By: Jolas Dranreb G.

Diansuy

Facts:

Respondent Bernardo F. Dimailig (Bernardo) was the registered owner of a parcel

of land covered by TCT No. T-361747 located in Alapan, Imus, Cavite. In October
1997, he entrusted the owner's copy of the said TCT to his brother, Jovannie, who in
turn gave the title to Editha Sanggalang (Editha), a broker, for its intended sale.
However, in January 1998, the property was mortgaged to Evelyn V. Ruiz (Evelyn) as
evidenced by a Deed of REM6 without Bernardo's knowledge and consent. Hence,
Bernardo instituted this suit for annulment of the Deed of REM.

In her Answer,8 Evelyn contended that she met Jovannie when she inspected the
subject property and assured her that Bernardo owned the property and his title
thereto was genuine. She further claimed that Jovannie mortgaged the property to
her. She also insisted that as a mortgagee in good faith and for value, the REM
cannot be annulled and that she had the right to keep the owner's copy of TCT No. T-
361747 until the loan was fully paid to her.

Bernardo testified that when he went abroad on October 19, 1997, he left the
owner's copy of the TCT of the subject property to Jovannie as they intended to sell
the subject property.10 However, on January 26, 1998, a REM was executed on the
subject property. Bernardo argued that his alleged signature appearing therein was
merely forged11 as he was still abroad at that time. When he learned in September
or November 1998 that Editha mortgaged the subject property, he personally told
Evelyn that the REM was fake and demanded the return of his title. Not heeding his
request, he filed a complaint for estafa through falsification of public document
against Editha and Evelyn.

Jovannie also took the witness stand. He testified that sometime in December
1997, Editha convinced him to surrender the owner's copy of TCT No. T-361747 which
she would show her buyer.14 Subsequently, however, Editha informed him that she
misplaced the title. Hence, he executed in August 199815 an affidavit of loss and
registered it with the Register of Deeds (RD).16 In September 1998, Editha finally
admitted that the title was not lost but was in Evelyn's possession because of the
REM.17 Upon learning this, Jovannie inquired from Evelyn if Editha mortgaged
Bernardo's property to her. Purportedly, Evelyn confirmed said mortgage and told him
that she would not return the owner's copy of TCT No. T-361747 unless Editha pay the
loan.

On the other hand, Evelyn maintained that she was a mortgagee in good faith.
She testified that sales agents - Editha, Corazon Encarnacion, and a certain Parani, -
and a person introducing himself as ''Bernardo" mortgaged the subject property to
her for P300,000.00 payable within a period of three months.20 She asserted that
even after the expiration of said period, "Bernardo" failed to pay the loan.

She pointed out that her companions inspected it while she stayed in the vehicle
as she was still recuperating from an operation. Moreover, Evelyn asserted that when
the Deed of REM was executed, the person who introduced himself as Bernardo
presented a community tax certificate and his picture as proof of identity.

Evelyn clarified that she met Jovannie for the first time when he went to her
house and told her that Bernardo could not have mortgaged the property to her as he
was abroad

Ruling of the Regional Trial Court: On November 26, 2009, the RTC dismissed the
Complaint. It held that while Bernardo was the registered owner of the subject
property, Evelyn was a mortgagee in good faith because she was unaware that the
person who represented himself as Bernardo was an impostor. Also, the RTC declared
that there was no showing of any circumstance that would cause Evelyn to doubt the
validity of the title or the property covered by it. In fine, Evelyn did all that was
necessary before parting with her money and entering Into the REM.

Ruling of the Court of Appeals: The assailed dispositions of the RTC are REVERSED
and SET ASIDE. Tile complaint of Bernardo F. Dimailig is GRANTED. The Deed of Real
Estate Mortgage constituted on the real property covered by TCT No. T-361747 of the
Registry of Deeds for the Province of Cavite, registered in his name, is DECLARED null
and void. Evelyn V. Ruiz is ORDERED to reconvey or return to him the owner's
duplicate copy of the said title. His claims for the payment of attorney's fees and
costs of suits are DENIED.

Issue:

Whether or not the CA erred in holding that petitioner is not a

mortgagee in good faith despite the presence of substantial evidence to
support such conclusion of fact

Ruling:

No valid mortgage will arise unless the mortgagor has a valid title or ownership
over the mortgaged property. By way of exception, a mortgagee can invoke that he
or she derived title even if the mortgagor's title on the property is defective, if he or
she acted in good faith. In such instance, the mortgagee must prove that no
circumstance that should have aroused her suspicion on the veracity of the
mortgagor's title on the property was disregarded.

Such doctrine of mortgagee in good faith presupposes "that the mortgagor, who
is not the rightful owner of the property, has already succeeded in obtaining a 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 said
title."37 In short, the doctrine of mortgagee in good faith assumes that the title to the
subject property had already been transferred or registered in the name of the
impostor who thereafter transacts with a mortgagee who acted in good faith. In the
case at bench, it must be emphasized that the title remained to be registered in the
name of Bernardo, the rightful and real owner, and not in the name of the impostor.

The burden of proof that one is a mortgagee in good faith and for value lies with
the person who claims such status.

In order for a mortgagee to invoke the doctrine of mortgagee in good faith, the
impostor must have succeeded in obtaining a Torrens title in his name and thereafter
in mortgaging the property. Where the mortgagor is an impostor who only pretended
to be the registered owner, and acting on such pretense, mortgaged the property to
another, the mortgagor evidently did not succeed in having the property titled in his
or her name, and the mortgagee cannot rely on such pretense as what appears on
the title is not the impostor's name but that of the registered owner.

In this case, Evelyn insists that she is a mortgagee in good faith and for value.
Thus, she has the burden to prove such claim and must provide necessary evidence
to support the same. Unfortunately, Evelyn failed to discharge her burden.