GR 112160; (February, 2000) (Digest)
G.R. No. 112160 February 28, 2000
OSMUNDO S. CANLAS and ANGELINA CANLAS, petitioners, vs. COURT OF APPEALS, ASIAN SAVINGS BANK, MAXIMO C. CONTRARES and VICENTE MAÑOSCA, respondents.
FACTS
Petitioners Osmundo and Angelina Canlas executed a Special Power of Attorney authorizing Vicente Mañosca to mortgage their two parcels of land to raise capital for a joint business venture. They later agreed to sell the properties to Mañosca, with a portion of the purchase price to serve as Osmundo’s investment. Mañosia issued postdated checks, one of which was unfunded, and obtained the titles. Mañosca, with the aid of impostors posing as the Canlas spouses, mortgaged the properties first to a private individual and subsequently to respondent Asian Savings Bank (ASB) to secure a loan. Upon Mañosca’s default, ASB extrajudicially foreclosed the mortgage.
The Canlas spouses, claiming the mortgage was executed without their authority by impostors, sued for annulment of the mortgage and to enjoin the foreclosure sale. The Regional Trial Court ruled in their favor, declaring the mortgage null and void. The Court of Appeals reversed, dismissing the complaint and holding the petitioners negligent in entrusting their titles to Mañosca, thereby enabling the fraud. The CA also awarded damages to ASB.
ISSUE
Whether the Court of Appeals erred in upholding the validity of the real estate mortgage and in finding the petitioners negligent, thus precluding relief.
RULING
The Supreme Court granted the petition and reinstated the RTC decision. The legal logic centers on the nullity of the mortgage contract and the applicable standard of diligence. A mortgage contract is void if executed by an impostor and not by the absolute owner of the property. It was conclusively established that impostors, not the true Canlas spouses, signed the mortgage deed in favor of ASB. Therefore, the contract was a complete nullity from its inception.
Regarding negligence, the Court applied the higher degree of diligence required of banks, which is more than that of a good father of a family. Banks, being imbued with public interest, must exercise extraordinary diligence in their dealings, including the verification of the identity of parties and the validity of titles offered as collateral. ASB failed in this duty by not taking adequate steps to ensure the persons appearing before it were the true registered owners. The negligence of a client in entrusting titles to another does not excuse the bank’s own failure to exercise the requisite diligence in verifying identities. Consequently, the petitioners’ alleged negligence did not bar them from seeking the annulment of a void contract. The award of damages to ASB by the CA was thus unwarranted.