DELFIN DOMINGO DADIS, Petitioner

vs.
SPOUSES MAGTANGGOL DE GUZMAN and NORA Q. DE GUZMAN, and THE
REGISTER OF DEEDS OF TALAVERA, NUEV A ECIJA, Respondent

G.R. No. 206008, June 7, 2017

FACTS:

Delfin Domingo Dadis filed a Complaint for reconveyance and damages against Spouses De
Guzman alleging among that the spouses were the registered owners of a parcel of land; their
daughter, Marissa, entered into a contract of real estate mortgage over the subject property in their
favor to secure a loan obligation. Moreover, they made it appear that Marissa was authorized by
the Spouses Dadis by virtue of a Special Power of Attorney, however, the SPA was forged because
it was never issued by him or Corazon as the signatures contained therein are not theirs, especially
since he was in the United States of America at the time.

In their Answer, the Spouses De Guzman stated that: they have no knowledge as regards the
supposed falsity of the SPA presented by Marissa and Corazon at the time the latter pleaded to
accommodate them into entering a mortgage contract. They have no knowledge that Delfin was
not in the Philippines at the time of the execution of the SPA and they were in good faith from the
time the property was mortgaged until it was foreclosed and they were able to help Delfin’s family,
who was financially distressed at the time.

The Regional Trial Court established that Delfin was not in the Philippines, thus, he could not have
signed the SPA authorizing Marissa to mortgage the property. Without his written consent, the
mortgage is void since such act is not merely an act of administration but of ownership or dominion
on the part of Corazon.

The CA reversed and set aside the RTC’s decision. It conceded that, as found by the RTC and
undisputed by the parties, the SPA had been forged. As to the issue of whether Magtanggol is a
mortgagee in good faith and for value, it resolved in the affirmative and noted that the purported
SPA bears the signatures of both Corazon Pajarillaga-Dadis and the plaintiff-appellee Delfin
Domingo Dadis, the registered owners of the property subject of the real estate mortgage and that
it was duly notarized.

Issue: Whether Magtanggol is a mortgagee in good faith.

Ruling:

No.

The doctrine of mortgagee in good faith presupposes that the mortgagor, who is not the rightful
owner of the property, has already succeeded in obtaining a Torrens title over the property in his
or her name and that, after obtaining the said title, he or she succeeds in mortgaging the property
to another who relies on what appears on the said title.

In this case, Marissa is undoubtedly not the registered owner of the subject lot; and the certificate
of title was in the name of her parents at the time of the mortgage transaction. She merely acted as
the attorney-in-fact of Corazon and Delfin by virtue of the falsified SPA. The protection accorded
by law to mortgagees in good faith cannot be extended to mortgagees of properties that are not yet
registered with the RD or registered but not under the mortgagor’s name.

When the mortgagee does not directly deal with the registered owner of the real property, like an
attorney-in-fact of the owner, it is incumbent upon the mortgagee to exercise greater care and a
higher degree of prudence in dealing with such mortgagor.
Cavite Development Bank v. Spouses Lim explained the doctrine of mortgagee in good faith in
this wise:

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of “the mortgagee
in good faith” based on the rule that all persons dealing with the property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title. The public interest in upholding the indefeasibility of a certificate of title, as
evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or
mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.

As Abad v. Sps. Guimba reminded: x x x A person who deals with registered land through someone
who is not the registered owner is expected to look behind the certificate of title and examine all
factual circumstances, in order to determine if the mortgagor/vendee has the capacity to transfer
any interest in the land. One has the duty to ascertain the identity of the person with whom one is
dealing, as well as the latter’s legal authority to convey.

The law “requires a higher degree of prudence from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. While one who buys
from the registered owner does not need to look behind the certificate of title, one who buys from
one who is not the registered owner is expected to examine not only the certificate of title but all
factual circumstances necessary for [one] to determine if there are any flaws in the title of the
transferor, or in [the] capacity to transfer the land.” Although the instant case does not involve a
sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in
the term “purchaser.”

Similar to a buyer, the status of a mortgagee in good faith is never presumed but must be proven
by the person invoking it. Good faith connotes an honest intention to abstain from taking
unconscientious advantage of another. “Good faith, or the lack of it, is a question of intention. In
ascertaining intention, courts are necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may, with safety, be determined.”

We rule that, based on his own disclosures during the trial, Magtanggol could not be considered
as a mortgagee in good faith because he had actual notice of facts that should have put him on
deeper inquiry into Marissa’s capacity to sell. He could not feign ignorance of Delfin’s absence or
whereabouts. The subject SPA was not yet existing at the time he first met Corazon and Marissa.

We rule that the evidentiary weight conferred upon the subject SPA with respect to its due
execution and the presumption of regularity in its favor was rebutted by clear and convincing
evidence. Both testimonial and documentary evidence presented by Delfin effectively overcame
and negated the legal presumptions. In the witness stand, he categorically denied that he signed
the SP A and that he executed such document before a notary public. Considering that the
notarization of the SPA is irregular, no probative value can be given thereto.

The falsity of the SPA could not be cured even if Magtanggol later on informed Delfin of the
mortgage transaction and of the proceedings leading to the property’s foreclosure, consolidation
of title, and issuance of a new title. The sale (or encumbrance) of conjugal property without the
consent of the husband was not merely voidable but void; hence, it could not be ratified. A void
contract is equivalent to nothing and is absolutely wanting in civil effects; it cannot be validated
either by ratification or prescription. Similar to other cases, Spouses Ravina v. Villa Abrille, et
al. already settled:

Significantly, a sale or encumbrance of conjugal property concluded after the effectivity of the
Family Code on August 3, 1988, is governed by Article 124 of the same Code that now treats such
a disposition to be void if done (a) without the consent of both the husband and the wife, or (b) in
case of one spouses inability, the authority of the court. Article 124 of the Family Code, the
governing law at the time the assailed sale was contracted, is explicit:

ART. 124. xxx These powers do not include the powers of disposition or encumbrance which must
have the authority of the court or the written consent of the other spouse. In the absence of such
authority or consent, the disposition or encumbrance shall be void.