G.R. No. 228011 - Jimenez vs. Jimenez, Jr.

Case Summary (G.R. No. 228011)

Factual Background

Corona F. Jimenez was the registered owner of a 532-square meter lot covered by TCT No. RT-122097 (126876). Corona executed an alleged Deed of Donation dated August 31, 2000 in favor of her son Damian F. Jimenez, Jr., and TCT No. N-217728 was thereafter issued in Damian’s name on September 7, 2000. On May 21, 2001, Damian mortgaged the property to Arturo C. Calubad and Antonio Keh for a P7,000,000 loan, and the mortgage was annotated on TCT No. N-217728 the same day. The Jimenez siblings learned of the mortgage; only Sonia registered an Affidavit of Adverse Claim, which was annotated on July 12, 2002. The property was scheduled for auction on October 24, 2002. The Jimenez siblings filed a complaint on October 21, 2002 seeking annulment of the Deed of Donation and related reliefs, and asked for a preliminary injunction, which the RTC denied, allowing the extrajudicial sale to proceed.

Proceedings at the Foreclosure Sale and Title Consolidation

The foreclosed property was publicly auctioned on October 24, 2002, where Calubad and Keh emerged as the highest bidders. A Certificate of Sale issued on November 3, 2002, and title consolidation followed, resulting in issuance of TCT No. N-257432 in the names of Calubad and Keh on December 11, 2003. The Jimenez siblings continued litigation challenging the Deed of Donation and the validity of transfers and mortgage.

Trial Court Proceedings and Findings

The Regional Trial Court of Quezon City rendered a Decision dated December 20, 2012 declaring Corona’s signature on the Deed of Donation a forgery and the Deed void. Notwithstanding that declaration, the RTC recognized TCT No. N-257432 issued in favor of Calubad and Keh, finding them to be innocent mortgagees for value and in good faith and therefore entitled to their consolidated title arising from the foreclosure sale.

Court of Appeals Ruling

On appeal, the Court of Appeals affirmed the RTC’s factual findings and legal conclusion that Calubad and Keh were mortgagees in good faith and that TCT No. N-257432 should be recognized. The CA denied Danilo’s appeal by Decision dated May 19, 2016 and denied his motion for reconsideration by Resolution dated October 25, 2016.

Issues Presented to the Supreme Court

The dispositive issue presented in the Petition for Review on Certiorari was whether Calubad and Keh, although mortgagees in good faith, could be regarded as purchasers in good faith at the foreclosure sale when they had knowledge of Sonia’s adverse claim annotated prior to the auction; and whether their consolidated title should therefore be cancelled and the original title in favor of Corona reinstated. The petition invoked limitations on relief under Rule 45, Rules of Court with respect to challenging factual findings.

Parties’ Contentions

Petitioner Danilo argued that reliance on Homeowners Savings and Loan Bank v. Felonia (HSLB) required denying title to purchasers who had actual knowledge of a pending adverse claim at the time they acquired the property in a foreclosure sale; hence, the mortgagees could not be purchasers in good faith and TCT No. N-257432 should be cancelled. Respondents Calubad and Keh contended that HSLB was inapposite on its facts and that the Court’s earlier ruling in Bank of the Philippine Islands v. Noblejas supported protection of a mortgagee in good faith and of a purchaser at a foreclosure sale even when a later adverse claim was annotated on the title.

Supreme Court’s Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision dated May 19, 2016 and Resolution dated October 25, 2016. The Court held that the factual determinations by the RTC and the CA that Calubad and Keh were mortgagees in good faith should be respected in a Rule 45 petition, absent any of the recognized exceptions permitting review of factual findings.

Legal Basis and Reasoning

The Court reiterated the doctrine of mortgagee in good faith as grounded not solely on the indefeasibility of a Torrens title but also on the nature and purpose of a mortgage and the public interest in upholding the reliability of registered titles. The Court set out the established requisites for the doctrine: (a) the mortgagor lacks valid title; (b) the mortgagor obtained a Torrens title; (c) the mortgagor mortgaged the property; (d) the mortgagee relied on the face of the title and no circumstances would have compelled inquiry by a reasonably cautious person; and (e) the mortgage was registered. The Court found these requisites satisfied because Damian’s title was ultimately found to derive from a forged deed, the mortgage was annotated on TCT No. N-217728 prior to Sonia’s affidavit, Calubad and Keh relied on the title and conducted an ocular inspection confirming possession, and the mortgage was registered.

The Court distinguished HSLB, explaining that HSLB’s exceptional facts involved a prior judicial determination that nullified the mortgagor’s title and thereby rendered the mortgage, foreclosure sale, and subsequent title null with finality; in that context the purchaser could not benefit from mortgagee protections. By contrast, in the present case the validity of the mortgage and the purchasers’ title were the very issues before the courts, and there was no final adjudication akin to HSLB that nullified the mortgagor’s title prior to the foreclosure. The Court therefore applied the line of authority exemplified by Bank of the Philippine Islands v. Noblejas, Gonzales v. Intermediate Appellate Court, and related decisions, which hold that a foreclosure sale retroacts to the date of registration of the mortgage and that any subsequent adverse claim or annotation cannot defeat the rights of an innocent mortgagee or of the purchaser at the foreclosure sale who derives title from that mortgage. The Court emphasized that the foreclosure sale is incidental to the mortgagor’s default and that the purc

Case Syllabus (G.R. No. 228011)

Parties and Posture

Danilo Santiago F. Jimenez, as represented by his attorney-in-fact Dr. Sonia R. Jimenez-Catarroja filed a Petition for Review on Certiorari under Rule 45 seeking reversal of the Court of Appeals' decision that affirmed the Regional Trial Court's judgment recognizing the title of the purchasers at a foreclosure sale.
Damian F. Jimenez, Jr. was the mortgagor whose allegedly forged Deed of Donation generated the contested Torrens title.
Arturo C. Calubad and Antonio Keh were the mortgagees and successful bidders at the foreclosure sale who secured TCT No. N-257432.
The Register (Registrar) of Deeds of Quezon City and the ex-officio sheriff were respondents in the underlying annulment and cancellation proceedings.

Key Facts

Corona Vda. De Jimenez was the registered owner of a 532-square meter lot under TCT No. RT-122097 (126876).
A Deed of Donation dated August 31, 2000 purportedly transferred the lot to Damian F. Jimenez, Jr., and TCT No. N-217728 was issued in his name on September 7, 2000.
On May 21, 2001, Damian executed a mortgage over the property in favor of Calubad and Keh for P7,000,000, and the mortgage was annotated on TCT No. N-217728 the same day.
Sonia R. Jimenez-Catarroja filed an Affidavit of Adverse Claim dated July 12, 2002, which was annotated on the title after the mortgage registration.
The Jimenez siblings filed an action for annulment of the Deed of Donation and related reliefs on October 21, 2002, and the RTC denied their prayer for preliminary injunction.
An extrajudicial foreclosure sale took place on October 24, 2002, where Calubad and Keh were the highest bidders, leading to a Certificate of Sale dated November 3, 2002 and consolidation of title into TCT No. N-257432 on December 11, 2003.
The RTC found on December 20, 2012 that Corona's signature on the Deed of Donation was forged and declared the Deed void while recognizing TCT No. N-257432 in favor of Calubad and Keh as innocent mortgagees.
The Court of Appeals affirmed the RTC in its May 19, 2016 decision, and the motion for reconsideration was denied on October 25, 2016.

Procedural History

The Jimenez siblings instituted an annulment action and prayed for preliminary injunction before the RTC of Quezon City on October 21, 2002.
The RTC denied the preliminary injunction and proceeded to decide the annulment action, issuing judgment on December 20, 2012 that voided the Deed of Donation but sustained the title of the foreclosure purchasers.
The Court of Appeals affirmed the RTC decision on May 19, 2016 and denied reconsideration on October 25, 2016.
Danilo Santiago F. Jimenez filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court.

Issues

Whether the rights of Calubad and Keh as mortgagees in good faith and as purchasers at a foreclosure sale are defeated by Sonia R. Jimenez-Catarroja's adverse claim annotated after the mortgage registration.
Whether knowledge of a subsequently annotated adverse claim or lis pendens prevents a mortgagee in good faith from enjoying the protection accorded to purchasers at foreclosure.
Whether the Supreme Court's decision in Homeowners Savings and Loan Bank v. Felon