G.R. No. 29937 , July 12, 1929
LUCIO EMAS, plaintiff-appellee, vs. ANTONIO DE ZUZUARREGUI and FAUSTINO AGUILAR, defendants-appellants.

FACTS

Lucio Emas owned an undivided half interest in a parcel of land in Tarlac, with the other half owned by Antonio de Zuzuarregui. Through a fraudulent scheme orchestrated by Victor Ortega and Simon Zapata, a forged deed (Exhibit A) was executed on October 2, 1925, purporting to convey Emas’s half to De Zuzuarregui for P2,000. The deed was signed by an impostor posing as Emas before notary public Hipolito de Jesus, who was also De Zuzuarregui’s attorney. De Zuzuarregui obtained a transfer certificate of title (No. 1024) based on the forged deed and later mortgaged the entire property to Faustino Aguilar. Emas filed an action to annul the transfer certificate and mortgage as to his half interest. The trial court ruled in favor of Emas, declaring him the owner of the undivided half and ordering the cancellation of the certificate and mortgage as to that portion. De Zuzuarregui and Aguilar appealed.

ISSUE

1. Whether De Zuzuarregui can be considered an innocent purchaser for value, such that the issuance of a transfer certificate of title cures the defect arising from the forged deed.
2. Whether Aguilar, as mortgagee, acquires rights over Emas’s half interest based solely on the annotation of the mortgage on the certificate of title.

RULING

1. No, De Zuzuarregui is not an innocent purchaser for value. The Supreme Court held that De Zuzuarregui cannot claim the protection accorded to innocent purchasers. His attorney, Hipolito de Jesus, suspected the transaction was dishonest due to the ease with which the “vendor” agreed to a drastic price reduction (from P5,000 to P2,000), which was grossly inadequate. De Zuzuarregui willfully ignored these suspicious circumstances. Knowledge imputable from willful disregard of facts that should arouse suspicion bars a purchaser from asserting innocence. Thus, the transfer certificate issued based on the forged deed did not validate his title over Emas’s half interest.

2. No, Aguilar’s mortgage does not bind Emas’s half interest. The Court ruled that the mere annotation of the mortgage on the certificate of title does not, by itself, prove Aguilar’s status as an innocent mortgagee for value. Aguilar failed to present the mortgage contract or evidence that he advanced money in good faith reliance on the title. His rights derive from De Zuzuarregui’s defective title, and without proof of being an innocent mortgagee, he cannot enforce the mortgage against Emas’s share.

The appealed judgment was affirmed, declaring Emas the owner of the undivided half, and ordering the cancellation of Transfer Certificate No. 1024 and the mortgage annotation as to that portion. Costs were imposed on the appellants.