply when the mortgagors are not the absolute owners of the property: The Court held that Article 2085 of the Civil Code requires the mortgagor to be the absolute owner, but an exception is the doctrine of "mortgagee in good faith." This doctrine gives effect to the mortgage contract and foreclosure sale even if the mortgagor is not the owner, based on public policy. This principle is rooted in the rule that persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to look beyond the face of the title. A mortgagee has the right to rely in good faith on the certificate of title of the mortgagor and, absent any suspicious signs, has no obligation to conduct further investigation. Therefore, even if the mortgagor lacks valid title, a mortgagee in good faith is entitled to legal protection. On whether respondents Ernesto and Dominador Alzona acted as mortgagees in good faith: The Court affirmed the findings of the CA and RTC that Ernesto and Dominador were mortgagees in good faith. The RTC gave credence to Ernesto's testimony that he conducted a credit investigation before approving the loan and mortgaging the property. The Court reiterated that the determination of witness credibility is within the trial court's domain and its findings, especially when affirmed by the appellate court, are entitled to great respect and finality, unless found to be arbitrary or based on overlooked facts. A review of Ernesto's testimony showed he exercised necessary precautions, including inquiring from neighbors (Felix Icepel and Auring Sales, who identified herself as the daughter-in-law of Bernardo and Maria Sales) and visiting the property. He also met Estela, Yolanda, Gloria, and Conrado, and the persons he knew as Bernardo and Maria Sales inside the house on the property. The CA noted that petitioners only disputed Ernesto's claim of meeting Gloria in their motion for reconsideration, not his claims about meeting Yolanda and Conrado. The testimonies of Francisco and Gloria Sales corroborated that Estela, Yolanda, Gloria, and Conrado were living in the house during the relevant period. Ernesto was also shown a copy of the OCT and tax declaration in Maria Sales' name. The Court concluded that Ernesto sufficiently established his good faith by exercising due diligence and that Estela and the impostors perpetrated the fraud. Ernesto could not be faulted for believing the individuals who represented themselves as Bernardo and Maria Sales. The Court also found no direct evidence that petitioners Yolanda, Gloria, and Conrado had sufficient knowledge of the fraud to be held equally guilty.
Main Doctrine
The principle of "innocent purchasers for value" and the doctrine of "mortgagee in good faith" are applicable even if the mortgagor is not the absolute owner of the property, provided the mortgagee exercised due diligence and acted in good faith, relying on the face of the Torrens Certificate of Title.