Manalansan v. Manalang
REITERATIONFacts
The Antecedents: Spouses Augusto Manalang and Victoria Dabu were the original owners of a two-story building. On August 14, 1951, they executed a deed of chattel mortgage over this building in favor of Benito Manalansan to secure a loan. Upon failure to pay the loan, the mortgage was foreclosed, and the sheriff sold the building at public auction to Manalansan on May 14, 1956. Manalansan then attempted to take possession but found Jose Sy and Julio Cuba occupying the building as tenants of Luis Manalang. Manalansan formally notified Manalang and his tenants to vacate and filed a case for recovery of possession. Procedural History: Defendant Luis Manalang presented evidence that the building was sold to him by the spouses Manalang and Dabu on September 24, 1949, with a right to repurchase within one year. The vendors failed to redeem the property. Manalang had the property assessed in his name for taxation purposes from 1950-1957 and paid the corresponding taxes. He also obtained a judgment from the Municipal Court on January 25, 1955, ordering Augusto Manalang, et al., to vacate the building. Since the finality of this judgment, Manalang claimed to have been in possession and leased the building to Sy and Cuba. The lower court, convinced that Manalang had acquired full ownership before the chattel mortgage, dismissed the complaint. Plaintiff Manalansan appealed directly to the Supreme Court. The Petition: The plaintiff-appellant, Benito Manalansan, argued that a building is immovable property and that the consolidation of ownership in Luis Manalang should be governed by Article 1607 of the New Civil Code, which requires a judicial order. He contended that since this procedure was not followed, his subsequent chattel mortgage and auction sale should prevail.
Issue(s)
Whether Article 1607 of the New Civil Code, requiring a judicial order for consolidation of ownership in a sale with right to repurchase of real property, applies to a contract executed before the effectivity of the New Civil Code. Whether the plaintiff-appellant, as a third party who acquired the building through a chattel mortgage and subsequent foreclosure sale, is bound by the prior sale with right to repurchase between Luis Manalang and the original owners, despite the alleged non-compliance with registration requirements.
Ruling
The Supreme Court affirmed the decision of the lower court, dismissing the complaint. The Court ruled that the provisions of Article 1607 of the New Civil Code do not apply to the contract of sale with right to repurchase executed before the New Civil Code came into effect. The Court also held that the plaintiff-appellant, despite not being a party to the original sale with right to repurchase, was bound by it due to prior possession and earlier title of Luis Manalang, and that there is no legal compulsion to register buildings separately from the land they stand on.
Ratio Decidendi
On the applicability of Article 1607 of the New Civil Code: The Court held that Article 1607 of the New Civil Code, which requires a judicial order for the consolidation of ownership in a sale with right to repurchase of real property, cannot apply to the contract of sale with right to repurchase between appellee Luis Manalang and the spouses Manalang and Dabu because said contract was executed before the New Civil Code came into effect. The Court explained that under Article 2255 of the transitional provisions of the New Code, former laws regulate acts and contracts executed before the effectivity of the New Code, even if the condition or period is still pending. Furthermore, Article 2252 of the New Code states that changes and new provisions that may prejudice vested or acquired rights under old legislation shall have no retroactive effect. Under Article 1509 of the Old Civil Code, the vendee irrevocably acquires ownership upon the failure of the vendor to redeem, meaning ownership is consolidated by operation of law. Imposing the additional conditions of Article 1607 would impair the vested rights of appellee Manalang under the Old Code. The nature of a sale with right to repurchase under the Old Code is that ownership is transferred upon execution, subject only to the resolutory condition of repurchase. Thus, Manalang acquired the right to consolidate full title upon the vendors' failure to redeem. On the registration and notice to third persons: The Court found no merit in the appellant's contention that the sale with right to repurchase and the consolidation of ownership should have been registered as notice to third persons. The Court pointed out that there is no registry of buildings in the Philippines separate from the lands on which they stand, and thus no legal compulsion to register transactions concerning buildings alone. The appellant, by accepting a chattel mortgage on the building, had a duty to investigate the mortgagor's title. Such an investigation would have revealed that the building had been assessed for taxation in Manalang's name since 1950, and taxes were paid by him. Moreover, prior to the appellant's auction sale, Manalang had obtained a final judgment ejecting the original owners from the premises, and the records of that case contained an affidavit by Augusto Manalang recognizing Manalang's ownership. Therefore, based on prior possession or earlier title, as required by Article 1544 of the Civil Code (regarding double sales of unregistered property), Luis Manalang is entitled to priority.
Main Doctrine
The provisions of Article 1607 of the New Civil Code requiring a judicial order for the consolidation of ownership in a sale with right to repurchase of real property do not apply to contracts executed before the effectivity of the New Civil Code, which are governed by the Old Civil Code where ownership consolidates by operation of law upon failure to redeem.