G.R. No. 202324, June 04, 2018
CONCHITA GLORIA and MARIA LOURDES GLORIA-PAYDUAN, Petitioners vs. BUILDERS SAVINGS AND LOAN ASSOCIATION, INC., Respondent

FACTS

Petitioners Conchita Gloria and her daughter Maria Lourdes Gloria-Payduan filed a complaint to annul a real estate mortgage and promissory note over their property in Kamuning, Quezon City. They alleged that Benildo Biag, an acquaintance, deceived them into surrendering the owner’s duplicate certificate of title under the pretext of verifying and reconstituting it after a fire at the Registry of Deeds. Instead, Biag used the title to secure a loan from respondent Builders Savings and Loan Association, Inc. Petitioners claimed Conchita was fraudulently made to sign the loan documents, believing her daughter requested it, and that the documents also bore the forged signature of her deceased husband, Juan. They argued the documents were not notarized and were products of forgery and collusion, leading to an invalid foreclosure.
Builders Savings defended the validity of the mortgage, asserting its credit investigator personally met the supposed borrowers, including the deceased Juan Gloria, and verified identities. It contended that Conchita, a retired teacher, voluntarily mortgaged her property, as evidenced by her submission of supporting documents like floor plans and tax declarations. The Regional Trial Court initially dismissed the complaint but, upon reconsideration, declared the mortgage void, finding consent was vitiated by fraud and that Builders Savings failed to exercise due diligence.

ISSUE

Whether the real estate mortgage and promissory note are null and void due to forgery and the mortgagee’s lack of due diligence.

RULING

The Supreme Court granted the petition, reinstating the RTC’s order annulling the mortgage. The legal logic rests on the fundamental principle that a forged signature renders a mortgage void and conveys no rights. The Court found the signature of the deceased Juan Gloria on the mortgage documents to be a clear forgery, as he had died years before the loan application. This forgery alone invalidates the entire contract. Furthermore, the Court emphasized the heightened degree of diligence required of banks and financial institutions when dealing with registered lands.
Builders Savings failed to exercise this required diligence. The application presented multiple red flags: the loan applicant was not the registered owner, the co-mortgagor was already deceased, and the transaction involved a third party (Biag) presenting the owner’s duplicate title. A prudent mortgagee should have conducted a more thorough investigation, including verifying the identities and civil status of the purported mortgagors beyond superficial checks. By failing to do so, Builders Savings cannot claim to be a mortgagee in good faith entitled to protection under the law. Consequently, the forged mortgage is a nullity, and the foreclosure proceedings derived from it are void.