G.R. No. 38384 ; November 3, 1933
Corazon Ch. Veloso y Ricablanca and Robustiano M. Rosales, plaintiffs-appellees, vs. La Urbana, Mutual Building and Loan Association, and Jose Maria del Mar, defendants. La Urbana, Mutual Building and Loan Association, appellant.

FACTS

Plaintiff Corazon Ch. Veloso was the registered owner of undivided portions of five parcels of land in Manila. Her brother-in-law, defendant Jose Maria del Mar, forged powers of attorney in the names of the plaintiffs, authorizing him to mortgage the properties. Using these forged documents, del Mar mortgaged the properties first to La Previsora Filipina and later to defendant La Urbana, which granted him loans totaling P13,475. The mortgages were registered, and the owner’s duplicate certificates of title were delivered to La Urbana. Upon del Mar’s default, La Urbana foreclosed the mortgages and purchased the properties at public auction. The plaintiffs discovered the fraud and filed this action to annul the mortgages and recover damages. Del Mar was criminally convicted for falsification.

ISSUE

Whether the mortgages constituted by del Mar using forged powers of attorney are valid and binding against the registered owner, Corazon Ch. Veloso.

RULING

No. The Supreme Court affirmed the trial court’s judgment declaring the mortgages null and void. A forged power of attorney is without legal effect. Persons dealing with an agent are bound to ascertain, at their peril, the existence and extent of the agent’s authority. La Urbana was negligent in failing to verify the genuineness of the forged powers of attorney, and it cannot claim to be an innocent mortgagee for value. The registration of the mortgages did not validate them as they were based on void instruments. The Court reserved to La Urbana any right of action it may have against del Mar or the Insular Treasurer under the Torrens Act ( Act No. 496 ).

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