Title
Adriano vs. Pangili
Case
G.R. No. 137471
Decision Date
Jan 16, 2002
Petitioner's land was fraudulently mortgaged by an impostor after entrusting the title to a relative. SC ruled the mortgage void due to lack of consent, holding the mortgagee primarily negligent for failing to verify the mortgagor's identity.

Case Summary (G.R. No. 137471)

Background Facts

Guillermo Adriano was the registered owner of a 304-square-meter parcel of land in Montalban, Rizal. On November 23, 1990, petitioner entrusted the original owner’s copy of TCT No. 337942 to Angelina Salvador for the purpose of securing a mortgage loan. Unknown to petitioner, Salvador mortgaged the property to Romulo Pangilinan without petitioner’s knowledge or consent.

Petitioner discovered later that a first real estate mortgage had been registered on his property in favor of respondent, with a consideration of P60,000.00, but denied having executed or authorized the mortgage or received any loan. Petitioner asserted forgery of his signature and sued for reconveyance, also filing a criminal estafa case involving forgery and falsification of documents.

Respondent’s Defense and Conduct

Respondent testified that he conducted a business buying, selling, and mortgaging real estate. He asserted that Angelina Salvador, accompanied by Marilou Macanaya and a man who introduced himself as Guillermo Adriano, approached him seeking a loan secured by the property. He required standard documents: a machine copy of the title, vicinity plan, tax declaration, photograph, and residence certificate.

Respondent performed an ocular inspection of the property accompanied by the group and accepted the original documents supposedly from the owner, verifying the title at the Registry of Deeds by obtaining a certified true copy. The mortgage contract was executed and notarized, followed by issuance of the loan amount. Respondent claimed to have exercised good faith and due diligence.

Issues Presented

  1. Whether the absence of petitioner’s consent and forged signature rendered the mortgage null and void, and who bears the loss.
  2. Whether the petitioner’s Motion for Reconsideration before the Court of Appeals was correctly denied.

The Essential Requisites of a Mortgage and Ownership Requirement

Article 2085 of the Civil Code requires the mortgagor be the absolute owner of the property mortgaged, among other requisites. It was established at trial, and not disputed on appeal, that petitioner’s signature was forged and that an impostor impersonated petitioner when the mortgage was executed. Therefore, the mortgage was invalid for lack of the owner’s consent and due to forgery.

Concurrent Negligence and Due Diligence of Parties

The Court of Appeals reversed the RTC primarily on the ground that petitioner was negligent in entrusting his original TCT to a distant relative, Angelina Salvador, who then enabled the impostor to execute the fraudulent mortgage. Citing prior jurisprudence, the CA applied principles akin to the bona fide purchaser rule, concluding that when two innocent persons are involved with one enabling fraud by negligence, the latter must bear the loss.

However, the Supreme Court clarified that the Torrens system, while providing evidentiary value to the title, does not protect fraud and does not create title de novo. It emphasized that the mortgagee—respondent—who is engaged professionally in real estate mortgage business must exercise extraordinary diligence.

Respondent’s Failure to Exercise Due Diligence

Despite respondent’s claim of conducting an ocular inspection and verifying documents, the Court emphasized that his verification was limited to appraising the property’s value, not the identity of the person claiming to be the owner. Respondent acknowledged that the person who presented themselves as petitioner was not verified beyond acceptance during brief visits and discussions lasting between five and ten minutes.

Respondent failed to make independent inquiries, such as asking occupants or lessees questions about ownership or consulting the actual registered owner. He also did not verify whether petitioner had authorized Angelina Salvador or any agent to mortgage the property, which he should have demanded under Article 1878 requiring special powers of attorney to create or convey real rights over immovable property.

The Burden of Loss and Legal Principles Applied

The Court highlighted the principle that, in cases of concurrent negligence, the loss falls on the one who was in the immediate, primary, and overriding position to prevent it. Here, the respondent, given his experience (almost seven years in real estate mortgage business) and capacity to prevent fraud through adequate verification, was primarily at fault for not identifying the impostor.

While petitioner exhibited negligence by entrusting the documents to Salvador, this act was insufficient to justify loss of property because he never authorized Salvador to mortgage or represent him in such transactions.

Jurisprudential Support and Equity Considerations

The Court cited several cases involving fraud and title protection that underscore the limits of the Torrens system’s protection and the necessity of due diligence by mortgagees or purchasers. Respondent’s failure to act prudently triggered the loss. Equity supplements, but does not supplant, the law requiring ownership as a prerequisite for a valid mortgage.

Furthermore, since respondent could have pursued claims against Salvador and other conspirators, the Court reinforced that petitioner’s property right should not be extinguished due to respondent’s negligence.

Final Ruling

The Supreme Court g

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