Domingo Lao v. Estrella Villones-Lao

Summary

Estranged spouses Domingo and Estrella Lao owned conjugal property worth P1.5M. Estrella, in financial need, obtained P167,000 loan from Villena spouses using forged special power of attorney allegedly signed by husband and stepson. Malana spouses facilitated the fraudulent transaction as agents/brokers. After Estrella defaulted, property was foreclosed and title transferred to Villenas. Supreme Court found clear evidence of forgery and bad faith, noting suspicious circumstances that should have alerted prudent lenders: estranged relationship, quick SPA acquisition, and poor signature imitations. Court established that notarized documents' presumption of regularity can be overcome by clear and convincing evidence of fraud. The decision protects property rights against fraudulent schemes while emphasizing lenders' duty of due diligence in mortgage transactions involving estranged spouses and conjugal property.