GR 91383 84; (May, 1991) (Digest)
G.R. Nos. 91383-84; May 31, 1991
Socorro Costa Crisostomo, petitioner, vs. Court of Appeals and Norma San Jose, Diana J. Torres, respondents.
FACTS
Petitioner Socorro Costa Crisostomo was the registered owner of a house and lot. In 1978, respondent Norma San Jose offered to buy it for P300,000.00, to be paid from a bank loan using Crisostomo’s title as collateral. Crisostomo agreed, executed a deed of absolute sale, and delivered her title to San Jose. San Jose issued postdated checks, which were later dishonored. San Jose then mortgaged the property to respondent Diana J. Torres. Crisostomo, having received only P20,000.00 as earnest money, demanded the property’s return and, upon refusal, filed an action for rescission against San Jose and Torres. The Regional Trial Court rescinded the sale, ordered the cancellation of San Jose’s title and the nullification of the mortgage to Torres, and awarded damages.
ISSUE
Whether respondent Diana J. Torres was a mortgagee in good faith, such that her real estate mortgage should be noted on the title to be re-issued to petitioner upon rescission.
RULING
No, Torres was not a mortgagee in good faith. The Supreme Court reinstated the trial court’s decision, nullifying the mortgage. The legal logic is anchored on the principle that one who deals with registered land must exercise due diligence. While a Torrens title generally commands reliance, this is not absolute. A mortgagee cannot close her eyes to facts that should put a reasonable person on guard. The Court found Torres’s investigation of the property’s ownership was grossly negligent. Her lawyer-agent merely checked the title at the registry and made a cursory ocular inspection without verifying the actual occupant, the petitioner, who had long been in possession. This failure to inquire from the possessor, despite clear opportunity, constitutes willful ignorance. Consequently, Torres is charged with her agent’s negligence and is deemed to have constructive notice of the defect in San Jose’s title. Since she was not in good faith, she cannot claim the protection afforded to an innocent mortgagee for value. The mortgage, being derived from a voidable sale rightfully rescinded, was correctly annulled by the trial court without any obligation for its notation on the revived title.