G.R. No. 209544 November 22, 2017
SPOUSES ELLIS R. MILES and CAROLINA RONQUILLO-MILES, Petitioners vs. BONNIE BAUTISTA LAO, Respondent

FACTS

Petitioners, registered owners of a Makati property, entrusted the duplicate title to their niece, Rodora Jimenez, for potential sale before leaving for the U.S. They alleged Rodora conspired with spouses Ricardo and Cresencia Ocampo to falsify a Deed of Donation, transferring the property to the Ocampos, who then obtained a new title. Subsequently, the Ocampos mortgaged the property to respondent Bonnie Bautista Lao to secure a loan. Upon the Ocampos’ default, respondent foreclosed the mortgage. Petitioners sued for the nullification of the donation, mortgage, and all derivative titles, alleging fraud and collusion among the defendants.
Respondent Lao claimed she was a mortgagee in good faith. She asserted that at the time of the mortgage, the property was registered under the Ocampos’ name, the title bore no annotations of any defect, and she conducted an ocular inspection finding no other occupants. The Regional Trial Court ruled for the petitioners, declaring all transactions void. Only respondent Lao appealed.

ISSUE

Whether the Court of Appeals erred in ruling that respondent Lao is a mortgagee in good faith.

RULING

The Supreme Court denied the petition and affirmed the CA, holding respondent Lao to be a mortgagee in good faith. The legal logic rests on the principle that persons dealing with registered land have the right to rely on the correctness of the certificate of title and are not obliged to go beyond it to investigate the title of the mortgagor, absent any sign that would excite suspicion. The Court found that the title in the Ocampos’ name was clean on its face, and Lao had no actual or constructive knowledge of any alleged flaw in its issuance. Her act of conducting an ocular inspection was a further precaution that supported her good faith.
The Court also rejected the petitioners’ argument that Lao’s act of foreclosing the mortgage instead of filing a criminal case for a bouncing check (related to the loan) indicated bad faith. A secured creditor has concurrent remedies, and the choice of foreclosure is a legitimate right that does not, by itself, prove malice or collusion. Since petitioners failed to present clear evidence that Lao participated in or had knowledge of the prior alleged fraud, the presumption of good faith in dealing with registered property prevailed. Consequently, the real estate mortgage was declared valid.