G.R. No. 250636, January 10, 2023
MERLINDA PLANA, PETITIONER, VS. LOURDES TAN CHUA AND HEIRS OF RAMON CHIANG, RESPONDENTS.

FACTS

Petitioner Merlinda Relano (Merlinda) and her first husband Nelson Plana owned five lots. After Nelson’s death, Merlinda married Ramon Chiang. Ramon fraudulently made Merlinda sign a Deed of Definite Sale dated December 17, 1975, purportedly selling the five lots to him, leading to the cancellation of the original titles and the issuance of new titles in Ramon’s name alone. In a prior case, Modina v. Court of Appeals, the Supreme Court declared the sale of four of these lots void for being simulated and without consideration. The present case concerns the fifth lot, Lot 10031, covered by TCT No. T-86916 in Ramon’s name. On June 25, 1996, Ramon mortgaged this lot to respondent Lourdes Tan Chua to secure a loan of ₱130,000.00, and the mortgage was annotated on the title. Merlinda filed a complaint for reconveyance, arguing that since the Deed of Definite Sale was void, Ramon had no right to mortgage the lot, and Lourdes was not a mortgagee in good faith. The Regional Trial Court (RTC) declared the sale and mortgage void, ordered the cancellation of Ramon’s title and the mortgage annotation, and reinstated the original title in the name of “Nelson Plana married to Merlinda Relano.” The Court of Appeals affirmed with modification, finding Lourdes to be a mortgagee in good faith and ordering the annotation of the real estate mortgage on the reinstated title. Merlinda elevated the case to the Supreme Court. During the proceedings, it was revealed that Ramon had previously filed a complaint (Civil Case No. 25285) against Lourdes for accounting and damages related to the same loan, wherein the parties entered into a Partial Compromise Agreement for the release of a court deposit of ₱83,500.00, which Lourdes accepted without prejudice to her other claims. Lourdes and her counsel did not disclose this case to the Supreme Court.

ISSUE

1. Whether Lourdes was a mortgagee in good faith.
2. What are the respective rights of Merlinda as owner of the property and Lourdes as mortgagee thereof.
3. What is the effect of the failure of Lourdes and her counsel to promptly and candidly inform the Court about Civil Case No. 25285 and the material facts attendant thereto.

RULING

1. Yes, Lourdes was a mortgagee in good faith. The Supreme Court upheld the factual findings of the RTC and the Court of Appeals. Lourdes relied on the face of TCT No. T-86916, which showed Ramon as the registered owner and indicated he was “single.” The law does not require a mortgagee to look beyond the certificate of title when the mortgagor is the registered owner. The circumstances alleged by Merlinda (that Lourdes was an acquaintance and that Lourdes’s son and Ramon’s son were both members of the Lion’s Club) were insufficient to prove bad faith or impose a duty to investigate further. The prior mortgage of the property to the Development Bank of the Philippines (DBP) also lent credibility to the title.
2. The rights of the parties are governed by the principles of an equitable mortgage and the doctrine of mortgagee in good faith. The Supreme Court ruled that the real estate mortgage between Ramon and Lourdes is valid and constitutes an equitable mortgage on the property. As a mortgagee in good faith, Lourdes’s lien attaches to the property itself, which is now rightfully reconveyed to Merlinda. Consequently, Merlinda’s title to Lot 10031 is subject to the mortgage lien in favor of Lourdes. The Court ordered the Register of Deeds to annotate the real estate mortgage on the reinstated TCT No. T-57961 in the name of “Nelson Plana married to Merlinda Relano.” Lourdes may exercise her rights as a mortgagee under the law, including foreclosure, subject to the outcome of the pending Civil Case No. 25285 regarding the exact loan obligation. The Partial Compromise Agreement in that case, where Lourdes accepted ₱83,500.00 without prejudice to her other claims, does not constitute a waiver of her mortgage lien but may affect the determination of the secured amount.
3. Lourdes and her counsel are required to show cause why they should not be cited for contempt. The Supreme Court found that Lourdes and her counsel deliberately withheld material information about Civil Case No. 25285 and the Partial Compromise Agreement, which was relevant to the determination of the parties’ rights and the exact extent of the mortgage obligation. Their failure to disclose these facts violated their duty of candor to the Court and hindered the speedy disposition of the case. The Court directed them to file a comment within a non-extendible period to show cause why they should not be cited for contempt.