GR 150730; (January, 2005) (Digest)
G.R. No. 150730 ; January 31, 2005
MILA SALES LLANTO, ET AL., petitioners, vs. ERNESTO ALZONA, DOMINADOR ALZONA, ESTELA SALES PELONGCO, and the REGISTER OF DEEDS OF CALAMBA, LAGUNA, respondents.
FACTS
Maria Sales was the registered owner of a parcel of land in Cabuyao, Laguna, covered by OCT No. P-3225. She died on August 27, 1986. On January 29, 1990, a real estate mortgage over the property was purportedly executed by Maria (already deceased) and her husband Bernardo in favor of respondent Dominador Alzona. Their daughter, respondent Estela Sales Pelongco, signed as an instrumental witness. The mortgage was later foreclosed for alleged non-payment, and the property was sold at public auction where respondent Ernesto Alzona (Dominador’s brother) was the highest bidder. Title was subsequently consolidated and transferred to Ernesto.
Petitioners, the other children of Bernardo and Maria, filed a complaint for Annulment of Mortgage and Auction Sale, with Reconveyance and Damages. They argued the mortgage was void because Maria was already deceased and Bernardo was not the owner at the time of its execution. The Regional Trial Court dismissed the complaint against the Alzonas, ruling they were mortgagees in good faith. The Court of Appeals affirmed this ruling. Petitioners thus elevated the case to the Supreme Court.
ISSUE
Whether respondents Ernesto and Dominador Alzona are mortgagees in good faith, thereby validating the mortgage contract and the subsequent foreclosure sale.
RULING
Yes, the respondents are mortgagees in good faith. The Supreme Court affirmed the decisions of the lower courts. While Article 2085 of the Civil Code requires the mortgagor to be the absolute owner, an exception exists under the doctrine of a “mortgagee in good faith.” This doctrine, grounded in public policy, protects one who relies on the face of a Torrens Certificate of Title without need to look beyond it.
The Court found that Ernesto Alzona exercised the diligence required of a prudent mortgagee. He verified the title with the Register of Deeds, which confirmed Maria Sales as the registered owner. He also conducted an ocular inspection and met individuals purporting to be Bernardo and Maria Sales, who were presented by their daughter, respondent Estela. There was no evidence that Ernesto had knowledge of the fraud being perpetrated. The fact that some petitioners were present during the inspection does not prove they informed Ernesto of the fraud. Consequently, as mortgagees in good faith who relied on the clean title and conducted due diligence, the Alzonas are entitled to legal protection. The mortgage and the foreclosure proceedings are upheld.