In the case of Office of the Ombudsman v. Rico C. Manalastas, the Supreme Court ruled that a Register of Deeds is not liable for failing to discover a professionally falsified title during the registration process, absent evidence of bad faith or gross negligence. This decision clarifies the scope of a Register of Deeds’ responsibilities, emphasizing that registration is a ministerial act and that they are not required to be experts in detecting sophisticated forgeries. Practically, this protects public officers from liability when they act in good faith, while also underscoring the importance of due diligence for financial institutions in verifying the authenticity of documents.

Forged Titles and Failed Loans: Who Bears the Risk?

This case revolves around a loan obtained from BPI Family Savings Bank, Inc. (BPI Family) by Marian Dy Tiu, who presented a falsified Transfer Certificate of Title (TCT) as collateral. Rico C. Manalastas, as Examiner of the Office of the Register of Deeds of San Juan City, processed the real estate mortgage based on this title. When the forgery was discovered, BPI Family filed an administrative complaint against Manalastas, alleging gross negligence. The Office of the Ombudsman initially found Manalastas guilty and imposed a one-year suspension, but the Court of Appeals (CA) reversed this decision, exonerating Manalastas.

The central legal question is whether Manalastas was grossly negligent in failing to detect the falsified title during the registration process. The Ombudsman argued that as an Examiner, Manalastas should have exercised utmost caution and verified the authenticity of the title, especially given the large loan amount involved. Manalastas countered that the falsification was expertly done and not readily detectable, and that he acted in good faith, relying on the apparent authenticity of the documents presented.

The Supreme Court, in affirming the CA’s decision, emphasized that the role of the Register of Deeds is primarily ministerial. Section 10 of Presidential Decree No. 1529, also known as the Property Registration Decree, outlines the general functions of Registers of Deeds:

Section 10. General functions of Registers of Deeds. – The office of the Register of Deeds constitutes a public repository of records of instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is situated.

It shall be the duty of the Register of Deeds to immediately register an Instrument presented for registration dealing with real or personal property which complies with all the requisites for registration. He shall see to it that said instrument bears the proper documentary and science stamps and that the same are properly canceled. If the instrument is not registrable, he shall forthwith deny registration thereof and inform the presentor of such denial in writing, stating the ground or reason therefor, and advising him of his right to appeal by consulta in accordance with Section 117 of this Decree.

The Court stated that registration is a ministerial act, meaning the Register of Deeds must perform it if the presented documents comply with the requisites for registration. The purpose of registration is to provide notice to all persons, but it does not validate an otherwise invalid instrument. Because it is a ministerial act, the Register of Deeds isn’t authorized to determine if fraud exists in the document submitted for registration.

Building on this principle, the Supreme Court noted that the falsification of the title was so well done that it would not be instantly detected, even with reasonable care. The document appeared authentic, bearing the official form and markings of the Land Registration Authority. The Court also invoked the presumption of regularity in the performance of official duties, stating that Manalastas acted in good faith when he examined the documents and recommended the registration of the mortgage.

To further clarify, the Court defined gross negligence as a failure to exercise even slight care or diligence, a thoughtless disregard of consequences without any effort to avoid them. In administrative cases, substantial evidence is required to prove guilt, meaning such amount of relevant evidence a reasonable mind might accept as adequate to support a conclusion. The Court found that BPI Family failed to provide substantial evidence of gross negligence on the part of Manalastas.

This approach contrasts with the Ombudsman’s view, which emphasized the need for Registers of Deeds to exercise utmost caution, especially when dealing with large loan amounts. However, the Court reasoned that BPI Family had already approved the loan before seeking registration of the mortgage, indicating that their primary purpose was to register the mortgage, not to verify the authenticity of the title. The CA correctly pointed out:

It must be noted that the main purpose of BPI when it brought the Real Estate Mortgage together with the purported owner’s duplicate copy of title to the Office of the Register of Deeds was to have the said mortgage inscribed in the records of said office and annotated at the back of the certificate of title covering the land subject of the instrument and not to verify the authenticity of the owner’s duplicate copy of title. In fact, BPI verified the authenticity of the forged title only after the real Paquito Tiu showed up and informed its head office about the forgery.

Moreover, the Supreme Court placed the blame on BPI Family, stating that they were negligent in approving the loan without conducting a thorough investigation of the borrower’s identity and the authenticity of the documents. The Court quoted its earlier decision that:

[T]he BANK may have been negligent to protect its interests when it approved the loan without first making the necessary investigation normally conducted by banking and/or financial/lending institutions, that is, i) by ascertaining that all the documents presented are authentic and that the persons who introduce themselves as owners are indeed the owner[s] of the property, and borrowers, if not the registered owner, are equipped with the legal document to transact business and ii) by conducting actual character and background investigation on Marian Dy Tiu as applicant and of Paquito Tiu being the registered owner of the property.

The court underscored that banks and financial institutions have the responsibility to verify the authenticity of titles and the identity of the individuals they are transacting with, to protect their interest. These institutions have the means to ascertain and verify the identities of the real owners and the documents submitted to them.

Ultimately, the Supreme Court concluded that Manalastas should not be held liable for gross negligence simply because he failed to discover the forgery. To reiterate, it would be unjust to punish him, when, in reality, he himself was a victim of the defraudation. He acted in good faith and followed the standard procedure for registering the document. In conclusion, if not for the appearance of the real Paquito Tiu, the forgery would not have been discovered.

In concurring opinions, Justices emphasized that Registers of Deeds are not guardians of private interests and that contracting parties are responsible for looking after their own affairs. Thus, BPI Family had to bear the burden of their loss.

FAQs

What was the key issue in this case?	The key issue was whether the Register of Deeds, Rico C. Manalastas, was grossly negligent in failing to detect a falsified title presented for registration of a real estate mortgage. The Supreme Court ultimately ruled that he was not.
What is the role of the Register of Deeds?	The Register of Deeds serves as a public repository of records related to land and property. Their primary duty is ministerial, involving the registration of instruments that comply with legal requirements.
What does “ministerial duty” mean?	A ministerial duty is an act that a public officer is legally required to perform, without exercising discretion or judgment. This means that if a document meets all the formal requirements, the Register of Deeds must register it.
When can a Register of Deeds be held liable for errors?	A Register of Deeds can be held liable for errors if they act with gross negligence or bad faith in performing their duties. However, they are generally protected by the presumption of regularity in the performance of their official duties.
What is “gross negligence”?	Gross negligence is the failure to exercise even slight care or diligence. It implies a thoughtless disregard of consequences, without exerting any effort to avoid them.
What standard of evidence is required to prove administrative liability?	In administrative cases, the standard of evidence is substantial evidence, meaning such amount of relevant evidence which a reasonable mind might accept as adequate to support a conclusion. This is a lower standard than in criminal cases.
Did the Supreme Court find BPI Family negligent in this case?	Yes, the Supreme Court suggested that BPI Family was negligent in approving the loan without conducting a thorough investigation of the borrower’s identity and the authenticity of the documents. They have the means to do so.
What is the practical implication of this ruling for banks and financial institutions?	This ruling reinforces the importance of due diligence for banks and financial institutions in verifying the authenticity of documents and the identity of borrowers before approving loans. They cannot solely rely on the Register of Deeds.

This case serves as a reminder that while public officers are expected to perform their duties diligently, they are not insurers against all forms of fraud. Financial institutions must also exercise due diligence in protecting their interests and verifying the authenticity of documents presented to them.

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: OFFICE OF THE OMBUDSMAN vs. RICO C. MANALASTAS, G.R. No. 208264, July 27, 2016