Veloso v. La Urbana
REITERATIONFacts
The Antecedents: Plaintiffs Corazon Ch. Veloso and Robustiano M. Rosales brought an action to annul mortgages constituted by Jose Maria del Mar in the name of Corazon Ch. Veloso in favor of the defendant corporation, La Urbana, and to recover damages. Jose Maria del Mar, the plaintiffs' brother-in-law, forged two powers of attorney purporting to grant him authority to mortgage the plaintiffs' undivided shares in certain parcels of land. Acting under these forged documents, Del Mar mortgaged the plaintiffs' participations to La Previsora Filipina, later cancelled and transferred to La Urbana for a loan of P10,600. Subsequently, Del Mar obtained an additional loan of P2,875 from La Urbana, executing another mortgage deed. Upon Del Mar's violation of the mortgage conditions, La Urbana foreclosed the mortgages and purchased the properties at public auction. The plaintiffs learned of these fraudulent transactions from the advertisement of the sale. Procedural History: The trial court declared the deeds of mortgage and the subsequent sale of the properties to La Urbana null and void. It ordered the cancellation of the registration of the deeds and directed La Urbana and Jose del Mar to pay the costs. The court also reserved any right of action La Urbana might have against Jose del Mar or the Insular Treasurer. The Petition: La Urbana appealed the decision of the trial court.
Issue(s)
Whether the forged powers of attorney and the mortgages constituted thereunder are valid and binding upon the plaintiffs. Whether La Urbana, as a mortgagee, was negligent in failing to ascertain the genuineness of the powers of attorney.
Ruling
The Supreme Court affirmed the judgment of the trial court, declaring the deeds of mortgage and the sale of the properties null and void, and ordering the cancellation of their registration. The Court held that the forged powers of attorney were without force and effect, and consequently, the mortgages constituted by virtue thereof were likewise null and void and could not prejudice the rights of the plaintiffs as registered owners.
Ratio Decidendi
On the validity of the forged powers of attorney and mortgages: The Court held that pursuant to Article 1714 of the Civil Code and the Torrens Act, the forged powers of attorney prepared by Jose Maria del Mar were without force and effect. Consequently, the registration of the mortgages constituted by virtue thereof were also null and void and could not in any way prejudice the rights of the plaintiff as the registered owners of her participations in the properties in question. The principle that a forged document produces no legal effect is fundamental. On the negligence of La Urbana: The Court found La Urbana negligent. It reasoned that Del Mar was not the registered owner of the mortgaged properties, and La Urbana was aware that it was dealing with him based on alleged powers of attorney. Therefore, it was La Urbana's duty to ascertain the genuineness of these instruments, notwithstanding their registration. The Court emphasized that every person dealing with an agent is put upon inquiry and must discover, at their peril, the authority of the agent, especially when the act is of an unusual nature. Failure to make such inquiry renders the person chargeable with knowledge of the agent's authority, and ignorance thereof is not an excuse. The burden of proof is upon the party dealing with the assumed agent to establish the fact and extent of the agency.
Main Doctrine
A mortgagee who deals with an agent on the strength of a forged power of attorney, even if registered, has the duty to ascertain the genuineness of such instrument. Failure to do so constitutes negligence, and the mortgagee must suffer the consequences of the fraudulent transactions.