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Diana Torres: Mortgagee in Bad Faith

Petitioner owned a property covered by a title certificate that she occupied. She agreed to sell the property to Norma San Jose, who would obtain a loan using the title as collateral, but San Jose issued postdated checks that were not honored. San Jose then had a new title issued, canceling petitioner's title. Petitioner demanded return of the title from San Jose and then Torres, to whom San Jose said she mortgaged the title. The Court ruled that Torres was not a mortgagee in good faith, as her lawyer knew of defects in San Jose's title when inspecting the property where petitioner was occupying, and willfully ignored signs that the title was defective. The appellate court erred in finding

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167 views2 pages

Diana Torres: Mortgagee in Bad Faith

Petitioner owned a property covered by a title certificate that she occupied. She agreed to sell the property to Norma San Jose, who would obtain a loan using the title as collateral, but San Jose issued postdated checks that were not honored. San Jose then had a new title issued, canceling petitioner's title. Petitioner demanded return of the title from San Jose and then Torres, to whom San Jose said she mortgaged the title. The Court ruled that Torres was not a mortgagee in good faith, as her lawyer knew of defects in San Jose's title when inspecting the property where petitioner was occupying, and willfully ignored signs that the title was defective. The appellate court erred in finding

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Tricia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

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 was the registered owner of a residential house and lot, located in Mandaluyong and
covered by a TCT. She has occupied the property ever since she had her house built and has introduced
other improvements thereon. Later on, private respondent Norma San Jose offered to buy the property,
which was accepted by petitioner, payment of which shall come from proceeds of a loan by San Jose
using petitioner’s title as collateral but she issued postdated checks to petitioner. On San Jose’s request,
another deed of sale was executed over the same property, which was then registered, such that
petitioner’s TCT was cancelled and a new TCT was issued.

Because of unfulfilled promises to make good the postdated checks, petitioner demanded San
Jose for the return of the title. However, the latter informed that the title was in the possession of Diana
J. Torres, the mortgagee. San Jose never returned the said title as she had promised nor did she ever
make any payment to the petitioner.

ISSUE:

Whether or not private respondent Diana Torres is a mortgagee in good faith.

HELD:

No. There are strong indications that Atty. Flor Martinez, the lawyer of Diana J. Torres, the
mortgagee, knew of the defect of San Jose's title.

When Atty. Martinez personally inspected the property with San Jose for her client Torres, she allowed
herself to be introduced to Socorro Crisostomo who was then actually occupying the house, as a Bank
Inspector of the Development Bank of Meycauayan, Bulacan from whom the loan was being obtained,
obviously to convince Crisostomo that the procedure is in accordance with her agreement with San Jose.

Based on jurisprudence, a person dealing with registered land has a right to rely upon the fact of the
Torrens Certificate of Title and to dispense with the need of inquiring further, except when the party
concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man
to make further inquiries.

Even assuming that Torres does not in fact know the circumstances of the sale, she is bound by the
knowledge of Atty. Martinez or by the latter's negligence in her haphazard investigation because the
negligence of her agents is her own negligence.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that there
was no defect in the title of the vendor or mortgagor.
His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of
the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser or
mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he
had such notice of the defects as would have led to its discovery had he acted with the measure of
precaution which may be required of a prudent man in a like situation.

The appellate court, therefore, gravely erred in the appreciation of evidence on the good faith of private
respondent Diana [Link], because respondent Torres was not a mortgagee in good faith,
there is no sufficient basis for the appellate court to order the notation of the Deed of Real Estate
Mortgage in favor of private respondent Diana Torres on the Certificate of title which is to be re-issued
to herein petitioner.

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