G.R. No. 33106, October 15, 1930
ERNESTINA ORTALIZ, ET AL., plaintiffs-appellants, vs. THE REGISTRAR OF DEEDS OF THE PROVINCE OF OCCIDENTAL NEGROS, ET AL., defendants. PHILIPPINE NATIONAL BANK, appellant.

FACTS

The plaintiffs, Ernestina, Elisa, and Jose Ortaliz, were declared the sole legitimate heirs of the deceased spouses Jose Ortaliz y Jordan and Vicenta Montilla. They sought the annulment of a court order dated December 21, 1918, which authorized the judicial administratrix of the estates to execute a power of attorney in favor of Gil Montilla to mortgage the estate properties. Pursuant to this authority, mortgages were executed in favor of the Philippine National Bank (PNB) to secure obligations of the Maao Sugar Central Co., Inc., a corporation in which the estates had no interest. The plaintiffs contended that the court order and the subsequent mortgages were void because: (1) the authorization was granted without the written consent of the heirs as required by law; (2) the mortgage was not for the benefit of the estates but for a third-party corporation; and (3) the administratrix had no authority to mortgage the properties for such purpose. PNB defended its mortgages, claiming it was a mortgagee in good faith and for value, relying on the court order and the annotations on the certificates of title.

ISSUE

Whether the court order authorizing the administratrix to mortgage the estate properties and the mortgages executed pursuant thereto are valid.

RULING

No. The Supreme Court declared the court order and the subsequent mortgages null and void ab initio. The authority granted to the administratrix to mortgage estate properties under Section 753 of the Code of Civil Procedure required the written consent of the heirs, which was not obtained. The law mandates strict compliance with this requirement for the validity of any sale or mortgage of estate property. Since the essential legal requisite was absent, the authorization and the mortgages derived therefrom were invalid. The Court rejected PNB’s claim of being a mortgagee in good faith, holding that the bank, as a party dealing with an agent, was bound to ascertain the scope and legality of the agent’s authority. The annotations in the registry indicated the mortgage was for the benefit of the estates, yet the bank accepted mortgages that clearly benefited a separate corporation. Consequently, the mortgages did not constitute a valid lien on the properties. The Court affirmed the order for the Registrar of Deeds to cancel the encumbrances annotated on the certificates of title.