G.R. No. L-26852 March 25, 1970
LEONEA MALLORCA, SOTERA MALLORCA, accompanied by her husband Ciriaco Mallorca, MAURICIO CUANGA, SOFRONIO CUANGA, PEDRO DANIEL, BIRIANA DANIEL, accompanied by her husband Ciriaco Zerrudo and OLIVA DANIEL, accompanied by her husband Silvestre Federico, plaintiffs-appellees, vs. ALFREDO DEOCAMPO, ET AL., defendants, DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.

FACTS

The case involves a 6/8 portion of Cadastral Lot No. 2199 of Dingle, Iloilo, originally registered under the names of Paulo Mallorca (married to Pascuala Bantod), Maria Mallorca, and Ciriaca Mallorca, each with a 2/8 share. Paulo died in 1937, Pascuala in 1946, and Maria and Ciriaca died in 1942 in Bataan. The owners’ duplicate certificate of title was left in the Office of the Register of Deeds. On August 15, 1955, three impostors, posing as the deceased Paulo, Maria, and Ciriaca Mallorca, executed a deed of sale for the 6/8 portion in favor of defendant Alfredo Deocampo. This deed was registered, and a new transfer certificate of title was issued in Deocampo’s name, along with the remaining co-owners. Deocampo later acquired the remaining shares, consolidated title in his name, and subsequently mortgaged the lot to the Development Bank of the Philippines (DBP) on August 1, 1957. The mortgage was registered. Upon Deocampo’s default, DBP foreclosed and purchased the lot at auction. The heirs of the deceased registered owners filed an action to annul the sale, mortgage, and foreclosure on grounds of fraud and forgery.

ISSUE

Whether or not the appellant Development Bank of the Philippines is an innocent mortgagee for value, such that its mortgage rights over the lot are valid despite the forged deed of sale that constituted Deocampo’s title to a 6/8 portion.

RULING

Yes, the Development Bank of the Philippines is an innocent mortgagee for value. The Supreme Court reversed the trial court’s annulment of the mortgage and foreclosure sale. At the time of the mortgage, the Torrens title to the lot was in Deocampo’s name, with no indication of any defect on its face. The bank relied on the certificate and had no knowledge of the forgery. As a mortgagee of registered land, it was not obligated to look beyond the certificate to investigate the mortgagor’s title. The doctrine of an innocent purchaser for value applies to an innocent mortgagee for value. While Deocampo’s title was void as to the 6/8 portion due to the forgery, the bank’s mortgage rights remained valid because it acted in good faith and without negligence. The original owners’ negligence in leaving their duplicate certificate with the Register of Deeds facilitated the forgery. The Court applied the principle that where one of two innocent parties must suffer due to a third party’s wrong, the loss falls on the one who enabled the wrong. Therefore, the mortgage and foreclosure sale in favor of DBP were declared valid.