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The Facts:
-Lots 24 and 25 were registered in the name of Candido Caluza under Transfer Certificate of Title
(TCT) No. 160544. Purificacion Arce-Caluza (Purificacion) is his second wife. Corazon Caluza-
Bamrungcheep (Corazon) is his legally adopted daughter during his first marriage. After Candido died
in 1981, Corazon and Purificacion executed a Deed of Extrajudicial Settlement adjudicating between
themselves the properties of Candido, as the latter's surviving heirs.
-Lots 24 and 25, together with Lot 23, which was registered in Candido's name, were adjudicated to
Corazon. Purificacion got Candido's land in Bulacan. However, administration of Lots 23, 24 and 25
were entrusted to Purificacion by Corazon as she had to leave for Thailand after her marriage to a
Unknown to Corazon, Purificacion executed an Affidavit of Loss alleging that the TCTs of Lots No 23,
24 and 25 were lost and could no longer be found. She filed a petition for the issuance of new owner's
duplicates of title alleging that she was her deceased husband's sole heir. The petition was granted
and new TCTs were issued in Purificacion's name. Purificacion then sold the lots to Catalina Remorin
(Catalina) and Catalina mortgaged Lots 24 and 25 to L & R Lending Corp.
- Corazon filed a complaint for reconveyance and damages against Purificacion and Catalina upon
discovery of sale. Plaintiff alleged that the two defendants connived with each other in transferring
the three lots in their names through simulated sales. Corazon likewise filed a criminal complaint for
falsification and perjury against the two.
-Catalina executed a Deed of Transfer, signed by Purificacion as witness, admitting the wrong they did
in illegally transferring the lots in their names and acknowledging Corazon to be the rightful owner
under the Deed of Extrajudicial Settlement. Corazon presented the Deed of Transfer before the
Register of Deeds of Quezon City and Catalina's TCT over Lots 24 and 25 was cancelled and a TCT was
issued in Corazon's name.
-Prior thereto, however, Catalina mortgaged Lots 24 and 25 to respondent Laurelia Caluza-Valenciano
(Laurelia) to pay off her mortgage indebtedness to L & R Lending Corporation. The inscription of the
mortgage in favor of Laurelia was carried over to Corazon's TCT.
- Corazon, Purificacion, Catalina, and Laurelia executed a Memorandum of Agreement to settle Civil
Case. It stipulated that Corazon cedes and grants unto and in favor of Purificacion full ownership and
other real rights over the southernmost apartment as well as the portion of the lot occupied thereby
subject to the condition that Purificacion shall assume satisfaction of the mortgage debt contracted
by Catalina in favor of Laurelia and shall cause transfer of said annotation to the title to be issued in
her (Purificacion's) name; and furthermore that any and all expenses for segregation survey, re-titling
and annotation of said mortgage shall be shouldered by said Purificacion Arce-Caluza;
-Before the agreement could be implemented, Purificacion died. Consequently, another compromise
agreement was executed stating that Corazon and Catalina agreed that title to the southernmost
apartment as well as the portion of the lot occupied thereby shall be transferred direct to its
interested buyer with defendant Catalina assuming and paying (from the proceeds of the sale) her
mortgage obligation with Laurelia; any and all expenses for segregation survey, re-titling, capital gains
taxes and those connected with the annotation and/or release of said mortgage should now be
shouldered by defendant Catalina O. Remorin;
- Corazon then sold the subject Lot to Laurelia by virtue of a deed entitled "Sale of Unsegregated
Portion of Land." However, Catalina also sold the same lot to Macapagal claiming to be authorized
under the Compromise Agreement.
- Macapagal sought to nullify the sale executed by Corazon in favor of Laurelia and to declare valid
the one executed by Catalina in her favor.
- RTC rendered judgment in favor of petitioner. Corazon and Laurelia appealed to the Court of
Appeals which reversed the decision of the trial court.
-Macapagals contention: the sale executed by Catalina in her favor should prevail over the one
executed by Corazon in favor of Laurelia, as Catalina was the one authorized to sell the disputed
property under the Compromise Agreement
- Respondents contention: Corazon, the registered owner of the disputed property, did not give
Catalina authority to sell the lot. It was provided in the Agreement that Catalina shall pay off her
mortgage obligation and incidental expenses from the proceeds of the sale only to reassure Catalina
that her obligation would be paid in the event that Corazon sells the property.
Issue: WON Catalina was authorized to sell the land as provided by their Compromise Agreement.
-The Compromise Agreement dated September 9, 1988 cannot be taken as a waiver of Corazon's
authority to sell and grant thereof to Catalina considering that the Agreement merely provided that
Catalina pay off her mortgage obligation and incidental expenses from the proceeds of the
sale. Although it was imperative, as part of the compromise, that the money come from the proceeds
of the sale, it was not expressly stated, nor did it necessarily mean, that Catalina herself be the one to
directly sell the property. Authority to sell must be couched in clear and unmistakable language.
-Moreover, intent to give Catalina authority to sell may not be easily attributed to Corazon
considering that the latter had to file the reconveyance case as a result of Purificacion's and Catalina's
acts of transferring the disputed lot in their names.
- In contract interpretation, analysis is not to be limited to the words used in the contract, as they
may not accurately reflect the parties' true intent. If the words of the contract appear to be contrary
to the evident intention as revealed by the circumstances, the latter shall prevail over the former.
-The fact that the deed of sale between respondents Corazon and Laurelia did not accurately reflect
the true consideration thereof is not cause for declaration of its nullity. When the parties intended to
be bound by the contract except that it did not reflect the actual purchase price of the property, there
is only a relative simulation of the contract which remains valid and enforceable. It cannot be
declared null and void since it does not fall under the category of an absolutely simulated or fictitious
contract. The contract of sale is valid but subject to reformation.
-Petition denied

POBLETE, respondent.

The Facts:
-Poblete obtained a P300,000.00 loan from Kabalikat ng Pamayanan ng Nagnanais Tumulong at
Yumaman Multi-Purpose Cooperative (Kapantay). Poblete mortgaged a Lot(lot 29) that she owned to
Kapantay to guarantee payment of the loan. Kapantay, in turn, used the OCT of Lot 29 as collateral
under its Loan with Land Bank.
- Poblete decided to sell Lot No. 29 to pay her loan. According to Poblete, Maniego agreed to buy Lot
No. 29 for P900,000.00, but Maniego suggested that a deed of absolute sale for P300,000.00 be
executed instead to reduce the taxes. Thus, Poblete executed the Deed of Absolute Sale (dated 9
November 1998) with P300,000.00 as consideration.
-Poblete asked her son-in-law, Balen, to deliver the Deed to Maniego and to receive the payment in
her behalf. Balen testified that he delivered the Deed but he did not receive from Maniego the agreed
purchase price. Maniego told Balen that he would pay the amount upon his return from the United
States. Poblete stated in her Affidavit that she agreed to have the payment deposited in her Land
Bank Savings Account.
- Maniego paid Kapantay's Loan for P448,202.08. On 8 June 2000, Maniego applied for a loan of
P1,000,000.00 with Land Bank, using OCT of Lot 29 as collateral. Land Bank alleged that as a condition
for the approval of the loan, the title of the collateral should first be transferred to Maniego.
-Pursuant to a Deed of Absolute Sale (dated 11 August 2000), the Register of Deeds issued a TCT in
Maniego's name. On 15 August 2000, Maniego and Land Bank executed a Credit Line Agreement and
a Real Estate Mortgage over Maniegos TCT.
-Maniego failed to pay the loan with Land Bank. Land Bank filed an Application for Extra-judicial
Foreclosure of Real Estate Mortgage (total indebtedness: P1,154,388.88)
- Poblete filed a Complaint for Nullification of the Deed and alleged that despite her demands on
Maniego, she did not receive the consideration of P900,000.00 for Lot No. 29. She claimed that
without her knowledge, Maniego used the Deed dated 9 November 1998 to acquire OCT from
Kapantay. Poblete claimed that the Deed dated 11 August 2000 bearing her and her deceased
husband's, Primo Poblete, supposed signatures was a forgery as their signatures were forged. Poblete
also filed a case for estafa through falsification of public document against Maniego.
-Land Bank filed its Answer and claimed that it is a mortgagee in good faith and it observed due
diligence prior to approving the loan by verifying Maniego's title with the Office of the Register of
-Maniego denied the allegations of Poblete and claimed that it was Poblete who forged the Deed
dated 11 August 2000. He also alleged that he paid the consideration of the sale to Poblete and even
her loans from Kapantay and Land Bank.
-RTC: decision in favor of Poblete. The RTC ruled that the sale between Poblete and Maniego was a
nullity. The RTC found that the agreed consideration was P900,000.00 and Maniego failed to pay the
consideration. Furthermore, the signatures of Poblete and her deceased husband were proven to be
forgeries. The RTC also ruled that Land Bank was not a mortgagee in good faith because it failed to
exercise the diligence required of banking institutions.
-CA: affirmed RTCs decision.
-It is a well-entrenched rule that a forged or fraudulent deed is a nullity and conveys no
title. Moreover, where the deed of sale states that the purchase price has been paid but in fact has
never been paid, the deed of sale is void ab initiofor lack of consideration. Since the Deed dated 11
August 2000 is void, the corresponding TCT issued pursuant to the same deed is likewise void. Since
TCT has been declared void by final judgment, the Real Estate Mortgage constituted over it is also
void. In a real estate mortgage contract, it is essential that the mortgagor be the absolute owner of
the property to be mortgaged; otherwise, the mortgage is void.
-There is a doctrine of "the mortgagee in good faith" based on the rule that buyers or mortgagees
dealing with property covered by a Torrens Certificate of Title are not required to go beyond what
appears on the face of the title. However, it has been consistently held that this rule does not apply to
banks, which are required to observe a higher standard of diligence. A bank whose business is
impressed with public interest is expected to exercise more care and prudence in its dealings than a
private individual, even in cases involving registered lands.
-Based on the evidence, Land Bank processed Maniego's loan application upon his presentation of
OCT which was still under the name of Poblete. Land Bank even ignored the fact that Kapantay
previously used Poblete's title as collateral in its loan account with Land Bank. The records do not
even show that Land Bank investigated and inspected the property to ascertain its actual occupants.
Land Bank merely mentioned that it inspected Lot No. 29 to appraise the value of the property. Land
Bank claims that it conditioned the approval of the loan upon the transfer of title to Maniego, but
admits processing the loan based on Maniego's assurances that title would soon be his. Because of
Land Bank's haste in granting the loan, it appears that Maniego's loan was already completely
processed while the collateral was still in the name of Poblete. Since Land Bank is not a mortgagee in
good faith, it is not entitled to protection.
-On the allegation that Poblete is in pari delicto with Maniego, we find the principle inapplicable.
The pari delicto rule provides that "when two parties are equally at fault, the law leaves them as they
are and denies recovery by either one of them." We adopt the factual finding of the RTC and the CA
that only Maniego is at fault.
-Petition denied