Innocent owner has better rights over mortgagee in good faith

Dear PAO,

During my cohabitation with my former common-law husband, he was able to transfer the certificate of title of the land I own to his name by forging my signature in a deed of conveyance. Fortunately, I was able to recover the subject property. However, prior to recovery, he was able to mortgage the subject lot to a third person without my knowledge. Now, the mortgagee wants that the real estate mortgage between her and my former live-in partner be annotated in the title of the property, which is now reconveyed in my name, claiming that she was a mortgagee in good faith. Is she correct?

Anita

Dear Anita,

The purchaser or mortgagee in good faith must yield to the superior rights of an innocent owner. This is the principle explained by the Supreme Court in its recent decision in the case of Merlinda Plana v. Chua and Chiang (GR 250636, Jan. 10, 2023, penned by Associate Justice Amy Lazaro-Javier) where the Court en banc reiterated its earlier decision in CDB v. Lim and explained:

«There is, however, a situation where, despite the fact that the mortgagor is not the owner of a mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of „the mortgagee in good faith“ based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title. x x x

»True, we have ruled in several cases that a void title may be the source of a valid title in the hands of an innocent purchaser for value. In Spouses Bautista v. Spouses Jalandoni, however, the Court clarified that where the true owner has not been found negligent or has not committed an act which could have brought about the issuance of another title relied upon by the purchaser or mortgagee for value, then the