G.R. No. 137471; January 16, 2002
GUILLERMO ADRIANO, petitioner, vs. ROMULO PANGILINAN, respondent.

FACTS

Petitioner Guillermo Adriano entrusted the owner’s duplicate copy of his Transfer Certificate of Title (TCT No. 337942) to a relative, Angelina Salvador, for the purpose of securing a mortgage loan. Without Adriano’s knowledge or consent, Salvador, together with an impostor posing as Adriano, mortgaged the property to respondent Romulo Pangilinan, a businessman engaged in lending money secured by real estate mortgages. Pangilinan released a loan of ₱60,000.00 to the impostor after verifying the genuineness of the title with the Registry of Deeds but without personally verifying the true identity of the mortgagor. Adriano later discovered the annotated mortgage on his title, denied executing the deed or receiving the money, and filed an action for the nullity of the mortgage and reconveyance of the title.
The Regional Trial Court (RTC) declared the real estate mortgage null and void, ordering Pangilinan to reconvey the title. The Court of Appeals (CA) reversed the RTC, dismissing Adriano’s complaint. The CA applied the equitable principle that as between two innocent parties, the one who made the fraud possible must bear the loss, holding Adriano negligent for entrusting his title to Salvador.

ISSUE

Whether the Court of Appeals erred in reversing the RTC and dismissing Adriano’s complaint for the nullification of the real estate mortgage.

RULING

Yes, the Supreme Court reversed the Court of Appeals and reinstated the RTC decision. The legal logic centers on the duty of a mortgagee, especially one engaged in the business of lending, to exercise due diligence. While Adriano was negligent in entrusting his title, this negligence was not the proximate cause of the loss. The pivotal factor was Pangilinan’s failure to exercise the requisite prudence in ascertaining the identity of the person posing as the registered owner. As a professional money lender, he was in the immediate, primary, and overriding position to prevent the fraud by taking simple verification steps beyond checking the document’s facial authenticity. The law requires such a mortgagee to go beyond the title and investigate the identity of the mortgagor. Consequently, where loss results from the concurrent negligence of two persons, it should be borne by the party whose negligence was the proximate cause. Equity, which supplements but does not supplant the law, cannot favor Pangilinan, who had the superior means to avert the loss. The mortgage, executed by an impostor, was therefore void.