AURELIA DE LARA AND RUFINO S. DE GUZMAN, PLAINTIFFS AND APPELLANTS, VS. JACINTO AYROSO, DEFENDANT AND APPELLANT.

From the stipulation of facts and the additional evidence submitted
at the hearing the lower court found and it is not disputed that the
spouses Jacinto Ayroso and Manuela Lacanilao were the registered owners
of a parcel of land, situated in the municipality of Cabanatuan, Nueva
Ecija, their title thereto being evidenced by Transfer Certificate No.
4203 of the land records of that province. The land had an area of a
little over 3 1/2 hectares, but according to an annotation on the back
of the certificate a large portion of that area—a little less than 3
hectares— had already been alienated, sold to the Pilgrim Holiness
Church in 1940. The certificate was kept in Jacinto Ayroso’s trunk in
his house in the poblacion of Cabanatuan, but somehow his
daughter, Juliana Ayroso, managed to get possession of it without his
knowledge and consent and gave it to a man whose name does not appear
in the record. With the certificate in his possession and representing
himself to be Jacinto Ayroso, this man was able to obtain from the
plaintiff spouses the sum of P2,000 which he agreed to pay back in
three months and as security therefor constituted a mortgage on Jacinto
Ayroso’s interest in the land covered by the certificate, signing the
deed of mortgage with the latters name. At that time, April 19, 1949,
Jacinto Ayroso was already a widower, his wife having died on the 31st
of the preceding month. Neither Jacinto Ayroso nor the man who
impersonated him was personally known to the plaintiffs, though the
latter believed in good faith that the two were one and the same
person, the impostor being then accompanied by Ayroso’s daughter
Juliana whom they knew personally and who also signed as a witness to
the mortgage deed. The mortgage was later registered in the office of
the Register of Deeds of Nueva Ecija and annotated on the back of the
certificate of title. Jacinto Ayroso never authorized anyone to
mortgage the land and received no part of the mortgage loan.

Upon the foregoing facts, the trial court rendered judgment
declaring the mortgage invalid, ordering the Register of Deeds of Nueva
Ecija to cancel the corresponding annotation on Transfer Certificate of
Title No. 4203 and dismissing the complaint with costs. From this
judgment an appeal has been taken directly to this court, and the
question for determination is whether the said mortgage may be enforced
by plaintiffs against the defendant Jacinto Ayroso.

There can be no question that the mortgage under consideration is a
nullity, the same having been executed by an impostor without the
authority of the owner of the interest mortgaged. Its registration
under the Land Registration Law lends it no validity because, according
to the last proviso to the second paragraph of section 55 of that law, registration procured by the presentation of a forged deed is null and void.

Plaintiffs, however, allege that they are innocent holders for value
of a Torrens certificate of title, and on the authority of Elason vs.
Wilborn (281 U. S., 457), De la Cruz vs. Fabie (35 Phil., 144), and
Blondeau et al. vs. Nano and Vallejo (61 Phil., 625), invoke the
protection accorded to such holders. But an examination of those cases
will show that they have no application to the one before us.

In the case first cited, Eliason vs. Wilborn, the appellants, owners
of registered land, delivered the certificate of title to a party under
an agreement to sell and the said party forged a deed to himself, had
the certificate issued in his name and then conveyed it to others, who
were good faith purchasers for value. Upholding the last conveyance,
the U. S. Supreme Court said: “The appellants saw fit to entrust it
(the certificate) to Napletone and they took the risk * * *. As between
two innocent persons, one of whom must suffer the consequences of a
breach of trust, the one who made it possible by his act of confidence
must bear the loss.”

In the second case, De la Cruz vs. Fabie, the attorney-in-fact of
the owner of registered land, having been entrusted with the title to
said property, abused the confidence thus reposed upon him, forged a
deed in his favor, had a new title issued to himself and then conveyed
it to another, who thereafter was issued a new certificate of title.
This court held the purchaser to be the absolute owner of the land as
an innocent holder of a title for value under section 55 of Act No. 496.

It will be noted that in both of the above cases the certificate of
title was already in the name of the forger when the land was sold to
an innocent purchaser. In such case the vendee had the right to rely on
what appeared in the certificate and, in the absence of anything to
excite suspicion, was under no obligation to look beyond the
certificate and investigate the title of the vendor appearing on the
face of said certificate to be the registered owner. It should also be
noted that in both cases fraud was made possible by the owner’s act in
entrusting the certificate of title to another. And this should be
emphasized because it is what impelled this court to apply in those
cases the principle of equity that “as between two innocent persons,
one of whom must suffer the consequences of a breach of trust, the one
who made it possible by his act of confidence must bear the loss.”

In the present case the title was still in the name of the real
owner when the land was mortgaged to the plaintiffs by the impostor.
And it is obvious that plaintiffs were defrauded not because they
relied upon what appeared in a Torrens certificate of title—there was
nothing wrong with the certificate—but because they believed the words
of the impostor when he told them that he was the person named as owner
in the certificate. As the learned trial judge says in his decision, it
was not incumbent upon plaintiffs to inquire into the ownership of the
property and go beyond what was stated on the face of the certificate
of title, but it was their duty to ascertain the identity of the man
with whom they were dealing, as well as his legal authority to convey,
if they did not want to be imposed upon. That duty devolves upon all
persons buying property of any kind, and one who neglects it does so at
his peril. It should be added that the appellee has not entrusted the
certificate of title to anybody, an element essential to the
application of the principle of equity above cited. It is thus clear
that the circumstances which impelled this court, in the cases cited to
extend protection to the innocent holders for value of the Torrens
certificates, at the expense of the owner of the registered property,
are not present in the case at bar.

Nor could the third case cited, Blondeau et al. vs. Nano and Vallejo,
serve as a good precedent for the one now before us. That case, it is
true, was also for foreclosure of mortgage, and the defense set up by
the registered owner was also forgery. But it should be noted that in
that case this court found as a fact that the mortgage had not been forged
and in addition there was the circumstance that the registered owner
had by his negligence or acquiescence, if not actual connivance, made
it possible for the fraud to be committed. It is thus obvious that the
case called for the application of the same principle of equity already
mentioned, and the decision rendered by this court was in line with the
two previous cases. But that decision does not fit the facts of the
present case, where the mortgage is admittedly a forgery and the
registered owner has not been shown to have been negligent or in
connivance with the forger. The contention that it was negligence on
appellee’s part to leave the Torrens title in his trunk in his house in
the poblacion when most of the time he was in the farm, was we think well answered by the trial court when it said:

“* * * it was not shown that the defendant has acted
with negligence in keeping the certificate of title in his trunk in his
own house. That his daughter was able to steal it or take it from the
trunk without his knowledge and consent and was able to make use of it
for a fraudulent purpose, (it) does not necessarily follow that he was
negligent. It is in keeping with ordinary prudence in common Filipino
homes for the owners thereof to keep their valuables in their trunks.
It would be too much to expect of him that he should carry said
certificate with him to wherever he goes.”

On the other hand the considerations underlying the decision in the
case of Ch. Veloso & Rosales vs. La Urbana & Del Mar (58 Phil.,
681), cited by the appellee, would seem to be applicable to the present
case. In the case cited, the plaintiff Veloso, owner of certain parcels
of registered land, brought action to annul certain mortgages
constituted thereon by her brother-in-law, the defendant Del Mar, using
two powers of attorney purportedly executed for that purpose by
plaintiff and her husband Rosales, but which were in reality forged,
the forgery having been committed by Del Mar himself. How Del Mar
obtained possession of the certificate of title the report does not
show, but the mortgages were duly registered and noted on the
certificates of title. In holding the mortgages void, this court said:

“* * * Inasmuch as Del Mar is not the registered
owner of the mortgaged properties and inasmuch as the appellant was
fully aware of the fact that it was dealing with him on the strength of
the alleged powers of attorney purporting to have been conferred upon
him by the plaintiff, it was his duty to ascertain the genuineness of
said instruments and not rely absolutely and exclusively upon the fact
that the said powers of attorney appeared to have been registered. In
view of its failure to proceed in this manner, it acted negligently and
should suffer the consequences and damages resulting from such
transactions.” (P. 683.)

Appellants, however, contend that the doctrine laid down in that case has already been overruled by the Blondeau case, supra.
This is not so, and to show that it is still good jurisprudence, this
court quotes it with approval in Lopez vs. Seva et al. (69 Phil., 311),
a case decided after the Blondeau decision.

We are with the learned trial judge in applying to the present case
the principle underlying the decision in the Veloso case, which, as His
Honor well says, “is fair and just because it stands for the security
and stability of property rights under any system of laws, including
the Torrens system,” affording protection against the dangerous
tendency of unprincipled individuals “to enrich themselves at the
expense of others thru illegal or seemingly lawful operations.” And as
His Honor also says, “as between an interpretation and application of
the law which serves as an effective weapon to curb such dangerous
tendency or that which technically may aid or foment it, the choice is
clear and unavoidable.” For, as repeatedly stated by this court,
although the underlying purpose of the Land Registration Law is to
impart stability and conclusiveness to transactions that have been
placed within its operations, still that law does not permit its
provisions to be used as a shield for the commission of fraud.

In view of the foregoing, the judgment appealed from is affirmed, with costs against the appellants.

Paras, C. J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador and Concepcion, JJ., concur.