Jimenez v. Jimenez
REITERATIONFacts
The Antecedents: Corona F. Jimenez was the registered owner of a property in Quezon City. She had several children, including Danilo Santiago F. Jimenez (petitioner) and Damian F. Jimenez, Jr. (respondent). After Corona's death, her children discovered a Deed of Donation allegedly executed by Corona in favor of Damian, which led to the transfer of the property's title to Damian's name. Subsequently, Damian mortgaged the property to Arturo S. Calubad and Antonio Keh (respondents) for a substantial loan. Danilo and his siblings learned of this mortgage, and Sonia, one of the siblings, filed an Affidavit of Adverse Claim. Despite this, the property was scheduled for auction sale. Procedural History: Following the notice of the auction sale, Danilo and his siblings filed a complaint before the Regional Trial Court (RTC) of Quezon City seeking the annulment of the Deed of Donation, Damian's title, and the real estate mortgage, along with a prayer for injunction. The RTC denied the injunction, and the auction proceeded, with Calubad and Keh emerging as the highest bidders. A Certificate of Sale was issued, and eventually, a new title was consolidated in their names. The RTC, while declaring the Deed of Donation void due to forgery, upheld the validity of Calubad and Keh's title, finding them to be innocent mortgagees in good faith. The Court of Appeals (CA) affirmed the RTC's decision. Danilo's motion for reconsideration was denied, leading to the present petition. The Petition: Danilo, through a Petition for Review on Certiorari under Rule 45, seeks to reverse the CA's decision. He argues that while Calubad and Keh may have been mortgagees in good faith, they were not innocent purchasers in good faith because they were aware of Sonia's adverse claim at the time of the public auction. Danilo contends that this knowledge should invalidate their right to the property, and his original title should be reinstated. The respondents, Calubad and Keh, counter that their rights as purchasers in the foreclosure sale are protected, citing precedent that subsequent adverse claims do not prejudice prior registered mortgages and subsequent purchasers at foreclosure sales.
Issue(s)
Whether the Court of Appeals erred in affirming the Regional Trial Court's finding that Calubad and Keh are mortgagees in good faith and purchasers in the foreclosure sale. Whether the knowledge of an annotated adverse claim (Affidavit of Adverse Claim / lis pendens) prior to the foreclosure sale defeats the rights of mortgagees in good faith who purchased at the auction. Whether factual findings on the issue of good faith are reviewable in a Petition for Review on Certiorari under Rule 45.
Ruling
The petition is DENIED. The Court of Appeals' Decision dated May 19, 2016 and Resolution dated October 25, 2016 are AFFIRMED. The RTC's Decision of December 20, 2012 declaring the Deed of Donation void but recognizing TCT No. N-257432 issued in favor of Arturo S. Calubad and Antonio Keh as innocent mortgagees for value and good faith is affirmed. Dispositive relief granted below is preserved.
Ratio Decidendi
On Whether the CA erred in affirming the RTC's finding that Calubad and Keh are mortgagees in good faith and purchasers in the foreclosure sale: The Supreme Court held that the determination of good faith is primarily a factual matter and Rule 45 does not generally entertain challenges to such factual findings, citing Ruiz v. Dimailig and Land Bank of the Philippines v. Belle Corporation. Applying the doctrine articulated in Cavite Development Bank v. Lim, the Court enumerated the requisites of the mortgagee-in-good-faith doctrine and found each requisite present in this case: Damian lacked valid title; a Torrens title was nonetheless obtained; the property was mortgaged to Calubad and Keh; they relied on the face of title and conducted an ocular inspection; and the mortgage was registered. The Court emphasized that these factual findings were made by the RTC and affirmed by the CA, and the Supreme Court saw no jurisprudential exception warranting departure from those findings. The accumulation of these facts supports the legal conclusion that Calubad and Keh were mortgagees in good faith and, having foreclosed and purchased the property, derived rights that retroact to the date of registration of the mortgage. Accordingly, the Supreme Court concluded that the lower courts did not err in recognizing the title issued to Calubad and Keh. On Whether knowledge of an annotated adverse claim defeats the rights of mortgagees in good faith who purchased at the auction: The Court distinguished the exceptional factual posture of Homeowners Savings and Loan Bank v. Felonia (HSLB), where the mortgage, foreclosure sale and title were later nullified by final judgment such that the bank could no longer claim the protection of mortgagee-in-good-faith doctrine. In contrast, in the present case the mortgage, foreclosure sale and resultant title of Calubad and Keh were not nullified by a final judgment prior to their acquisition. The Court applied the rule in Bank of the Philippine Islands v. Noblejas and its progeny (including Gonzales v. Intermediate Appellate Court and Pineda v. CA) that a foreclosure sale by a mortgagee in good faith retroacts to the date of registration of the mortgage and is therefore not defeated by subsequently annotated liens or lis pendens. The Court explained that allowing posterior annotations to defeat a prior registered mortgage or its foreclosure sale would render the mortgage meaningless and destroy the security interest's value. Therefore, Sonia's adverse claim annotated after the registered mortgage could not prevail over Calubad and Keh's rights as mortgagees in good faith and purchasers at the foreclosure sale. On Whether factual findings on good faith are reviewable under Rule 45: The Court reaffirmed that Rule 45 does not generally permit reexamination of factual findings of lower courts and that findings of good faith are inherently factual. The Court cited Ruiz v. Dimailig and Land Bank of the Philippines v. Belle Corporation to justify deference to the RTC and CA on the issue of good faith. The petitioner offered no exceptional circumstance—such as a grave abuse of discretion amounting to lack or excess of jurisdiction—that would warrant the Supreme Court's departure from the factual conclusions below. Consequently, the petition failed to present a proper basis to disturb the lower courts' factual findings regarding good faith.
Main Doctrine
A mortgagee in good faith who forecloses and purchases at a public auction acquires rights that retroact to the date of registration of the mortgage and are not defeated by any subsequently annotated adverse claim or lis pendens.