G.R. No. 209544. November 22, 2017.

MAIN TOPIC – Real Estate Mortgage


Petitioners claimed that on March 28, 1983, they became registered owners in fee simple of a parcel of land in Makati City by TCT No. 120427. They averred that before they left for the United States, they entrusted the duplicate of the TCT of the subject property to their niece, defendant Rodora Jimenez (Rodora) so that she may offer it to interested buyers. 

They alleged that Rodora and spouses Ocampo conspired and made it appear, that petitioners were donating the subject property to spouses Ocampo. They claimed that no written Special Power of Attorney (SPA) to sell the property was given to Rodora. Later on, petitioners claimed that through falsification, evident bad faith and fraud, spouses Ocampo caused the execution of a falsified Real Estate Mortgage\ in favor of respondent Lao, with the subject property as security, in exchange of a loan in the amount of Php2,500,000. Since the spouses Ocampo failed to pay the loan, respondent foreclosed the mortgage. Alleging that there was collusion among the defendants, petitioners prayed that TCT No. 21234 in the name of spouses Ocampo be cancelled, and TCT No. 120427 under their name be restored.

All the defendants denied petitioners’ claim that there was collusion among them. Spouses Ocampo maintained that they acquired the property in good faith and for value. Meanwhile, respondent alleged that she entered into a mortgage contract with spouses Ocampo without knowledge that their title thereon was defective.

Petitioners claims that respondent is in bad faith considering that she did not directly deal with the mortgagors, and dealt with them only through respondent’s agent, Carlos Talay.

The trial court rendered judgment in favor of the plaintiffs and against the defendants.

The appellate court reversed the trial court and ruled that respondent is a mortgagee in good faith.


Whether or not the respondent is a mortgagee in good faith?


In this case, respondent’s decision to deal with the mortgagors through a middleman, does not equate to bad faith. At the outset, it bears to stress that the spouses Ocampo were already the registered owners of the property at the time they entered into a mortgage contract with respondent. Hence, respondent was justified in relying on the contents of TCT No. 212314 and is under no legal obligation to further investigate. Likewise, there is nothing in the records, and neither did petitioners point to anything in the title which would arouse suspicions as to the spouses Ocampo’s defective title to the subject property.

While arguably, respondent’s decision to use a middleman in her transactions with the mortgagors could be characterized as risky or reckless, the same does not establish a corrupt motive on the part of respondent, nor an intention to take advantage of another person. Indeed, bad faith does not simply connote bad judgment or negligence.

This is the doctrine of “the mortgagee in good faith” based on the rule that buyers or mortgagees dealing with property covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title. Indeed, a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security, and in the absence of any sign that might arouse suspicion, the mortgagee has no obligation to undertake further investigation. This doctrine presupposes, however, that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining Torrens title over the property in his name and that, after obtaining the said title, he succeeds in mortgaging the property to another who relies on what appears on the title.


WHEREFORE, the petition is DENIED for lack of merit. The Decision dated May 24, 2013 and Resolution dated September 30, 2013 of the Court of Appeals in C.A.-G.R. CV No. 95973 are hereby AFFIRMED.



Good faith connotes an honest intention to abstain from taking unconscientious advantage of another.