GR 122425; (September, 2001) (Digest)
G.R. No. 122425 September 28, 2001
FLORDELIZA H. CABUHAT, petitioner, vs. THE HONORABLE COURT OF APPEALS, SPECIAL FIFTH DIVISION and MERCEDES H. AREDE, respondents.
FACTS
Mercedes Arede purchased a parcel of land and registered it in the name of her informally adopted daughter, Mary Ann Arede, but kept the title in her possession. Upon reaching majority, Mary Ann fraudulently obtained a reconstituted owner’s duplicate of the title. Using this, she mortgaged the land to a bank and, upon its release, mortgaged it again to Flordeliza Cabuhat for P300,000.00, which mortgage was duly registered. Unknown to Cabuhat, Mary Ann had earlier sold the same land to Mercedes under a Deed of Sale dated January 17, 1990, but this sale was never registered.
Mercedes sued for annulment of title. The trial court declared Mary Ann in default, upheld Cabuhat’s mortgage lien as valid, and ordered damages against Mary Ann. Mercedes appealed, arguing the mortgage was invalid because it was based on a forged title and executed when Mary Ann was no longer the owner. The Court of Appeals reversed the trial court, nullifying the mortgage lien.
ISSUE
Whether the mortgage lien in favor of Flordeliza Cabuhat, an innocent mortgagee for value, is valid and deserves protection despite the mortgagor’s defective title obtained through fraud.
RULING
The Supreme Court granted the petition and reinstated the trial court’s decision, upholding the mortgage lien. The Court emphasized the fundamental principle of indefeasibility of title under the Torrens system. A mortgagee in good faith and for value has the right to rely on the face of the certificate of title presented. Cabuhat, having no knowledge of the prior unregistered sale or the fraud behind the reconstituted title, and having registered her mortgage, is an innocent mortgagee entitled to protection.
The Court distinguished the cited case of Parqui v. PNB, as the present case involves a mortgagee who relied on a registered title in good faith. The legal logic rests on the priority of registered rights and the policy to maintain public confidence in Torrens certificates. Between two innocent parties—Mercedes, who failed to register her sale, and Cabuhat, who registered her mortgage—the loss must fall on the party whose negligence made the fraud possible. Mercedes’ failure to register her deed of sale allowed Mary Ann to perpetrate the fraud; thus, her unregistered claim cannot prevail over Cabuhat’s registered mortgage lien acquired in good faith and for value.