G.R. No. 109803 April 20, 1998
Philippine Bank of Communications, petitioner, vs. The Court of Appeals and Olympia Fernandez-Puen, respondents.

FACTS

Private respondent Olympia Fernandez-Puen, president and majority stockholder of Global, Inc., filed a complaint to nullify a real estate mortgage over her paraphernal property. Her estranged husband, Chee Puen, then General Manager of Global, Inc., informed her in April 1978 that the company needed a P300,000 loan and proposed using her property as collateral. Relying on his assurance the loan would not exceed P300,000, she signed three sets of blank real estate mortgage forms for petitioner bank, on which Chee Puen had penciled the figure “300”. Chee Puen later notarized the mortgage using a residence certificate bearing respondent’s forged signature. He applied for and obtained a P3,000,000 loan from petitioner bank for Global, Inc., using the signed blank forms to mortgage respondent’s property. He also submitted a fraudulent “Secretary’s Certificate of Board Resolution” misrepresenting himself as president and acting corporate secretary. Petitioner bank did not investigate Chee Puen’s authority, verify the residence certificate signature, or ascertain the verity of the board resolution. Respondent discovered the fraud on February 16, 1981, when, after delivering a board resolution replacing Chee Puen as signatory to the bank, she was informed by a teller of the P3,000,000 loan. Document examination confirmed respondent’s signatures on the mortgage were affixed before the typewritten entries and the signature on the residence certificate was forged. The trial court declared the mortgage null and void, a decision affirmed by the Court of Appeals with the modification of deleting the award of attorney’s fees.

ISSUE

Whether the real estate mortgage contract is valid and binding upon private respondent Olympia Fernandez-Puen.

RULING

The Supreme Court dismissed the petition and affirmed the nullification of the real estate mortgage. The Court held that respondent did not consent to mortgage her property to secure a P3,000,000 loan, as her consent was vitiated by the misrepresentation of Chee Puen, who fraudulently obtained her signature on blank forms for a purportedly smaller loan. The elements of estoppel were not present, as respondent did not intentionally mislead the bank; the misrepresentation was made by Chee Puen. Petitioner bank’s reliance on the mortgage application was not reasonable due to its gross negligence in failing to verify respondent’s authority, conduct credit checks, or investigate the authenticity of the board resolution. The defense of laches was also inapplicable, as respondent promptly acted upon discovering the fraud by filing necessary actions. The mortgage was declared null and void.