Era, Jogi and Naldo inherited a vast tract of land from their beloved parents, together with the ancestral house erected on it.
Jogi and Naldo allowed Era to administer and manage the property since she lived in the ancestral house anyway.
Unknown to Jogi and Naldo, Era applied a loan with Bangko Mayaman. In support of her application, she submitted, among others, a notarized Special Power of Attorney purportedly executed by her siblings and duly witnessed by their friends. The SPA allegedly authorized Era to obtain a loan and mortgage their inherited properties.
Era was overjoyed when the loan was approved. She then executed a real estate mortgage over the subject property. This made sure that the lien was duly annotated on tax declaration covering the mortgaged property.
Era defaulted in the payment of her loan obligation. Expectedly, the bank extra-judicially foreclosed the mortgaged property. It emerged as the highest bidder in the public auction sale. Since Era failed to redeem the subject property within the redemption period despite notice, the latest tax declarations in the names of the siblings were cancelled and new tax declarations in the name of the bank were issued.
Jogi and Naldo were dumbfounded when they found that they were co-owners no more. They immediately wrote the bank and disowned Era’s acts. Jogi and Naldo claimed that they never authorized Era to obtain a loan and mortgage the properties they co-owned.
They claimed that the SPA was spurious since their signatures were faked. They even claimed that they never appeared before the notary public.
The bank maintained, among others, the validity of the SPA and its right to rely on all documents that Era submitted given that they were notarized.
Jogi and Naldo were thus constrained to file a complaint for the declaration of nullity of documents, recovery of possession and ownership, and damages with prayer for the issuance of a writ of preliminary injunction against Era, the bank and Office of the Provincial Sheriff.
In the course of the court proceedings, the persons who allegedly witnessed the execution of the document categorically denied their presence and participation in the signing and notarization of the SPA. Be that as it may, the bank did not present the notary public who allegedly notarized the SPA.
Q: What is the evidentiary weight and legal significance of notarized documents?
A: Generally, a notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public, and have in their favor the presumption of regularity which may only be rebutted by clear and convincing evidence.
However, the presumptions that attach to notarized documents can be affirmed only so long as it is beyond dispute that the notarization was regular.
Q: What should the bank have done when the witnesses to the execution of the SPA denied having appeared before notary public?
A: The bank should have presented the notary public who allegedly notarized the SPA in order to refute the claim of Jogi, Naldo and their witnesses. The testimony of the notary public is important because it is he who can certify to the due execution and delivery of a document under his hand and seal which would thus give the document the force of evidence.
Q: What is the effect of the bank’s failure to present the notary public?
A: The bank failed to sufficiently establish the regularity in the execution of the SPA. Thus, the presumption of regularity accorded by law to notarized documents can no longer apply. The SPA becomes a mere private document.
Consequently, the questioned SPA is to be examined under the parameters of Section 20, Rule 132 of the Rules of Court which provides that “[b]efore any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either (a) [b]y anyone who saw the document executed or written, or (b) [b]y evidence of the genuineness of the signature or handwriting of the maker.”
Q: Is the entire real estate mortgage which was executed pursuant to the forged SPA null and void in its entirety?
A: No, it is null and void but only with respect to the shares of Jogi and Naldo. While Era, as herself a co-owner, by virtue of Article 493 of the Civil Code, had the right to mortgage or even sell her undivided interest in the said properties, she, could not, however, dispose of or mortgage the subject properties in their entirety without the consent of the other co-owners.
Accordingly, the validity of the subject real estate mortgage and the subsequent foreclosure proceedings therefore conducted in favor of the bank should be limited only to the portion which may be allotted to Era in the event of partition.
Q: Is the loan Era obtained null and void given the partial invalidity of the real estate mortgage?
A: No, the the partial invalidity of the subject real estate mortgage brought about by the forged status of the subject SPA would not result into the partial invalidation of the loan obligation principally entered into by the bank and Era.
This is because mortgage being a mere accessory agreement and does not affect the principal contract of loan. The mortgage, while void, can still be considered as an instrument evidencing the indebtedness.
What is lost is merely the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary action.
(Source: Rural Bank of Cabadbaran, Inc. vs. Yap. G.R. No. 178451, July 30, 2014)
Ma. Soledad Deriquito-Mawis is Dean of Lyceum of the Philippines University; Chairperson for the Philippine Association of Law Schools; and founder of Mawis Law Office
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