G.R. No. 190259 - Ampatuan vs. Puno

Case Summary (G.R. No. 190259)

Facts

Petitioner was the registered owner and on November 23, 1990 entrusted the owner’s duplicate of TCT No. 337942 to Angelina Salvador to assist in finding a money lender. Without petitioner’s knowledge or consent, Salvador (together with others, including an impostor) mortgaged the property to respondent.
Petitioner later discovered an annotated first real estate mortgage in favor of respondent for P60,000 and denied executing or receiving consideration for that mortgage, alleging forgery. He filed a civil action for reconveyance and cancellation of the mortgage and a criminal complaint for estafa via falsification of public document.
Respondent’s account: Salvador, Macanaya and a man who introduced himself as Adriano presented original documents, respondent conducted an ocular inspection, procured a certified true copy of the title, had the parties execute a mortgage and promissory note, and advanced P60,000. He claimed to have acted in the regular course of business and asserted that Salvador acted as petitioner’s agent.

Procedural History

RTC (Branch 76, San Mateo, Rizal) found the mortgage null and void, declared the annotated real estate mortgage to be of no force and effect, and directed respondent to reconvey the title to petitioner.
The Court of Appeals reversed and set aside the RTC judgment, effectively dismissing petitioner’s complaint, reasoning that petitioner had entrustment of the title to Salvador and applying principles protecting an innocent mortgagee.
Petitioner filed a petition for review under Rule 45 to the Supreme Court; the CA denied petitioner’s motion for reconsideration. The Supreme Court granted the petition and reinstated the RTC decision.

Issues Presented

Whether the lack of the registered owner’s consent (forgery of signature and absence of authorization) renders the mortgage void and determines who must bear the loss.
Whether the petitioner’s Motion for Reconsideration before the Court of Appeals should have been dismissed (procedural issue raised but addressed within the broader appellate review).

Applicable Legal Provisions and Principles

Civil Code Article 2085: essential requisites of mortgage include that the mortgagor be the absolute owner of the thing mortgaged.
Civil Code Article 1878: special powers of attorney are necessary in certain acts, including to create or convey real rights over immovable property and to loan or borrow money (except in urgent circumstances).
Torrens system principles: certificate of title is evidence of indefeasible title to the person named, but the Torrens system does not create title nor protect a usurper from the true owner; it does not shelter fraudulent acts.
Equitable principle applied: where concurrent negligence of two persons causes loss, it is to be borne by the one in the immediate, primary and overriding position to have prevented it. Jurisprudence concerning bona fide purchasers or mortgagees for value and the duty of reasonable inquiry are applied to determine whether a mortgagee acted in good faith and with due diligence.

Court of Appeals’ Reasoning (as presented in the record)

The CA held that where a registered owner entrusts his title to a third person who then procures a mortgage, and a mortgagee relies on the title in good faith, the loss between innocent parties should be borne by the mortgagor (or the one who made the fraud possible by his act of confidence).
The CA stressed petitioner’s entrustment of his TCT to his distant relative, concluding that respondent acquired the mortgage in the regular course of business and acted in reliance on title and documentation.

Supreme Court’s Analysis on Ownership and Forgery

The Supreme Court affirmed the RTC’s factual finding that petitioner’s signature on the deed of mortgage was forged and that an impostor posed as petitioner when the mortgage was executed. The owner did not execute or authorize the mortgage.
Under Article 2085, an essential requisite of a valid mortgage is that the mortgagor be the absolute owner. Because the mortgagor in the deed was an impostor, the mortgage was void. The Court cited Parqui v. Philippine National Bank to reaffirm that a mortgage is invalid if the pledgor is not the owner.

Supreme Court’s Analysis on Concurrent Negligence and Due Diligence

The Supreme Court rejected the CA’s application of the bona fide purchaser/mortgagee doctrine to absolve respondent, distinguishing prior cases where the registered owner himself enabled the creation of defective titles. Here, the mortgagor was an impostor, not the registered owner.
The Court emphasized the mortgagee’s heightened duty of inquiry: respondent was in the business of real estate mortgages for several years and was expected to exercise due diligence to ascertain identity and authority of the person offering the property as collateral. Respondent’s own testimony showed limited and cursory ocular inspection (5–10 minutes), no meaningful inquiry of occupants or lessors, and an assumption that the person presented to him was the owner. Although respondent obtained a certified true copy of the title, he failed to verify the identity of the alleged mortgagor or whether a special power of attorney authorized Salvador to act on petitioner’s behalf.
The Court applied the rule from Uy v. CA and related authorities: one cannot close his eyes to facts which should alert a prudent person, and willful blindness or failure to investigate precludes claiming innocent purchaser/mortgagee status. The Torrens system does not protect those who rely negligently on appearances when circumstances call for inquiry.

Application of Article 1878 and Agent Authority

Petitioner had not executed a special power of attorney authorizing Salvador to borrow or create real rights over the property. Article 1878 requires

Case Syllabus (G.R. No. 190259)

Case Citation and Procedural Posture

Supreme Court, Third Division, G.R. No. 137471, January 16, 2002; reported at 424 Phil. 578.
Petition for Review under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) Decision of November 11, 1998 in CA‑GR CV No. 44558 and the CA Resolution of February 5, 1999 denying petitioner’s Motion for Reconsideration.
The CA reversed the Regional Trial Court (RTC) of San Mateo, Rizal (Branch 76) in Civil Case No. 845; RTC’s Decision dated November 25, 1993 had declared the real estate mortgage null and void and directed reconveyance of title to petitioner.
Supreme Court granted the petition, set aside the CA decision, and reinstated the November 25, 1993 RTC Decision. No costs were imposed.
Decision authored by Justice Panganiban; concurred in by Melo (Chairman), Vitug, Sandoval‑Gutierrez, and Carpio, JJ.
CA Decision was penned by Justice Renato C. Dacudao; CA membership included Justices Ma. Alicia Austria‑Martinez (Division chairman) and Salvador J. Valdez Jr.

Relevant Parties and Property

Petitioner: Guillermo Adriano — registered owner of the subject land.
Respondent: Romulo Pangilinan — mortgagee and businessman engaged in buying and selling and in the mortgage of real estate properties.
Angelina Salvador — distant relative of petitioner, entrusted with owner’s duplicate title by petitioner to find a loan; alleged to have mortgaged the property or aided an impostor.
Other persons named in related criminal action: Romy de Castro and Marilen Macanaya (and Marilou/Marilou Macanaya referenced in respondent’s testimony).
Subject property: parcel of land, approximately 304 square meters, located at Col. S. Cruz, Geronimo, Montalban, Rizal, covered by Transfer Certificate of Title (TCT) No. 337942.
Loan amount involved: Sixty Thousand Pesos (P60,000.00).

Facts as Found and Undisputed

On or about November 23, 1990, petitioner entrusted the original owner’s copy of TCT No. 337942 to Angelina Salvador to secure a mortgage loan (i.e., to find a money lender).
Without petitioner’s knowledge or consent, Angelina Salvador mortgaged (or caused an impostor to mortgage) the subject property to respondent.
Petitioner, upon checking the Registry of Deeds, discovered an annotation of a first real estate mortgage on TCT No. 337942, purportedly executed by Guillermo Adriano in favor of Romulo Pangilinan for P60,000. Petitioner denied authoring or receiving consideration for such mortgage and denounced the signature as a forgery.
Petitioner filed the civil action for reconveyance and a criminal case for estafa through falsification of public document (Criminal Case No. 1533‑91, RTC San Mateo, Rizal, Branch 76) against respondent, Angelina Salvador, Romy de Castro and Marilen Macanaya.
Respondent’s account: in early December 1990 Angelina Salvador, Marilou Macanaya and a person introducing himself as Guillermo Adriano came to respondent seeking a loan; respondent required documents (owner’s duplicate title, tax declaration, vicinity plan, photograph, residence certificate); respondent conducted an ocular inspection, met a person posing as Adriano who produced original documents; respondent verified title with Registry of Deeds, executed mortgage, had it notarized and registered, took promissory note signed by the alleged owner and others, and disbursed P60,000 in cash.

Trial Court (RTC) Findings and Decision

RTC expressly found the signature on the deed of mortgage to be forged by comparing signatures in the mortgage and other records; difference was glaring and indicative that signatures were not by the same person.
RTC observed respondent’s admission that the person who appeared in court as plaintiff was not the same person who had represented himself as the owner and executed the contract.
RTC rendered judgment declaring the real estate mortgage on TCT No. 337942 null and void, directing respondent to reconvey or deliver the title to petitioner after discharge and cancellation of the annoted mortgage; defendant’s counterclaim dismissed for lack of basis. (RTC Decision dated November 25, 1993; no pronouncement as to costs.)

Court of Appeals (CA) Ruling

CA reversed and set aside the RTC judgment and dismissed the complaint instituted in the lower court (dispositive portion dated November 11, 1998).
CA reasoning: where a mortgagee relies in good faith on a Torrens title and lends money based on the title, and one defendant is an alleged forger while another made the fraud possible by negligence or acquiescence, then between two innocent persons the one who made the fraud possible by an act of confidence must bear the loss.
CA emphasized petitioner’s entrusting and delivery of his TCT No. 337942 to Angelina Salvador “for the avowed purpose of using the said property as a security or collateral for a real estate mortgage debt of loan,” and treated respondent as an innocent mortgagee for value who relied on the title in the regular course of business.
CA denied petitioner’s Motion for Reconside