Insurance Services and Commercial Traders, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Paz and Vivencia Salvaleon owned a parcel of land. They borrowed P2,000.00 from spouses Amador and Mila de Castro, agreeing to mortgage their land as collateral, surrender the title, and sign an authorization to obtain a loan. Amador de Castro sought advice from Cesar Busque, General Manager of Cantrade Davao, on how to solicit a mortgage. Busque recommended a "fast loan" and presented a special power of attorney (SPA) for the Salvaleons to sign, authorizing Mila to mortgage the property. This SPA was notarized. Subsequently, Busque negotiated a real estate mortgage with Insurance Services and Commercial Traders, Inc. (Instrade) using a forged SPA, purportedly signed by the Salvaleons, authorizing Busque to use their property as security for Cantrade's indebtedness to Instrade. When Cantrade failed to pay, Instrade initiated foreclosure proceedings. Procedural History: The Salvaleons filed a complaint for annulment of the extrajudicial foreclosure sale and damages against Instrade, Cantrade, and Busque. The trial court issued a temporary restraining order, which was later lifted. The foreclosure sale proceeded, and TCT No. T-80694 was issued in Instrade's name. The Salvaleons claimed the SPA authorizing Busque to mortgage their property was forged, rendering the mortgage and foreclosure proceedings void. The trial court ruled in favor of the Salvaleons, declaring the SPA and mortgage null and void, annulling the foreclosure, ordering the cancellation of Instrade's title, and reinstating the Salvaleons' title. Instrade appealed to the Court of Appeals, which affirmed the trial court's decision. Instrade then filed a petition for review with the Supreme Court. The Petition: Instrade contended that a public document is entitled to full credit by a third party and that parties at fault or guilty of contributory negligence are not entitled to judicial relief. The core issue was whether the Court of Appeals erred in affirming the trial court's decision nullifying a forged notarized special power of attorney.
Issue(s)
Whether the Court of Appeals erred in affirming the trial court's decision nullifying a forged notarized special power of attorney purportedly executed by the Salvaleons. Whether petitioner Instrade, as a third party, is entitled to protection as an innocent purchaser for value despite the forged special power of attorney.
Ruling
The petition is denied. The Decision and Resolution of the Court of Appeals affirming the trial court's judgment were affirmed. The extrajudicial foreclosure sale and the subsequent issuance of TCT No. T-80694 in the name of Instrade were declared null and void. The Register of Deeds of Davao City was ordered to reinstate TCT No. 37249 in the names of the plaintiffs (Salvaleons) and cancel TCT No. T-80694 issued in the name of Instrade.
Ratio Decidendi
On the nullity of the forged special power of attorney: The Court affirmed the findings of the trial and appellate courts that the Special Power of Attorney (SPA) purportedly executed by the Salvaleons authorizing Busque to mortgage their property was forged. Despite being notarized, the SPA was declared null and void ab initio for lack of consent from the principals. The Court emphasized that while a public document enjoys a presumption of regularity, this presumption is rebuttable by strong, complete, and conclusive proof. Busque's admission that the Salvaleons were not present during the notarization of the SPA, coupled with the existence of multiple SPAs notarized by the same notary public under questionable circumstances, provided sufficient grounds to doubt the validity of the document. The Court reiterated that conclusions and findings of fact by the trial court, when adopted by the Court of Appeals, are binding upon the Supreme Court. On the status of Instrade as an innocent purchaser for value: The Court ruled that Instrade could not claim to be an innocent purchaser for value. The Court clarified that for a holder of a certificate of title to be considered an innocent purchaser for value, the instrument registered must not be forged. When the instrument is forged, the registered owner does not lose title, and the assignee in the forged deed acquires no rights. Instrade's claim of good faith was negated by its failure to exercise due diligence. It had the opportunity to scrutinize the documents, including the SPAs, but did not do so. Furthermore, Instrade accepted the Salvaleons' property as collateral despite Cantrade's history of bad business dealings, including offering bounced checks and attempting to use properties owned by third parties. The Court found that Instrade acted with undue haste and failed to ascertain the ownership of the mortgaged land and the authority of the supposed agent, thus betraying its lack of good faith. The principle that one who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim good faith was applied.
Main Doctrine
A forged document, even if notarized, is void ab initio and cannot transfer title to property. An innocent purchaser for value must rely on a deed executed by the registered owner, not a forged deed. Failure to exercise due diligence in verifying the authenticity of documents and the authority of agents negates a claim of good faith.