Torres vs.

CA AUTHOR: Valera
186 SCRA 672 (1990) NOTE:
Assurance Fund *****Petition for review of the CA decision which reversed
Medialdea, J: the decision of the CFI holding that it is respondent Sps.
Cue who is legally entitled to the disputed realties, being an
innocent mortgagee and later the highest bidder when the
properties were supposedly foreclosed, and not the
petitioner Torres, the defrauded owner thereof.
FACTS:
 The land in question is located at the corner of Quezon ave. and Raon St. wherein the M. Torres building is
constructed. Petitioner Torres is the owner of the land and building evidenced by TCT no. 53628 issued in his name.
(NOTE: Torres was and still in possession of the owners duplicate and at least until 1971 he has paid real estate taxes
and collected rent from his tenants)
 Fernandez, Torres’ brother in law, filed a petition in the CFI in a LRC GLRO cad Rec. case where he misrepresented
to be the atty. in fact of Torres and falsely alleging that the owners duplicate of TCT 53628 was lost, Fernandez
succeeded in obtaining a court order for the issuance of the another copy of the certificate.
 Fernandez, upon receiving another copy of the TCT forged a simulated deed of sale in his favor whereby a new TCT
was issued in favor of Fernandez cancelling the TCT of Torres
 From 1966 to 1967 Fernandez mortgage the properties to Mota and Fermin who assigned her credit to Mota The
mortgages were annotated at the back of the new TCT and so was the deed of assignment.
 Torres, upon discovery of the acts done by Fernandez, cause an annotation in the new TCT of a notice of an adverse
claim. Torres then filed a civil case against Fernandez for the annulment of Fernandez’ TCT and the proceedings in
LRC GLRO case. Thus causing a notice of lis pendends to be annotated at the Fernandez TCT
 Fernandez failed to pay his loans which prompted Mota to institute an extrajudicial foreclosure of the mortgage.
 Fernandez filed a Civil case agaisnt Mota for the annulment of the mortgage. The foreclosure was enjoined, the
Fernandez and Mota entered into an amicable settlement.
 Before Fernandez could pay his obligation under the settlement agreement, It was decided in the case initiated by
Torres that the Fernandez TCT is without force and effect as the Torres TCT in the name of Torres is the true and legal
evidence of ownership of the property.
 The CA affirmed, but while the case was pending, Fernandez still failed to comply with the payment of his obligation
under the settlement agreement thus prompting the Cues applied for and were granted a writ of execution. The
property was levied and sold at a public auction where Mota was the highest Bidder.
 The redemption period lapsed without Fernandez nor Torres redeeming the properties. Mota was issued the Sherriff’s
deed of Sale which resulted too the issuance of the Mota TCT, which cancelled the Fernandez TCT.
 Mota, then advised the Tenants of the property that she is the new owner of the building and the rental payments
should be made to her.
 Torres filed a complaint against Fernandez and Mota to restrain Mota from collecting rentals and to void the Mota
TCT void.
 Mota then in return, filed a cross claim agaisnt Fernandez and a Third party complaint against the National Treasurer
as the custodian of the Assurance Fund.
 However, Torres died during the proceedings, he was substituted by his widow.
 The trial court decided to nullify the Mota TCT and upheld the validity of the Torres TCT as the true evidence of title
to the property and dismissed Mota’s 3rd party complain and cross claim.
 The CA reversed the Trial Court holding that it is respondent Mota who is legally entitled to the disputed realties,
being an innocent mortgagee and later the highest bidder when the properties were supposedly foreclosed, and not the
petitioner Torres, the defrauded owner thereof.
ISSUE(S):
 WON the CA erred in reversing the Trial court decision and holding that Mota is legally entitled to the property bein
an innocent mortgagee.

HELD:
1.) Yes.
RATIO:
1.) There is nothing on the records which show that Torres performed any act or omission which could have
 jeopardized his peaceful dominion over his property.
2.) In considering Mota as an innocent mortgagee under Sec 55 of the Land registration law holds that Torres was
bound by the mortgage, it was pronounced t was a foreclosure sale where Mota was the highest bidder also bound
Torres and concluded that the Mota TCT prevails of the Torres TCT however, the properties were sold on
execution and not on a foreclosure sale thus the purchaser thereof was bound by his notice of adverse claim and
notice of lispendens annotated in the Fernandez TCT
3.) Even if the courts grant Mota the status of an innocent mortgagee, the doctrine relied upon by the CA that a forged
instrument may become the root of a valid title cannot be applied where the owner still holds a valid and existing
certificate of title covering the same interest in a property.
4.) In view of the fore going to hold for the purpose of enforcing the mortgage, that Mota was an innocent mortgagee
would be futile because as shown above, no TCT covering the properties in derogation of the Torres TCT may be
validly issued.
**** ASSURANCE FUND discussion
a.) The remaining possible remedies of Mota is to go after Fernandez of the Assurance funds, as they in fact had done
in the lower court.
b.) The trial court dismissed 3rd party complaint against the Treasurer of the Philippines as custodian of the assurance
fund after finding her negligent in protecting their interest. The trial Court recognized the principle that a person
dealing with registered lands need not go beyond the certificate of title but nevertheless pointed out that there are
circumstances in this case which should have put Mota on guard adn prompted them to investigate the property
being mortgaged to them
 The property in question is a very valuable property, in fact accepted by defendants Mota and Medina Cue as
collateral for more than half a million pesos in loans granted by them to Fernandez. Its value lies principally in
its income potential, in the form of substantial monthly rentals. Certainly, the registered title does not yield any
information as to the amount of rentals due from the building, much less on who is collecting them, or who is
recognized by the tenants as their landlord. Any prospective buyer or mortgagee of such a property, if prudent
and in good faith, is normally expected to inquire into all these and related facts and circumstances.
 Besides, by the course of visible dimensions of the M. Torres Building, it should be readily obvious to any one
that the area of the two lots x x x covered by TCT No. 86018 cannot accommodate the building, as in fact it
also rests upon a lot covered by TCT No. 56387, and partly upon a lot leased by (Torres) from the City of
Manila. Had (the Cues) known of this fact would they have accepted the mortgage alone over TCT No. 86018?
The answer is obvious. And yet, to all indications, they never bothered to look into this fact about the M.
Torres Building.
 Another thing that defendants Mota and Medina Cue must have investigated, as any prudent buyer or
mortgagee should before consummating any transaction on real property, is the matter of payment of taxes on
the property. After all, the big value of the property in question necessarily means that even real estate taxes on
it alone would involve big amounts of money, and if there are tax arrearages, any buyer or subsequent owner
of the property will have to come face to face with the tax lien attaching to the property wherever its owner
may be.
c.) The court takes note of the manifestation of the OSG that Mota failed to contest the ruling of the trial court
negating the liability of the Assurance fund thus their only remedy is merely to go against Francisco
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):