Ortaliz v. Registrar of Deeds
REITERATIONFacts
The Antecedents: Plaintiffs Ernestina, Elisa, and Jose Ortaliz were declared the sole legitimate and universal heirs of the decedents Jose Ortaliz Jordan and Vicenta Montilla. They sought the annulment of an order authorizing the administratrix to execute a power of attorney in favor of Gil Montilla to mortgage the decedents' property, the subsequent mortgage executed in favor of the Philippine National Bank (PNB) for the indebtedness of Maao Sugar Central Co., Inc., further mortgages by the company, and annotations on the titles. Procedural History: The Court of First Instance (CFI) of Occidental Negros rendered judgment holding that the mortgage executed by Gil Montilla in favor of PNB was valid because it was executed after the enactment of Act No. 2884, which amended Section 714 of the Code of Civil Procedure, authorizing liens on estates. The CFI also held that this mortgage was cancelled in 1920 by subsequent contracts and ordered the cancellation of the liens. Both parties appealed. The Petition: Plaintiffs appealed the CFI's ruling on the validity of the initial mortgage, while PNB appealed the cancellation of the mortgage.
Issue(s)
Whether the mortgage executed by Gil Montilla, as attorney-in-fact for the administratrix, in favor of the Philippine National Bank is valid. Whether the Philippine National Bank, as a mortgagee, can invoke the privilege of acquiring property in good faith and for valuable consideration despite alleged irregularities in the mortgage execution.
Ruling
The Supreme Court held that the orders of the court below authorizing the mortgage of the estate in question are null and void ab initio. Consequently, the mortgages executed in favor of the Philippine National Bank by Gil Montilla, as attorney-in-fact of the judicial administratrix, are likewise null and void. The judgment of the lower court ordering the cancellation of the liens in favor of the Philippine National Bank was affirmed.
Ratio Decidendi
On the validity of the mortgage executed by Gil Montilla: The Court held that Section 714 of the Code of Civil Procedure, as amended by Act No. 2884, requires the written consent and approval of the heirs, devisees, and legatees residing in the Philippines before a probate court can authorize the sale or mortgage of real property of a decedent's estate. In this case, the plaintiffs, who were declared heirs, did not give their written consent. Furthermore, the record did not show that the mortgage was necessary to pay off debts and expenses of administration, nor was it beneficial to the heirs. Instead, the mortgage was executed for the exclusive benefit of the Maao Sugar Central Co., Inc., which was not connected with the intestate estates. The court found that the lower court committed an error prejudicial to the interests of the plaintiffs in authorizing the administratrix to appoint an attorney-in-fact with power to mortgage the property without the requisites required by law. The requisites set forth in Section 714 are indispensable for the protection of the heirs, and unless they are present, the court has no power to grant the authority. The law provides how this kind of sale or mortgage is to be made, and the manner thus provided must be strictly followed. The validity of the sale or mortgage depends upon the fulfillment of the requisites established by law. On the Philippine National Bank's claim of good faith: The Court stated that the Philippine National Bank contracted with an agent and did so at its own risk, being bound to ascertain the character and scope of the powers given to the agent with whom it contracted. The very entries in the registry of deeds relied upon by the bank showed that the object of the authority granted by the court and the powers given by the administratrix to Gil Montilla was to mortgage the property belonging to the intestate estate of the decedents. It was incumbent upon the bank to see whether the requisites of the law were complied with in said mortgage. Therefore, the bank could not invoke the privilege of acquiring property in good faith and for valuable consideration when the underlying transaction was void from the beginning due to non-compliance with mandatory legal requirements.
Main Doctrine
A mortgage executed by an attorney-in-fact of an administratrix, without the written consent of the heirs and without complying with the requisites of Section 714 of the Code of Civil Procedure (as amended by Act No. 2884), is null and void ab initio, even if registered in good faith by the mortgagee.