The Supreme Court, in this case, emphasized the critical importance of authenticating documents, particularly real estate mortgages, to protect property rights. The Court ruled that a real estate mortgage (REM) with a forged signature and a defective acknowledgment lacks the necessary legal validity. This means the mortgage cannot be enforced, and the property owner retains their rights. This decision highlights the necessity for lenders to verify the authenticity of signatures and ensure proper notarization to avoid potential legal challenges.

Unmasking the Mortgage: Can a Forged Signature and Flawed Notarization Doom a Real Estate Deal?

The case revolves around a disputed real estate mortgage allegedly executed by Virgilio Dycoco in favor of Adelaida Orina. Dycoco, represented by his attorneys-in-fact, claimed his signature on the mortgage was forged and that he was in the United States when it was purportedly signed. Orina, on the other hand, insisted on the mortgage’s validity. The central legal question is whether the presented real estate mortgage, challenged for forgery and improper notarization, could legally transfer property rights.

The Regional Trial Court (RTC) initially dismissed Dycoco’s complaint, but the Court of Appeals (CA) affirmed this decision. The CA emphasized that Dycoco himself needed to testify to authenticate his presented evidence, such as his U.S. passport, which showed he was not in the Philippines on the mortgage’s execution date. The Supreme Court (SC), however, reversed the CA’s decision, scrutinizing the presented evidence and emphasizing the significance of proper document authentication.

Central to the Supreme Court’s decision was the acknowledgment portion of the real estate mortgage, which was found to be incomplete. The acknowledgment lacked the name of the person who appeared before the notary public. The Court emphasized the importance of proper notarization, citing that documents acknowledged before a notary public are considered public documents, but noted that this status is contingent on proper execution. Because of the incomplete acknowledgment, the REM did not hold the weight of a public document, making it necessary to prove the document as if it was a private document under the Rules of Court.

“Documents acknowledged before a notary public, except last wills and testaments, are public documents. Since the subject REM was not properly notarized, its public character does not hold.”

Since the REM was treated as a private document, the court relied on Section 20, Rule 132 of the Rules of Court. The provision states:

“Section 20. Proof of private document. – Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.”

The Court observed that Orina only presented a photocopy of the REM, and failed to present the original document for signature comparison. Nor did she bring forward any other witnesses, or even give an explanation as to why she could not. On the other hand, Dycoco’s attorneys-in-fact presented his U.S. passport and a Special Power of Attorney (SPA) executed in the U.S., bearing his notarized signature. The Court noted that the respondents even commented on Dycoco’s formal offer of evidence that the passport was “immaterial, irrelevant and impertinent.” The Court took it as a virtual admission of the authenticity of the entries in the passport. The SPA was notarized and certified in accordance with Public Act No. 2103, which, according to the Court, effectively removes the necessity of presenting Dycoco himself on the witness stand.

Section 2. An instrument or document acknowledged and authenticated in a foreign country shall be considered authentic if the acknowledgment and authentication are made in accordance with the following requirements:

(a) The acknowledgment shall be made before (1) an ambassador, minister, secretary of legation, chargé d’affaires, consul, vice-consul, or consular agent of the United States, acting within the country or place to which he is accredited, or (2) a notary public or officer duly authorized by law of the country to take acknowledgments of instruments or documents in the place where the act is done.

(b) The person taking the acknowledgment shall certify that the person acknowledging the instrument or document is known to him, and that he is the same person who executed it, and acknowledged that the same is his free act and deed. The certificate shall be under his official seal, if he is by law required to keep a seal, and if not, his certificate shall so state. In case the acknowledgment is made before a notary public or an officer mentioned in subdivision (2) of the preceding paragraph, the certificate of the notary public or the officer taking the acknowledgment shall be authenticated by an ambassador, minister, secretary of legation, chargé d’affaires, consul, vice-consul, or consular agent of the United States, acting within the country or place to which he is accredited. The officer making the authentication shall certify under his official seal that the person who took the acknowledgment was at the time duly authorized to act as notary public or that he was duly exercising the functions of the office by virtue of which he assumed to act, and that as such he had authority under the law to take acknowledgment of instruments or documents in the place where the acknowledgment was taken, and that his signature and seal, if any, are genuine.

This ruling highlights the importance of verifying the authenticity of documents, especially in real estate transactions. Lenders and creditors must take extra precautions to ensure that the person signing the mortgage is indeed the property owner and that the document is properly notarized. Failure to do so can result in the mortgage being declared void and unenforceable. The case emphasizes the importance of adhering to the formalities required by law to protect property rights and ensure the validity of legal documents. Claiming to be a witness, Evelyn Sagalongos testified that Dycoco was in the office of the Notary Public when the mortgage was signed. But she did not appear as one of the witnesses in the REM. Because of this the Court gave no merit to her argument.

FAQs

What was the key issue in this case?	The primary issue was whether a real estate mortgage with a purportedly forged signature and a defective acknowledgment could be considered valid and enforceable.
What made the acknowledgment defective?	The acknowledgment was incomplete because it did not include the name of the person who personally appeared before the notary public, rendering it non-compliant with legal requirements.
Why was the presentation of a photocopy of the REM a problem?	Presenting a photocopy without explaining the absence of the original prevented a proper comparison of signatures to verify the authenticity of the document.
What evidence did Dycoco present to support his claim of forgery?	Dycoco presented his U.S. passport showing he was in the United States on the date the mortgage was allegedly signed, along with a Special Power of Attorney bearing his authentic signature.
What is the significance of Public Act No. 2103 in this case?	Public Act No. 2103 provides the requirements for authenticating documents executed outside the Philippines, and compliance with this law strengthens the validity of Dycoco’s SPA.
What does the ruling mean for lenders?	The ruling underscores the need for lenders to thoroughly verify the identity of borrowers and the authenticity of signatures on mortgage documents to avoid potential legal challenges.
What happens when a real estate mortgage is declared void?	If a real estate mortgage is declared void, it cannot be enforced, and the property owner retains full rights and ownership of the property, free from the mortgage claim.
Why was Sagalongos’s testimony discredited by the court?	Sagalongos’s testimony was discredited because she claimed Dycoco was present during the signing, which contradicted the U.S. passport entries showing he was out of the country; she also claimed to be a witness but did not appear as one in the mortgage.

In conclusion, the Supreme Court’s decision serves as a reminder of the stringent requirements for the validity of real estate mortgages. It highlights the necessity for meticulous verification of signatures, proper notarization, and adherence to legal formalities in property transactions. Failure to comply with these requirements can render a mortgage unenforceable, protecting property owners from fraudulent claims.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Virgilio Dycoco v. Adelaida Orina, G.R. No. 184843, July 30, 2010