GR 34599; (December, 1931) (6) (Digest)
G.R. No. 34599, December 2, 1931
POTENCIANO GABRIEL, plaintiff-appellee, vs. ALFREDO BAENS, ET AL., defendants. “LA URBANA”, ET AL., appellants. (Consolidated with G.R. Nos. 34600, 34601, 34602, 34603, and 34604)
FACTS
Lazaro Baens was the registered owner of a tract of land. Before his death, he sold a portion to Potenciano Gabriel. After his death, his estate administrator, with court approval, sold other portions to the other plaintiffs (or their predecessors). All plaintiffs took possession. However, the deeds lacked proper technical descriptions, so the transfers were not reflected in the Torrens titles. Years later, the court authorized the Baens heirs to execute proper conveyances to the plaintiffs, but instead, Juan T. Tabien fraudulently induced the heirs in 1928 to convey the entire original tract (including the portions already sold to the plaintiffs) to him for only P2,000, despite the deed reciting over P114,000. Tabien then obtained a new certificate of title in his name and mortgaged the entire property to “La Urbana” for P23,000. The plaintiffs filed separate actions to annul the deed and mortgage and to have their ownership declared.
ISSUE
Whether the mortgage constituted in favor of “La Urbana” by the fraudulent transferee (Tabien) is valid and enforceable against the true owners (the plaintiffs).
RULING
No, the mortgage is not valid and enforceable against the true owners. The Court affirmed the trial court’s annulment of the deed to Tabien and the mortgage to “La Urbana.” While “La Urbana” claimed to be a mortgagee in good faith, the Court found it was not. A mortgagee dealing with registered land must exercise due diligence. Here, “La Urbana” failed to investigate why the taxes were paid by persons other than the registered owner (Tabien), ignored the unusual circumstance of a recent title issuance for a valuable property sold for a nominal sum, and disregarded its own usual practice of verifying tax delinquency. This failure constituted gross negligence, preventing it from being considered an innocent mortgagee for value. The Torrens system does not protect a mortgagee who acts with negligence. The Court ordered the cancellation of the certificates of title derived from the fraudulent deed and the mortgage annotation. (A dissenting opinion argued the mortgage was valid and “La Urbana” was a mortgagee in good faith).
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