GR 114172; (August, 2003) (Digest)
G.R. No. 114172 ; August 25, 2003
JUANITA P. PINEDA, assisted by her husband, CRISPIN PINEDA, and LILIA SAYOC, Petitioners, vs. COURT OF APPEALS and TERESITA A. GONZALES, assisted by her husband, FRANCISCO G. GONZALES, Respondents.
FACTS
Spouses Virgilio and Adorita Benitez mortgaged their property to petitioners Juanita Pineda and Lilia Sayoc, delivering the owner’s duplicate certificate of title (TCT No. T-8361) as security, though the mortgage was unregistered. Later, with Pineda’s consent, the Benitezes sold the house on the property to Olivia Mojica. Mojica then petitioned for and obtained a second owner’s duplicate of TCT No. T-8361 by falsely alleging its loss. Using this duplicate, the Benitezes sold the lot to Mojica, leading to the cancellation of TCT No. T-8361 and the issuance of a new title (TCT No. T-13138) in Mojica’s name. Mojica subsequently mortgaged the property to respondent Teresita Gonzales, who registered the mortgage. Petitioners later sued to annul the second owner’s duplicate title and won a trial court declaration of its nullity. Meanwhile, Gonzales foreclosed the mortgage after Mojica’s default and acquired the property.
ISSUE
Whether respondent Teresita Gonzales, as a mortgagee for value and in good faith, acquired rights over the property superior to those of the petitioners, the original unregistered mortgagees.
RULING
Yes. The Supreme Court affirmed the Court of Appeals, ruling in favor of respondent Gonzales. The legal logic rests on the principles of land registration and the rights of innocent purchasers or mortgagees for value. Petitioners’ failure to register their real estate mortgage rendered it unenforceable against third parties. In contrast, Gonzales, who dealt with the registered owner (Mojica) holding a clean title, was a mortgagee in good faith. She had no obligation to look beyond the certificate of title, which contained no annotation of petitioners’ prior interest. The subsequent judicial declaration nullifying the second owner’s duplicate title did not invalidate Gonzales’s registered mortgage, as she was not a party to that suit and had acquired her rights in good faith before its commencement. The Court emphasized that the Torrens system aims to protect those who rely on the face of the title. Since petitioners’ claim was unrecorded, they bear the loss resulting from their failure to register, not the innocent subsequent mortgagee who relied on the indefeasibility of the registered title.