Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-45742 April 12, 1939

TIBURCIO MAMUYAC, petitioner-appellant, vs. PEDRO ABENA (alias Indong), respondent-appellee.

Nicanor Tavora for petitioner. Pedro C. Quinto for respondent.

LAUREL, J.:

This is a petition for writ of certiorari to review the decision of the Court of Appeals promulgated on July 30, 1937 in CA-G. R. No. 43446.

Gregoria Pimentel was the owner of the two parcels of land which she sold and conveyed on June 1, 1926, to Pedro Abena, the respondent-appellee herein. On January 27, 1927, Gregoria Pimentel again sold and conveyed the same parcels to Tiburcio Mamuyac, the petitioner-appellant herein. The document of sale, Exhibit 1, in favor of Abena was duly inscribed in the registry of property of the province on January 31, 1927, and from April, 1927, said parcels of land were declared for taxation in the name said Abena. The document executed in favor of the petitioner on January 27, 1927, was neither inscribed in the registry of property nor were the parcels of the land declared for taxation in the name of the latter.

To determine the conflict, petitioner-appellant instituted an action in the Court of First Instance of La Union against the respondent-appellee for the recovery of the two controverted parcels of land. After hearing, the trial court rendered judgment in favor of the defendant, respondent-appellee here. From this judgment, the petitioner-appellant appealed to the Court of Appeals. This latter court, with one member dissenting, affirmed the decision of the Court of First Instance of La Union. The dispositive part of the majority decision of the appellate court is:

Either way considered the question, and under the theory of the plaintiff on the possession, and under Article 1473 of the Civil Code which has exact application to the present case, the court did not commit any error in sentencing for the defendant, which confirmed in its entirety, with costs to the appellant in this instance.Plaintiff, petitioner-appellant here, elevated the case to this court by writ of certiorari as adverted to in the beginning of this opinion.

The first assignment of error of the petitioner-appellant challenges the findings of fact of the Court of Appeals. This cannot be done.

The appellate jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law incurred by the latter, the findings of fact of said Court of Appeals being final as to the former. (Guico vs. Mayuga and Heirs of Mayuga [1936], 35 Off. Gaz., 861.)

Review of judgments and decrees of the Court of Appeals is limited to "cases in which only errors or questions of law are involved." (Sec 2, Commonwealth Act No. 3, amending section 138 of the Administrative Code, in relation to sec. 2, Art. VIII, Constitution of the Philippines.) (Mateo vs. Collector of Customs and Court of Appeals [1936], 35 Off. Gaz., 915.)

The petitioner-appellant under his under his second and third assignments of error contends that he has a better right over the two parcels of land involved because of possession claimed by him in virtue of an alleged private contract of mortgaged executed in his favor on January 4, 1935 (Exhibit B.) It is sufficient answer to this contention that "in order that a mortgage may be deemed to be legally constituted, it is undispensable that the instrument in which it appears be a public document and be recorded in the property register. Therefore, a mortgage in legal form was not constituted by said private document." (Tuason vs. Goduco, 23 Phil., 342, 347.) Even were we to accord validity to the mortgage, Exhibit B, article 1473 of the Civil Code, invoked by him, applies only to the determination of presence between sale and sale:

The provision recorded just comes to identifying preferred when the same thing shall have been sold to two or more persons, cases that already occupy the Law 15, tit. 32, lib. 3. Romano of the Code, and the Law 50, tit. 5. º part. 5. a (4 Bonel, Civil Code, p 483) and the same can not be availed of in case of conflict Between a sale and a mortgage.

Do apply the provision of Article 1473 of the Civil Code to resolve the resolve the dispute between the buyer of a property and the seller's lender, a mortgage on the same property sold?

The Supreme Court did not declare the appeal.

Whereas it is inapplicable to the case of Article 1473 of the Civil Code, which is violated in the first plea, it has not been addressed in this litigation case referred to that article, nor the appellant had entered the property of the property in question when it instructed the record possessory or possessed with the good faith that requires the last paragraph of that article, being, as it were, knowing that Godinez and the burdens weighing on this, which places under conditions that n is the third referred to in Article 606 of the Code, alleged to be infringed in the second reason for not having applied, when it really is not the case. (Judgment of 7 July 1896, 15 Civil Code, Martinez Ruiz 2. Ed., 330, 332.)

Upon the other hand, even if we were to accept the contention of the petitioner-appellant that he had been in possession of said properties by reason of the alleged contract of mortgage executed in his favor, on January 4, 1925, and were to accord legal effect to the document of

sale of January 27, 1927, which was not recorded in the registry of property, still his right cannot prevail over that of Abena who had duly registered his deed of sale. (Exhibit 1.)

The contention of the appellant that respondent's ownership and preference over the property over the property in question is not complete because of lack of material delivery of the possession to him by the vendor is not well taken, for the reason that the execution of the public document of sale in favor of the respondent-appellee is equivalent to the delivery of the realty sold. (Sanchez vs. Ramos, 40, Phil., 614, 616.).

The petitioner is hereby dismissed with costs against the petitioner. So ordered.

Avanceña, C.J., Villa-Real, Imperial, Concepcion and Moran, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-19545 April 18, 1975

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner, vs. THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.

Magno L. Dajao for petitioner.

First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondent.

ANTONIO, J.:

Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan.

The facts of the case are as follows:

On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social Welfare Administrator together with the recommendation of the Manager of the Government Service Insurance System, approved in principle the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of another area either in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be financed through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the Government Service Insurance System. The President, through the Executive Secretary, informed the PHHC of such approval by letter bearing the same date (Annex "B").

On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following conditions precedent:

1. That the confirmation by the OEC and the President of the purchase price of P0.45 per sq. m. shall first be secured, pursuant to OEC Memorandum Circular No. 114, dated May 6, 1957.

2. That the portion of the estate to be acquired shall first be defined and delineated.

3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS.

4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated February 3, 1959.

5. The vendor shall agree to the dismissal with prejudice of Civil Case No. Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et al."

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter.

On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate (specifically two parcels covered by TCT Nos. T-23807 and T-23808), and the People's Homesite and Housing Corporation, entered into a contract embodied in a public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former conveyed unto the latter the two parcels of land abovementioned, under the following terms and conditions, among others:

1. That for and in consideration of the sum of THREE MILLION THREE HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE (P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE to the herein VENDOR in the manner outlined hereinbelow, the VENDOR by these presents does hereby sell, transfer and convey by way of absolute sale unto the VENDEE, its successors, administrators or assigns, the above described two (2) parcels of land, together with all the improvements existing thereon;

2. That the payment of the consideration mentioned in paragraph 1 above shall be made as follows:

(a) The vendee is presently negotiating or securing from the GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of a directive of the President of the Philippines, a loan for the purchase of the above described two (2) parcels of land in anticipation of the purchase by the said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be floated by the National Government to enable the VENDEE to make this purchase, and from whatever amount may be granted as loan by the GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS shall be retained by the said VENDEE for the purpose of paying and clearing the existing lien annotated at the back of the aforesaid Transfer Certificates of Title Nos. T-23807 and T-23808, said payment to be made directly to the MORTGAGEES and the difference shall be paid to the VENDOR, provided that this first payment shall not be less than ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS and the VENDOR is hereby constituted as Attorney-in-fact and authorized to receive from, and the GOVERNMENT

SERVICE INSURANCE SYSTEM is directed to pay the balance of the loan direct to the herein VENDOR chargeable against VENDEE's loan from the GOVERNMENT SERVICE INSURANCE SYSTEM; provided, however, That should this amount be more than sufficient to cover the said mortgage lien, the VENDEE shall pay the difference to the VENDOR; and provided, further, That the VENDOR shall take charge of the preparation and registration of the documents necessary in clearing the above referred to mortgage lien, with the understanding that the expenses for preparation, notarization, registration, including documentary stamps, and other expenses for the cancellation of said mortgage lien shall be for the account of the VENDOR and shall be advanced by the VENDEE to the VENDOR;

(b) That out of the sum of P1,710,000.00 to be retained by the VENDEE mentioned in the immediately preceding paragraph 2(a) for the purpose of discharging the said mortgage lien, the VENDEE shall deduct and further retain or keep as a trust fund the amount of FORTY THOUSAND (P40,000) PESOS, Philippine Currency, to answer for the remaining Notice of Lis Pendens annotated at the back of Transfer Certificate of Title Nos. T-23807 and T-23808 until such lien shall have been discharged or cancelled, the VENDEE binding itself to deliver forthwith the said amount of P40,000.00 unto the successful party involved in said Notice of Lis Pendens;

(c) The remaining balance of the total consideration in the amount of ONE MILLION SIX HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or whatever amount is not paid by virtue of the first payment mentioned in paragraph (a) above, shall be paid by the VENDEE unto the VENDOR immediately upon the VENDEE's obtaining sufficient funds from proceeds of bonds floated by the VENDEE or the Government for the purchase of the properties subject of this transaction; provided, however, That full and complete payment of the balance mentioned in this particular paragraph 2(c) shall be made or paid by the VENDEE within a period of sixty (60) days from date of delivery of title by the VENDOR in the name of the VENDEE; and provided, further, That this sixty (60) days period may be extended for another period of sixty (60) days upon written request by the VENDEE at least five (5) days prior to the expiration of the said sixty (60) days period. Should there be instituted any legal action, however, for the collection of any amounts due from the VENDEE in favor of the VENDOR, the VENDEE binds itself to pay unto the VENDOR a sum equivalent to twenty-five (25%) per centum of the total balance due from the, VENDEE in favor of the VENDOR as and by way of attorney's fees, and the costs of suit;

3. That the VENDOR hereby warrants to defend the title and ownership of the VENDEE to the two (2) parcels of land above described from any claim or claims of third parties whomsoever;

(4.) That all expenses for the preparation and notarization of this document shall be for the account of the VENDOR; provided, however, That registration and issuance of certificates of title in the name of the VENDEE shall be for the account of the VENDEE." (Annex "F")

The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration expenses. In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections were embodied in a letter to the President, dated January 9,

1961, but this notwithstanding, the President, through the Executive Secretary, approved the Deed of Absolute Sale on February 1, 1961.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying (Annexes "D" and "D-1").

On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961 (Annex "G").

Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of this decision are quoted hereunder:

.... the records show that the deed of sale executed on December 29, 1960 ... was approved by the President upon favorable recommendation of the Cabinet and the Committee created for the purpose of surveying suitable lots which may be acquired for relocating squatters in Manila on February 1, 1961 only and that said instrument of sale was registered with the Register of Deeds on March 14, 1961.

That Corporation, as vendor, maintains that in view of the execution of the deed of sale on December 29, 1960 it ceased to be the owner of the property involved and that consequently it was under no obligation to pay the real property tax thereon effective January 1, 1961. In support of its stand, that Corporation cites Article 1498 of the New Civil Code of the Philippines which provides that "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred" and Article 1496 of the same Code which states that "the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." On the other hand, the Provincial Treasurer contends that, as under the Land Registration Act (Act No. 496) the Philippine Suburban Development Corporation is still the owner of the property until the deed of sale covering the same has been actually registered, the vendor is still liable to the payment of real property tax for the calendar year 1961.

It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the

transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961.

Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General, pursuant to the Executive Order dated February 3, 1959 and later by the President, and that the petitioner should register the deed and secure a new title in the name of the vendee before the government can be compelled to pay the balance of P1,676,223.00 of the purchase price. Respondent further contends that since the property involved is a land registered under the Land Registration Act (Act No. 496), until the deed of sale has been actually registered, the vendor remains as the owner of the said property, and, therefore, liable for the payment of real property tax.

We find the petition meritorious.

I .

It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet meeting, approved and authorized the purchase by the national government, through the PHHC, of the unoccupied portion of the property of petitioner; that on June 10, 1960, the PHHC, acting pursuant to the aforecited approval of the President, passed its Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of said property; and that after the PHHC took possession of the aforementioned property on the first week of June, 1960 to use it as a resettlement area for squatters and flood victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting on June 13, 1960, approved and authorized the purchase by the PHHC of the entire property consisting of 752.4940 hectares, instead of only the unoccupied portion thereof as was previously authorized.

Considering the aforementioned approval and authorization by the President of the Philippines of the specific transaction in question, and the fact that the contract here involved — which is for a special purpose to meet a special situation — was entered into precisely to implement the Presidential directive, the prior approval by the Auditor General envisioned by Administrative Order No. 290, dated February 3, 1959, would therefore, not be necessary.

As We held in Federation of the United NAMARCO Distributors v. National Marketing Corporation, 1 the approval by the Auditor General contemplated by Administrative Order No. 290 dated February 3, 1959, refers to contracts in general, ordinarily entered into by government offices and government-owned or controlled corporations, and not to a contract for a special purpose, to meet a special situation and entered into in implementation of a Presidential directive to solve and emergency. In other words, where the contract already bears the approval of the President, the action of the Auditor General would no longer be necessary because under the said Administrative Order, the President has, at any rate, the final say.

II

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. 3

In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, 4 or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. 5

In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. 6

III .

We fail to see the merit in respondent's insistence that, although possession was transferred to the vendee and the deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as owner of the property until the deed of sale is actually registered with the Office of the Register of Deeds, because the land sold is registered under the Torrens System. In a long line of cases already decided by this Court, the constant doctrine has been that, as between the parties to a contract of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without the act of registration, a deed purporting to convey or affect registered land shall operate as a contract between the parties. The registration is intended to protect the buyer against claims of third persons arising from subsequent alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as between the parties to the contract. 8

The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving conflicting rights over registered property and those of innocent transferees who relied on the clean titles of the properties in question. It is, therefore, not relevant to the case at bar.

In the case at bar, no rights of third persons are involved, much less is there any subsequent alienation of the same property. It is undisputed that the property is in the possession of the vendee, even as early as the first week of June, 1960, or six (6) months prior to the execution of the Deed of Absolute Sale on December 29, 1960. Since the delivery of possession, coupled with the execution of the Deed of Absolute Sale, had consummated the sale and transferred the title to the purchaser, 10 We, therefore, hold that the payment of the real estate tax after such transfer is the responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a government entity not subject to real property tax. 11

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.

Makalintal, C.J., Fernando, Barredo and Aquino, JJ., concur

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-45192 April 10, 1939

In re Consulta filed by Attorney VICENTE J. FRANCISCO on behalf of DOMINGO CABANTOG.

Sumulong, Lavides and Sumulong for appellant. Vicente J. Francisco for appellee.

LAUREL, J.:

On January 21, 1936, the spouses Francisco Vicuña and Maxima Caballes made an absolute sale of three parcels of land, covered by transfer certificates of title Nos. 13395, 13396, and 13397, in favor of Domingo Cabantog for the sum of P2,500. The deed of sale was presented for registration, and the senior clerk in the office of the register of deeds of Laguna, in the absence of the latter official, made a notation thereon to the effect that the same was presented at 12.15 o'clock on January 25, 1936, as per entry number 18624, vol. II of the day book. On his return to duty on January 27, 1936, the register of deeds had the aforesaid notation cancelled and substituted by the following:

18624. — The inscription of the proceeding deed of sale is hereby suspended until after the resolution to be rendered by the Supreme Court on the appeal intended to be presented by Maxima Caballes against the decision of the Court of First Instance of Laguna in Civil Case No. 6600 instituted by Apolonia Coronado et al. vs. Maxima Caballes et al., in which the latter has been condemned to pay to the plaintiff the amount of P1,000,000 (should be P100,000).

The undersigned is of the opinion that it is the duty of the register of deeds to aid the courts, avoiding that their decisions may be effective due to transfers of properties made by the party losing in a case after same have been handled down; and also to protect the interest of the winning party by preventing the multiplicity of litigations.

Pending the appeal of Maxima Caballes to this court from the decision in civil case No. 6600 sentencing her to pay Apolonia Coronado the sum of P100,000, the latter secured an attachment of the three parcels of land sold by Maxima Caballes to Domingo Cabantog, which attachment was entered in the day book of the register of deeds of Laguna on January 27, 1936. Against the refusal of the register of deeds to register the deed of sale in favor of Domingo Cabantog, his counsel elevated a consulta to the judge of the Fourth Branch of the Court of First Instance of Manila, through the Chief of the General Land Registration Office, requesting answer to the following:

QUESTIONS

1. Is it not the ministerial duty of the register of deeds of Laguna, upon presentation to him of the absolute deed of sale in favor of Domingo Cabantog of the three (3) parcels of land in question, with the corresponding owners' duplicate certificates of title, to register said deed of sale, cancel said outstanding certificates in the name of the vendors, and prepare and issue the proper transfer certificates of title in the name of the vendee, the proper registration fees having been tendered and accepted and there being no judicial order suspending such action?

2. Does the register of deeds of Laguna have the authority to deny issuance of the proper transfer certificates of title in favor of the vendee on the ground alleged by him that, "it is the duty of the register of deeds to aid the courts, avoiding that their decision may be effective (or ineffective) due to transfers of properties made by the party losing in case after same have been handed down; and also to protect the interest of the winning party by preventing the multiplicity of litigations', or should the register of deeds leave this question to the determination of the proper court in case the same is submitted to it for determination by any interested party?

A copy of the consulta having been served on the register of deeds, the latter filed his answer thereto justifying his action upon the following grounds, among others:

The resolution of the undersigned to suspend the registration of the deed of sale granted by Maxima Caballes in favor of the appellant Sunday Cabantog refusal thereof and to issue new certificates of clear title to the purchaser Cabantog Sunday, is based on such bill of sale is a transfer made in fraud of the creditor Apolonia Coronado, plaintiff in Civil Case No. 6600 of the Court of First Instance of Laguna, in which the seller Caballes Maxima has been ordered to pay that sum of Apolonia Coronado P100, 000. In support of this assertion, it is stated that the judgment against such vendor is dated December 14, 1935, while the sale of which is here and whose registration is requested by Domingo Cabantog Maxima has been granted by Caballes on January 21, 1936, ie, more than a month after having borne the judicial pronouncement of sentence. It also notes that the value of all real property Maxima registered to Caballes can cover not even half the amount of the judgment against it, as these hardly worth P30, 000 selling them at the current price.

The undersigned sincerely believes that it is his duty to deny or at least suspend the registration of fraudulent conveyances, especially when, as in this case the person is taken, there is a damning court ruling prior to execution of the deed for which registration is requested, while or until a competent court can decide the true nature of this transfer. This is a prudent step to avoid not only the damage that can irrogar seller's creditors but also the government for any legal disputes claiming another innocent after being buyers. This prevents itself that a judgment be ineffective and precipitated by reckless acts submitted by a Registrar of Titles in the registration of documents of dubious legality.

The case came up to the oral hearing, at which attorney Vicente J. Francisco for Domingo Cabantog, Fiscal Villanueva for the register of deeds, and Attorney Lorenzo Sumulong for Apolonia Coronado extensively argued their respective sides of the controversy. After hearing, the Fourth Branch of the Court of First Instance of Manila, His Honor, Judge Montemayor presiding, entered a resolution setting out the controlling facts and closing with the following conclusion:

After carefully studying the case, the court agrees with Attorney Francisco and Fiscal Villanueva that, without considering the merits of the contention of Apolonia Coronado as to the alleged fraud in the transfer of the three parcels of land, strictly as a matter of procedure, the register of deeds should have given due course to the registration of the deed of sale in favor of Cabantog. Without doubting the good faith of the register of deeds and even commending his civic spirit and his desire to help the courts, it is believed that in the present case the law did not expect, much less require him to make use of his personal knowledge of the facts or of what he believed to be the intention of the parties, in the performance of his official duties as register of deeds, namely the registration of instruments presented to him for recording. The parties interested are supposed and expected by the law to take the steps necessary to protect their own interests and take the necessary precautions. The undersigned does not understand why long before the deed of sale presented for registration, and even pending trial of civil case No. 6600, Apolonia did not take the steps necessary to protect her interests and insure the satisfaction of the judgment which she expected from the court. Again, if the defendant Maxima Caballes received copy of the decision in civil case No. 6600 on January 17, 1936, it is reasonable to presume that Apolonia Coronado must have received copy of the same about the same time, if not earlier, and yet we find that attachment of the three parcels of land was not presented for recording or registration with the register of deeds until January 27, 1936, that is, two days after the presentation of deed of sale. Moreover, there is no evidence to show, as far as the present consulta is concerned, that Maxima Caballes is now insolvent and that the deed of sale under consideration was really made in fraud of creditors. There is no showing either that by authorizing and directing the register of deeds to admit the deed of sale of registration in his office, Apolonia would be losing and be deprived of all under her remedies against the said parcels of land. It should also be borne in mind that civil case No. 6600 of the Court of First Instance is now pending appeal in the Supreme Court.

In view of the foregoing, this court rules that the register of deeds of the Province of Laguna should have registered the deed executed by Maxima Caballes and Francisco Vicuna in favor of Domingo Cabantog. It should be understood, however, that this ruling is without prejudice to any action that may be taken be Apolonia Coronado in the proper court to guide or control the action of the register of deeds with respect to the deed in question. Furthermore, this ruling does not in any manner touch upon the nature, propriety or validity of the transfer of the three parcels of land to Cabantog.

Apolonia Coronado moved for reconsideration but was unsuccessful, and has appealed from the foregoing resolution of the lower court, assigning various errors specified in her brief.

Consolidating the several errors assigned, the present appeal calls for a determination of the nature of the function of a register of deeds with reference to the registration of a deed of sale of a registered land. Is that function ministerial or discretional under the law? Section 57 of the Land Registration Act (No. 496) provides:

SEC. 57. An owner desiring to convey in fee his registered land or any portion thereof shall execute a deed of conveyance, which the grantor or grantee may present to the register of deeds in the province where the land lies. The grantor's duplicate certificate shall be produced and presented at the fame time. The register of deeds shall thereupon, in accordance with the rules and instructions of the court, make out in the registration book a new certificate of title to the grantee, and shall prepare and deliver to him an owner's duplicate certificate. The register of deeds shall note upon the original and duplicate certificates the date of transfer, the volume and page of the registration book where the new certificate is registered, and a reference by number to last prior certificate. The grantor's duplicate certificate shall be surrendered, and the word "canceled" stamped upon it. The original certificate shall also be stamped `canceled'. The deed of conveyance shall be filed and endorsed with the number and place of registration of the certificate of title of the land conveyed.

According to this provision of the law, upon presentation of a deed of conveyance of a registered land, together with the grantor's duplicate certificate, the register of deeds shall (1) make out in the registration book new certificate of title; (2) prepare and deliver to the grantee an owner's duplicate certificate of title; (3) note upon the original and duplicate certificates the date of transfer, the volume and page of the registration book where the new certificate is registered, and a reference by number to the last prior certificate; (4) require the surrender of the grantor's duplicate certificate for purposes of cancellation; (5) cancel likewise the original certificate and (6) file and endorse in the manner required the deed of conveyance presented for registration. The duties enjoined upon the register of deed by the aforecited section of the Land Registration Act are clearly ministerial and mandatory in character not only as is indicated by the auxiliary "shall" but by the nature of such functions required to be performed by him. Upon the other hand, section 193 of the Administrative Code, in referring to the "general functions of register of deeds" provides that "it is the duty of a register of deeds to record in proper form all instruments relative to such lands, the recording whereof shall be required or allowed by law." We have not overlooked reference to the case of Debrunner vs. Jaramillo (12 Phil., 316), in which it was said that the duties of a registrar of property when he is acting under the Mortgage Law, are to a large extent judicial, as indicated in articles 18, 100 and 101 et seq. of that law, and to the case of Betco vs. La Flor de Intal (43 Phil., 517), where it was said that "registers of deeds perform both functions of an administrative character and functions which are at least of a quasi-judicial nature." Notwithstanding divergence of facts between these cases and the present case, we have given weight to what seem are logical inferences of counsel for the appellant in the application of general principles, but we find that as plausible

an argument to the contrary may be found in Standard Oil Co. of New York vs. Jaramillo (44 Phil., 630); and Garcia Sanchez vs. Rosauro (40 Phil., 231); and Williams vs. Suñer (49 Phil., 534) with the same divergence of facts and the laws involved.

Limiting ourselves to the facts of the present case, we are of the opinion that it is the duty of the register of deeds of Laguna under the law to register the deed executed by Maxima Caballes and Francisco Vicuna in favor of Domingo Cabantog. If the register of deed is on doubt as to the propriety of recording any given instrument, section 200 of the Administrative Code provides the procedure to be followed:

SEC. 200. Reference of doubtful matter to judge of fourth branch of Court of First Instance at Manila. — Where the register of deeds is in doubt with regard to the proper step to be taken or memorandum to be made in pursuance of any deed, mortgage, or other instruments presented for registration or where any party in interest does not agree with the register of deeds with reference to any such matter, the question shall be referred to the judge of the Fourth Branch of the Court of First Instance of the Ninth Judicial District either on the certificate of the register of deeds stating the question upon which he is in doubt or upon the suggestion in writing of the party in interest; and thereupon said judge, upon consideration of the matter as shown by the record certified to him, and in case of registered lands, after notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum to be made.

The question of whether or not the conveyance was made for defraud creditors of the transferor should better be left for determination by the proper court. There is as much danger in giving this authority to the register of deeds without judicial intervention as there would be injustice in the suggested frustration of a judicial victory for Apolonia Coronado.

The resolution of the lower court is confirmed with costs against the appellant. So ordered.

Avanceña, C. J., Villa-Real, Imperial, Diaz, Concepcion, and Moran, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-3970 October 29, 1952

GURBAX SINGH PABLA & CO., GURBAX SINGH PABLA, BELA SINGH PABLA, OJAGAR SINGH, DHARAM SINGH, TALOK SINGH and CIPRIANO TAN ENG KIAT, petitioners-appellees, vs. HERMOGENES REYES and TEODORA TANTOCO, respondents-appellants.

The facts are stated in the opinion of the Court. Jose N. Buendia for appellants. Eliseo Caunca for appellees.

LABRADOR, J.:

This is an appeal prosecuted by the respondents-appellants against an order of the Court of First Instance of Manila dated November 29, 1949, compelling them to surrender owner's duplicates of Transfer Certificates of Title Nos. 8071 and 8072, so that the contract of lease entered into between petitioners-appellees and the owner of the land covered by said certificates of title be annotated thereon. John Tan Chin Eng is the owner of the land covered by the above-mentioned certificates of title, and on July 23, 1948, he entered into a contract (Exhibit A) with the petitioner-appellees, under the terms of which petitioners-appellees were to construct thereon a three-story building of concrete and of strong materials valued at from P80,000 to P90,000. The contract also provided that the building shall become the exclusive property of the owner of the land, but that the petitioner-appellees were to occupy, hold, or possess it as lessees for a period of three years and six months from its completion, without paying any rentals therefor, the sum spent in the construction being considered as the rentals; that after the above period of three years and six months petitioners-appellees were to continue occupying the said building for another two years at a monthly rental of P2,000. This contract of lease was filed and registered in the office of the Register of Deeds of Manila on August 10, 1948, under Primary Entry No. 3352, Volume 15. At the time that the contract was entered into there was an existing mortgage over the land in favor of Jose Calvo and Carlos Calvo for the sum of P110,000. This mortgage in favor of the Calvos was cancelled, and a new mortgage was executed by the owner in favor of respondents-appellants herein, Honorable Hermogenes Reyes and his spouse Teodora Tantoco, dated March 8, 1949, which was registered on the same date in the office of the Register of Deeds of Manila under Primary Entry No. 5014. On May 14, 1949, the original contract of lease, Exhibit A, was amended by Exh. C, by virtue of which the period under which the lessees were to hold any occupy the property without rentals was extended to seven years and four months, and the rental for the additional two years thereafter reduced to P1,148. This amended contract of lease, Exhibit C, was also

registered in the office of the Register of Deeds of Manila under Primary Entry No. 5014, Volume 16, on May 20, 1949.

On May 25, 1949, counsel for petitioners-appellees wrote respondents-appellants requesting them to allow him to take the certificates of title to the office of the Register of Deeds of Manila for the annotation of the contracts of lease entered into by the owner with them (Exhibit D), and on May 27, 1949, the son of respondents-appellants acknowledged receipt of the said letter but informed counsel for the petitioner-appellees that the request could not be granted without the written consent of the owner of the certificates of title (Exhibit E). On June 16, 1949, respondents-appellants' son wrote the owner of the land (Exhibit M) demanding the payment of the overdue interest on the mortgage with the following statement:

. . . For this reason, I wish to request that you come over to my office before 12:00 noon to pay the said interest before we can deliver your Transfer Certificate of Title to Atty. Manuel P. Calanog who will take charge of registering the lease contract between Mr. Singh Pabla and your goodself.

On June 3, 1949, the petitioners-appellees filed a motion in the Court of First Instance of Manila praying that an order issue to the owner for the delivery of the owner's duplicates of transfer certificates of title Nos. 8071 and 8072 to the petitioners in order that the Register of Deeds of Manila may be able to make the annotation thereon of the contract of lease, Exhibit A, and its amendment, Exhibit C. Against this petition Hermogenes Reyes and Teodora Tantoco filed an opposition, alleging that they had no knowledge whatsoever of the contract of lease, Exhibit A, or of its amendments, Exhibit C, and that the execution of the amendment, Exhibit C, violated the express provision of the mortgage, to the effect that the owner could not sell, assign, or encumber the mortgaged premises without the written consent of the mortgages. It is to be noted that with respect to the original contract of lease, Exhibit A, no allegation is made in the opposition of the respondents-appellants that they were not aware of the existence of the contract, Exhibit A, their only allegation being that the only annotation on the certificates of title at the time they entered into the contract of mortgage was the mortgage in favor of Jose Calvo and Carlos Calvo. It is also to be noted that respondents-appellants do not deny an express allegation of paragraph 13 of the amended petition to the effect that notice was given to the public by a big sign board placed on the premises while the building was under construction that petitioners-appellees are the owners of the building. The amended petition further states, without denial on the part of the respondents-appellants, that as early as October 9, 1948, the Register of Deeds of Manila had demanded in writing from the owner of the land the submission of his duplicate certificates of title Nos. 8071 and 8072 in order that the lease executed by him in favor of the petitioners-appellees may be given due course. At the hearing of the motion no oral evidence was submitted; only documentary evidence was presented.

Thereafter the Court of First Instance of Manila issued the order already mentioned above, directing respondents to surrender the certificates of title to the Register of Deeds of Manila in order that petitioners-appellees' contract of lease may be noted thereon. It expressly found

that respondents-appellants had knowledge of the lease contract, Exhibit A, but that respondents' deed of mortgage of March 8, 1949, has priority over petitioner's amended contract of lease, Exhibit C. As regards the (supposed) prohibition contained in the contract of mortgage, the court held that the prohibition gives a right of foreclosure; in other words, that in spite of the prohibition the amended contract of lease, Exhibit C, may not be considered as null and void.

In this court on appeal claim is made on behalf of the respondents-appellants that the court a quo erred in holding that respondents-appellants had knowledge of the contract of lease, Exhibit A; that it erred in holding that Tirso T. Reyes is the attorney-in-fact of the respondents-appellants; that it erred in ordering the registration of the contract of lease, Exhibit A; and that it erred in not holding that the registration of the contracts, Exhibits A and C, will prejudice the rights and interest of respondents-appellants.

It should be noted that all that the petitioners demand or pray for is the surrender of the titles to the Register of Deeds so that their contracts of lease, Exhibits A and C, may be noted thereon. The only issue, therefore, is whether petitioners have a right to have said deeds registered. It is not denied that the contracts have been executed by the registered owner of the land, or that they have been lawfully executed, or that they have all the qualities of registerable documents. Indeed, the owner is agreeable to the registration. The objections interposed by respondents, who are mortgagees merely, that they had no knowledge of the contract of lease, or that their mortgage has priority, or that they will be prejudiced, are beside the issue.

The purpose of registering an instrument is to give notice thereof to all persons (section 51, Act No. 496); it is not intended by the proceedings for registration to seek to destroy or otherwise affect already registered rights over the land, subsisting or existing at the time of the registration. The rights of these parties, who have registered their rights, are not put in issue when an instrument is subsequently presented for registration; nor are its effects on other instruments previously registered put in issue by the procedure of registration. Thus, the objections raised by respondents-appellants that they had no knowledge of the contract of lease, Exhibit A, before the property was mortgaged to them, or that the same violates their contract of mortgage with the owner of the land — these are not passed upon by the order for the registration of petitioners-appellees' contract of lease. The objections, as well as the relative rights of all parties who have registered their deeds, shall be decided in the proper suit or proceeding when the opportune occasion arises; but they are not now in issue, nor may they be adjudicated upon, simply because petitioners-appellees have applied for the registration of their contract of lease.

The impropriety and inconvenience of proceeding to determine completely and in advance all the possible consequences of a document, upon all parties affected thereby, in the proceeding for its registration becomes apparent when, as in this case, important and complicated questions of fact and of law were presented by the respondents-appellants about their alleged lack of knowledge of the contracts of lease and the invalidity thereof. The court a quo passed

upon vital issues of fact upon the motion and the opposition thereto, and upon the documents, letters, and receipts presented, without any other evidence than the above. Yet the question of knowledge is mainly a question of fact and requires inquiry into many and complicated circumstances, which can not be satisfactorily shown except by testimony.

On the other hand, the supposed invalidity of the contracts of lease is no valid objection to their registration, because invalidity is no proof of their non-existence or a valid excuse for denying their registration. The law on registration does not require that only valid instruments shall be registered. How can parties affected thereby be supposed to know their invalidity before they become aware, actually or constructively, of their existence or of their provisions? If the purpose of registration is merely to give notice, then questions regarding the effect or invalidity of instruments are expected to be decided after, not before, registration. It must follow as a necessary consequence that registration must first be allowed, and validity or effect litigated afterwards.

The foregoing, however, must not be understood as an absolute and invariable rule of procedure, for parties may, by mutual consent, submit issues for determination at the time of the proceeding to register a document. But the court should only proceed therewith (determination of the issues) upon giving all the parties concerned sufficient opportunity to present their respective sides and the evidence in support thereof, and that if this can not be done, the determination of the issues should be reserved in a subsequent proceeding and the registration of the document ordered.

In accordance with the above opinion, we find that the issues raised by respondents-appellants, namely, that the contracts of lease, Exhibits A and C, are invalid because they violate the contracts of mortgage executed in favor of the owner of the land, that Tirso T. Reyes is not the attorney-in-fact of the respondents-appellants, and that the respondents-appellants had no knowledge of the execution of the contract of lease, Exhibits A and C — these issues were not properly investigated because respondents-appellants did not have the opportunity to present evidence thereon and did not even present copy of their mortgage at the hearing, and the trial court decided the questions without full and complete investigation. The ruling of the trial court on the above issues should, therefore, be set aside and their determination reserved in a proper proceeding.

Wherefore, the opposition to the motion for the surrender of the certificates of title to the Register of Deeds of Manila is overruled, and the order appealed from, in so far as it orders the surrender of the certificates of title for the registration of the contracts of lease, is hereby affirmed, but the other rulings are reversed, and the other issues raised by respondents-appellants reserved for determination in a proper proceeding. With costs against the respondents-appellants.

Paras, C. J., Bengzon, Padilla, Montemayor and Jugo, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-23148 March 25, 1926

THE DIRECTOR OF LANDS, applicant, vs. SEYMOUR ADDISON, ET AL., claimants, SOLEDAD P. HERNANDEZ, claimant-appellee; TOMAS ANGELES, ET AL., claimants-appellants.

I. P. Santos and Feria & La O for appellants. Valentina J. Alcid and Vicente Sotto for appellee.

OSTRAND, J.:

Omitting the features not strictly relevant to the points of law involved, the facts of the present case are briefly as follows: On February 8, 1916, a Torrens certificate of title (No. 414) to a parcel of land containing an area of nearly 61 hectares, in the barrio of Santo Niño, municipality of Concepcion, in the Province of Tarlac, was issued in favor of Juana Angeles and seventeen others as tenants in common (hereinafter referred to collectively as the "Angeles heirs," though a few of them in fact bear other surnames). The certificate of title was issued in pursuance of a decree of registration entered in land registration case No. 6540.

On April 29, 1921, a deed purporting to be executed by eleven of the persons in interest in said land and to have been acknowledged before the notary public, and conveying about 47 hectares consisting of a western portion of the tract described in the certificate of title to Pedro Manuntag, the son of Juana Angeles, was presented to the register of deeds of Tarlac together with the owner's duplicate of said certificate of title No. 414. The deed contained no technical description of the land conveyed, the aforesaid certificate of title was not cancelled, and no transfer certificate of title was issued neither to the vendors nor to the vendee; in fact no attempt was made to comply with the provisions of section 57 and 58 of the Land Registration Act, the register of deeds contenting himself by noting the transaction by way of a memorandum on the original certificate of title. It has been proven beyond dispute that the deed was a forgery, at least one of the purported conveyors being dead at the time of the date of the instrument.

Armed with the owner's duplicate of the original certificate of title containing the memorandum of the alleged sale to him, Pedro Manuntag proceeded to mortgage the property to Soledad P. Hernandez for the sum of P3,000. This mortgage was also noted on the owner's duplicate of the original certificate of title, the memorandum bearing the date of August 1,

1921. On July 22, 1922, the mortgage was cancelled and an absolute deed of conveyance of the property made by the same Pedro Manuntag to said Soledad P. Hernandez, the consideration stated in the deed being P3,940. The deed was presented to the register of deeds of Tarlac who repeated the error committed in connection with the deed from the Angeles heirs to Pedro Manuntag and simply entered the transaction by memorandum on the back of the original certificate of title without complying with sections 57 and 58, supra. The memorandum is dated August 1, 1921. The owner's duplicate of the original certificate of title remained in possession of Soledad P. Hernandez who, on October 4, 1923, executed a deed of sale with pacto de retro for the term of one year and in consideration of the sum of P2,000 in favor of Arturo Sanchez Mijarez. This transaction was also noted on the original certificate of title, the entry bearing the date of October 12, 1923.

In the meantime a cadastral proceeding was instituted by the Director of Lands in the municipality of Concepcion including among other lands the tract covered by certificate of title No. 414. In this cadastral proceeding the Angeles heirs appeared as claimants and as no other person at first appeared to contend with them, the court on November 17, 1921, entered a decision awarding the property to them though in some respects erroneously stating the respective shares of the coowners. After the period allowed by law for an appeal from this decision has passed, Soledad P. Hernandez appeared by her attorney and, representing that she had acquired the property now in question by purchase from Pedro Manuntag, asked that the corresponding certificate of title be issued to her in the cadastral case. This motion was denied by Judge Anacleto Diaz, then presiding over the Court of First Instance in Tarlac, on the ground that the judgment had become final.

However, on July 26, 1923, the chief surveyor of the General Land Registration Office, having found certain errors in the decision in the cadastral case and having observed the memoranda aforementioned upon certificate of title No. 414, asked the court to set the cause for hearing in order that after notification to the various parties in interest, the question of ownership might be finally and definitely determined. This suggestion was opposed by Tomas Angeles in behalf of the Angeles heirs, and Soledad P. Hernandez again came forward and asked that the proper certificate be issued in her name. The judge presiding over the court (now Judge Cayetano Lukban) accepted the suggestion of the chief surveyor and, and after the parties had all been notified, proceeded to determine the controversy between the Angeles heirs and Soledad P. Hernandez. Upon hearing the court found that the document of April 21, 1921, purporting to be a deed of conveyance of the land from the Angeles heirs to Pedro Manuntag, was a forgery, but nevertheless on the authority of the decision of this court in the case of De la Cruz vs. Fabie (35 Phil., 144), decided the controversy in favor of Soledad P. Hernandez by an order dated August 27, 1924, from which the present appeal is taken.

Of the various questions raised by the assignments of error only one need be answered, namely, whether the court erred in holding that Soledad P. Hernandez had acquired title to the property, notwithstanding the fact that the deed of eleven of the Angeles heirs to Pedro Manuntag had been shown to be a forgery.

The principle that a forged deed is an absolute nullity and conveys no title is firmly embedded in our jurisprudence and it is clear that standing alone the need purporting to be executed by the Angeles heirs did not make Pedro Manuntag the owner of the land. But citing the case of De la Cruz vs. Fabie (35 Phil., 144), it is argued that under our Torrens registration system the act of registration is, in the language of section 50 of the Land Registration Act, "the operative Act to convey and affect the land" and that a deed of conveyance of registered land "shall operate only as a contract between the parties and as evidence of authority to the clerk of register of deeds to make registration," and it is therefore urged that the presentation of the owner's duplicate certificate and the entry thereupon of the memorandum of a transfer in fee simple to Soledad P. Hernandez, an innocent third party, constituted in itself a valid conveyance of the title to the land in question.

It must be conceded that if the transfers to Pedro Manuntag and by him to Soledad P. Hernandez were duly registered, it would be difficult to differentiate the present case from that of De la Cruz vs. Fabie. But, in our opinion, the entry of a mere memorandum of a conveyance in fee simple upon the original certificate of title to the purchaser is not a sufficient registration of the conveyance of the fee. Sections 57 and 58 of the Land Registration Act prescribe how conveyances in fee registered land must be made and read as follows:

SEC. 57. An owner desiring to convey in fee his registered or an any portion shall execute a deed of conveyance, which the grantor or grantee where the lands lies. The grantor's duplicate certificate shall be produced and presented at the same time. The register of deeds shall thereupon, in accordance with the rules and instructions of the court, make out in the registration book a new certificate of title to the grantee, and shall prepare and deliver to him an owner's duplicate certificate. The register of deeds shall note upon the original and duplicate certificates the date of transfer, the volume and page of the registration book where the new certificate is registered, and a reference by number to the last prior certificate. The grantor's duplicate shall be surrendered, and the word "canceled" stamped upon it. The original certificate shall be also stamped "canceled." The deed of conveyance shall be filed and indorsed with the number and place of registration of the certificate of title of the land conveyed.

SEC. 58. When a deed in fee is for a part only of the land described in a certificate of title, the register of deeds shall also enter a new certificate and issue an owner's duplicate to the grantor for the part of the land not included in the deed. In every case of transfer the new certificate or certificates shall include all the land described in the original and surrendered certificates: Provided, however, That no new certificate to a grantee of a part only of the land shall be invalid by reason of failure of the register of deeds to enter a new certificate to the grantor for the remaining unconveyed portion: And provided further, That in case the land described in a certificate of title is divided into lots, designated by numbers or letters, with measurement of all the bounds, and a plan of said has been filed with the clerk and verified pursuant to section forty-four of this Act, and a certified copy thereof is recorded in the registration book with the original certificate, when the original owner makes a deed of transfer in fee of one or

more of such lots, the register of deeds may, instead of canceling such certificate and entering a new certificate to the grantor for the part of the land not included in the deed of transfer, enter on the original certificate and on the owners' duplicate certificate a memorandum of such deed of transfer, with a reference to the lots thereby conveyed as designated on such plan, and that the certificate is canceled as to such lot or lots; and every certificate with such memorandum shall be effectual for the purpose of showing the grantor's title to the remainder of the land not conveyed as if the old certificate had been canceled and a new certificate of such land had been entered; and such process may be repeated so long as there is convenient space upon the original certificate and the owner's duplicate certificate for making such memorandum of sale lots.

As will be seen, the issuance of a transfer certificate of title to the purchaser is one of the essential features of a conveyance in fee by registration and in order to enjoy the full protection of the registration system, the purchaser must be a holder in good faith of such certificate. This appears clearly from section 39 of the Land Registration Act which provides that "every applicant receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith, shall hold the same free of all incumbrance except those noted on said certificate, and any of the following incumbrances which may be subsisting, namely, (enumeration of subsisting incumbrances)." In fact the register of deeds has no authority to register a conveyance in fee without the presentation of the conveyor's duplicate certificate unless he is ordered to do so by a court of competent jurisdiction (see Land Registration Act, section 55). As we have already shown, neither Pedro Manuntag nor Soledad P. Hernandez ever held a certificate of title to the land here in question and there had therefore been no sufficient legal conveyance in fee to them neither by deed nor by registration. The original certificate of title No. 414 in favor of the Angeles heirs has never cancelled and is the only certificate in existence in regard to the property.

In the case of De la Cruz vs. Fabie, supra, the situation was entirely different. There the registration of the property in question was decreed in the name of Gregoria Hernandez and a duplicate original certificate of title issued to her. She returned the duplicate certificate over to her nephew, the defendant Vedasto Velasquez, who forged a deed to himself of the property and presenting the same with the duplicate certificate of title to the register of deeds obtained a transfer certificate with its corresponding duplicate in his own name. He thereafter sold the land to his codefendant Ramon Fabie to whom a transfer certificate of title was issued upon the cancellation of Velasquez' certificate. There was therefore a complete chain of registered title. The purchaser was guilty of no negligence and was justified in relying on the certificate of title held by the vendor. In the present case, on the other hand, the vendor held no certificate of title and there had therefore been no complete conveyance of the fee to him. The purchaser was charged with presumptive knowledge of the law relating to the conveyance of land by registration and, in purchasing from a person who did not exhibit the proper muniments of title, must be considered to have been guilty of negligence and is not in position to complain of his loss.

We may say further that the distinction we have drawn between the two cases is not a mere technicality; if in the present case the procedure prescribed by section 58 of the Land Registration Act had been followed and which, in accordance with paragraph 3 of section 30 of the Rules for the Uniform Administration of the Registries of Deeds, as amended by Circular No. 31 of the General Land Registration Office, dated September 28, 1921, and approved by the Secretary of Justice, would have required the presentation of a subdivision plan and through the publicity attending the necessary monumenting of the dividing lines, the forgery of deed would in all probility have been discovered before any harm could have been done.

It appears to be conceded by the parties that Pedro Manuntag has legitimately acquired the interests of Juana Angeles and Silvino Angeles, amounting in all to a one-eight share in the land, which interests passed to Soledad P. Hernandez through the deed executed by Manuntag in her favor; the rest of the land is, as we have seen, still the property of the remaining Angeles heirs.

It appears that Bernardino Angeles and Matias Angeles have died since certificate of title No. 414 was issued and it is possible that some of the other original coowners have suffered the same fate. The evidence before us is hardly sufficient to definitely or exactly determine the present ownership of the shares of the various original heirs, but the record indicates that Soledad P. Hernadez is the owner of a one-eight interest in the land; the estate of Bernardino Angeles of one-twelfth; Leonarda, Tomasa, Ambrosia, Tomas, and Pelagia Angeles of one-twelfth each; the estate of Matias Angeles of one-twelfth; Alberto, Florencio and Agustin Angeles of one-twenty-fourth each; Maria, Romana, and Matias Angeles 2d one-thirty-sixth each' and Clemente, Eulalia, and Aquilino Tullo of one-thirty- sixth each.

The order appealed from is reversed and it is ordered that certificate of title No. 414 be cancelled and that in its stead a transfer certificate of title be issued describing the land in accordance with the cadastral survey and stating the names and shares of the various coowners as hereinabove set forth it should be found that recent changes in ownership have occurred, in which case the court below may upon motion and hearing, in accordance with section 112 of the Land Registration Act, make such modifications as the evidence before its justifies. All memoranda existing on certificate of title No. 414 will be cancelled except the one entered under document. No. 1425, evidencing the sale with the right of repurchase in favor of Arturo Sanchez, which memorandum shall, however, effect only the one-eight interest of Soledad P. Hernandez. No costs will be allowed in this instance. So ordered.

Avanceña, C. J., Malcolm, Villamor, Johns, Romualdez and Villa-Real, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-41377 July 26, 1935

ANGELA BLONDEAU and FERNANDO DE LA CANTERA Y UZQUIANO, plaintiffs-appellants, vs. AGUSTIN NANO and JOSE VALLEJO, defendants-appellees.

John R. McFie, Jr., for appellants. Evangelista and Santos for appellee Vallejo. No appearance for the other appellee.

MALCOLM, J.:

This action was brought in the Court of First Instance of Manila to foreclose a mortgage alleged to have been made by the defendants Agustin Nano and Jose Vallejo to the plaintiff Angela Blondeau, bearing date November 5, 1931, to secure the payment of the sum of P12,000, and covering property situated on Calle Georgia, Manila. Nano, purporting to represent both defendants, after filing an answer, was found in contempt of court. The other defendant Vallejo thereupon presented an amended answer in which it was alleged that his signature to the mortgage was a forgery. Following the trial, judgment was rendered against Nano but not against Vallejo. From this judgment the plaintiffs have taken an appeal.

With all due deference to the findings of the trial judge, now an honored member of this court, we are inclined to the view, first, that the accessorias bearing Nos. 905A to 905F, Calle Georgia, Manila, were as indicated in the mortgage, the property of the defendant Agustin Nano, and second, that the purported signature of the defendant Vallejo to the mortgage was not a forgery. In support of the first of our statements, attention need only be invited to a series of documents, including the transfer certificate of title, showing that Vallejo was considered the owner of the land only. As to the second statement, it needs be recalled that the mortgage was executed in the home of the plaintiffs, and that of those present, the principal plaintiff Angela Blondeau and her husband Fernando de la Cantera, together with the instrumental witness Pedro Jimenez Zoboli, identified Vallejo as the person who signed the document. As against their testimony stands the alibi of Vallejo, partially corroborated by the testimony of the notary public Gregorio Bilog. It is expecting a great deal to have us believe that not only the mortgage but the power of attorney of Vallejo in favor of Nano and a series of documents were the product of the evil machinations of Nano, and that although Nano and Vallejo, members of same family, lived together, Vallejo was entirely unacquainted with the activities of Nano in dealing with their joint property. It is significant that the proper cedulas of Vallejo were

presented for the accomplishment of the documents, and that if there was fraud, not one but a number of notaries public were deceived thereby.

We repeat that upon its face, the mortgage appears to be regular and to have been duly executed and accepted by Vallejo on November 5, 1931. The evidence then resolves itself into a question of the execution of the mortgage by Vallejo on the one hand, and the denial of its execution on the other hand. That there was a conflict between experts as to the handwriting, one being of the opinion that the signatures of Vallejo were genuine, and the other being of the opinion that they were not genuine, is not unexpected. Under such conditions, the question is, which side produced the weightier testimony, and as hereinbefore indicated, we are of the opinion that the balance inclined in favor of the plaintiffs.

But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetrated. When Fernando de la Cantera, a member of the Philippine bar and the husband of Angela Blondeau, the principal plaintiff, searched the registration records, he found them in due form, including the power of attorney of Vallejo, in favor of Nano. If this had not been so and if thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would not have lent P12,000 to the defendant Vallejo.

The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a departure from the orthodox principles of property law. Under the common law, if the pretended signature of the mortgagor is a forgery, the instrument is invalid for every purpose and will pass on the title or rights to anyone, unless the spurious document is ratified and accepted by the mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly entered in the registry, to become the root of a valid title in a bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the requirement that no transfer shall be registered unless the owner's certificate was produced along with the instrument of transfer. An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a representation to a third party that the holder of the transfer is authorized to deal with the lands. (53 C.J., 1141, 1142; Act No. 496, as amended, secs. 47, 51, 55.)

With respect to the conclusiveness of the Torrens title and the binding force and effect of annotations thereon even when through a forged deed the land passes into the possession of an innocent purchaser for value, the basic rule is found in the opinion delivered by Mr. Chief Justice Arellano in De la Cruz vs. Fabie ( [1916], 35 Phil., 144). The history of the case was as follows:

Vedasto Velazquez was attorney in fact of Gregoria Hernandez. Gregoria Hernandez registered her title of ownership to the land in question in the property registry and was issued certificate of title No. 121. Vedasto Velazquez, being the attorney in fact of Gregoria Hernandez, had in his possession all the muniments of title of the land,

including the certificate of title No. 121, and, abusing her confidence in him, a few days after the registration of the land, forged a notarial instrument wherein he made it appear that she had sold the said land to him for the price of P8,000.

Vedasto Velazquez then went to the register of deeds and applied for the registration of the land in his own name, presenting Gregoria Hernandez' certificate of title No. 121 for cancellation, and the deed of conveyance which was purported to have been made by Gregoria Hernandez in his favor in order that he might be registered as the true owner of the land. All this was done; Gregoria Hernandez' title was cancelled and certificate of title No. 43 was issued to Vedasto Velazquez.

x x x x x x x x x

On May 31, 1907, Vedasto Velazquez sold the land finally and absolutely to Ramon Fabie, who presented to the register of deeds the notarial instrument executed for the purpose and was thereupon furnished with the certificate of title No. 766." On these facts, it was held that Fabie was an innocent holder of a title for value and that, under section 55 of the Land Registration Law, he was the absolute owner of the land.

The decision above cited has repeatedly been reexamined by this court, one of the most recent instances being found in the case of El Hogar Filipino vs. Olviga ( [1934], 60 Phil., 17). While counsel for the appellee is undoubtedly correct in his contention that neither the case of Fabie nor the case of Olgiva nor any other case relied upon by the appellants is on all fours with the present facts, the principle on which these cases rest should here be carried forward and given application.

The recent decision of the United States Supreme Court in the case of Eliason vs. Wilborn ( [1930], 281 U.S., 457), is of enlightening interest. Plaintiffs in this case, purchasers of land previously brought under the Illinois Torrens Act, delivered the certificate of title to a party under an agreement to sell, who forged a deed to himself, had a certificate issue in his name, and then conveyed to defendants who were good faith purchasers for value. Plaintiffs informed the register of the forgery after the defendants had bought, and demanded the cancellation of the deeds and certificates, and the reissue of a certificate to themselves. The register refused, and a petition was brought to compel such action. The Circuit Court for Cook County, Illinois, the Supreme Court of Illinois, and the United States Supreme Court, united in dismissing the petition. Mr. Justice Holmes, delivering the opinion of the latter court, said:

. . . The statute requires the production of the outstanding certificate, as a condition to the issue of a new one. The appellants saw fit no entrust it to Napletone and they took the risk. They say that according to the construction of the act adopted the registrar's certificate would have had the same effect even if the old certificate had not been produced. But that, if correct, is no answer. Presumably the register will do his duty, and if he does he will require the old certificate to be handed in. It does not justify the omission of a precaution that probably would be sufficient, to point out that a dishonest

official could get around it. There is not the slightest reason to suppose that Napletone would have got a certificate on which the Wilborns could rely, without the delivery of the old one by the appellants. As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss.

Vargas & Mañalac in their treatise on the Philippine Land Registration Law quote with approval the comment of Mr. Powell in his book on Land Registration, section 213. The question which the author propounded was: Why does the law say that the person who had no title at all and only a forged deed as a color of title should become the true owner of the land by merely continuing to occupy and enjoy the land which in fact does not belong to him, but which belongs to the victim of the forgery? His answer was:

. . . that public policy, expediency, and the need of a statute of repose as to the possession of land, demand such a rule. Likewise, public policy, expediency, and the need of repose and certainty as to land titles demand that the bona fide purchaser of a certificate of title to registered land, who, though he buys on a forged transfer, succeeds in having the land registered in his name, should nevertheless hold an unimpeachable title. There is more natural justice in recognizing his title as being valid than there is in recognizing as valid the title of one who has succeeded in ripening a forged color of title by prescription.

In the first place, a forger cannot effectuate his forgery in the case of registered land by executing a transfer which can be registered, unless the owner has allowed him, in some way, to get possession of the owner's certificate. The Act has erected in favor of the owner, as a safeguard, against a forged transfer being perpetrated against him, the requirement that no voluntary transfer shall be registered unless the owner's certificate is produced along with the instrument of transfer. Therefore, if the owner has voluntarily or carelessly allowed the forger to come into possession of his owner's certificate he is to be judged according to the maxim, that when one of two innocent persons must suffer by the wrongful act of a third person the loss fall on him who put it into the power of that third person to perpetrate the wrong. Furthermore, even if the forger stole the owner's certificate, the owner is up against no greater hardship than is experienced by one whose money or negotiable paper payable to bearer is stolen and transferred by the thief to an innocent purchaser.

Other incidental facts might be mentioned and other incidental legal propositions might be discussed, but in its final analysis this is a case of a mortgagee relying upon a Torrens title, and loaning money in all good faith on the basis of the title standing in the name of the mortgagors only thereafter to discover one defendant to be an alleged forger and the other defendant, if not a party to the conspiracy, at least having by his negligence or acquiescence made it possible for the fraud to transpire. Giving to the facts the most favorable interpretation for Vallejo, yet, as announced by the United States Supreme Court, the maxim is, as between two innocent persons, in this case Angela Blondeau and Jose Vallejo, one of whom must suffer the

consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss, in this case Jose Vallejo. Accordingly, the four errors assigned will be sustained, the judgment reversed, and in the court of origin a new one entered sustaining plaintiff's mortgage and granting her the relief prayed for in her complaints .So ordered, without special pronouncement as to the costs in either instance.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.