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BENJAMIN NAVARRO v. SECOND LAGUNA DEVELOPMENT BANK

FACTS:

The petitioners, Spouses Benjamin Navarro and Rosita Fortea, filed a complaint against Second Laguna Development Bank, Spouses Domalito Velasco and Esther Navarro, Luciana Navarro, and Isaac Guzman and Vilma Esporlas, for annulment of foreclosure of mortgage and consolidation of ownership and damages. The suit involves a 1/6 portion of Lot No. 1513-A located in Alabang, Muntinlupa, which was originally owned by the late Catalino Navarro and his wife Consuelo Hernandez. On December 4, 1968, 5/6 of the lot was sold to their children, including Benjamin and Rosita Navarro. However, without the knowledge and consent of Benjamin and Rosita Navarro, Spouses Domalito Velasco and Esther Navarro, along with Luciana Navarro, executed a falsified Deed of Absolute Sale, making it appear that the entire lot was sold to Spouses Velasco. Consequently, the title to the property was transferred to Spouses Velasco, who then mortgaged it to Second Laguna Development Bank. The bank foreclosed the mortgage and acquired ownership of the property. Benjamin and Rosita Navarro filed a complaint seeking annulment of the mortgage and cancellation of the bank's title, claiming that their signatures in the Deed of Absolute Sale were falsified. The trial court dismissed the complaint and declared Spouses Guzman as the lawful owners of the property. The Court of Appeals affirmed the trial court's decision with modifications on appeal.

ISSUES:

  1. Whether the sale of the lot with respect to petitioners' 1/6 share is void ab initio due to the falsification of their signatures in the Deed of Absolute Sale.

  2. Whether the mortgage contract involving petitioners' share is void.

  3. Whether respondent spouses Guzman are purchasers in good faith.

RULING:

  1. The sale of the lot with respect to petitioners' 1/6 share is void ab initio due to the falsification of their signatures in the Deed of Absolute Sale.

  2. The mortgage contract involving petitioners' share is void.

  3. Respondent spouses Guzman are purchasers in good faith.

PRINCIPLES:

  • A sale is void if it is tainted with fraud, such as the falsification of signatures. In this case, the sale of the lot with respect to petitioners' share is considered void ab initio due to the falsification of their signatures in the Deed of Absolute Sale.

  • A void contract produces no legal effect whatsoever and cannot be ratified. Thus, the mortgage contract involving petitioners' share, which was based on the void sale, is also considered void.

  • In order to establish bad faith, the party alleging it must provide evidence to substantiate the claim. In this case, there is no evidence to establish the bad faith of respondent spouses Guzman, therefore, they are considered purchasers in good faith.