Philippine National Bank v. Mallorca
REITERATIONFacts
The Antecedents: Ruperta Lavilles mortgaged a parcel of land to Philippine National Bank (PNB) to secure a loan. While the mortgage was in effect, Lavilles sold a portion of the land to Primitiva Mallorca without PNB's knowledge or consent. Mallorca requested annotation of the sale on the title, which led to the issuance of a new Transfer Certificate of Title (TCT) with two co-owner's copies, one for Lavilles and one for Mallorca, with PNB's mortgage lien annotated on both. Procedural History: Lavilles defaulted on her loan, and PNB foreclosed the mortgage extrajudicially. PNB acquired the property in a foreclosure sale. Mallorca sued PNB to enforce her right of redemption over the portion she purchased, and the court declared her entitled to redeem that specific portion within the legal period. Mallorca failed to exercise this right. PNB then sought to consolidate its title, requiring Mallorca to surrender her co-owner's copy of the TCT for cancellation and issuance of a new title in PNB's name. The cadastral court ordered Mallorca to surrender the copy, and she appealed. The Petition: PNB filed a petition for consolidation of title, praying that Mallorca's co-owner's copy of TCT 24256 be declared null and void, and that the Register of Deeds be directed to cancel it and issue a new title in PNB's name.
Issue(s)
Whether the cadastral court has jurisdiction to order the surrender of a co-owner's duplicate title for consolidation of title in favor of the mortgagee after foreclosure and expiration of the redemption period. Whether Primitiva Mallorca's 20,000 square meter portion of the mortgaged land remained unaffected by the foreclosure sale to PNB.
Ruling
The Supreme Court affirmed the order of the cadastral court directing Primitiva Mallorca to surrender her co-owner's copy of TCT 24256. The Court ruled that PNB has the right to consolidate its title on the entire lot mortgaged, including Mallorca's portion, by virtue of the foreclosure sale and the expiry of her right of redemption. The Court also held that the cadastral court has jurisdiction to entertain the petition for cancellation of title in this instance.
Ratio Decidendi
On the issue of whether Primitiva Mallorca's portion remained unaffected by the foreclosure sale: The Court held that Mallorca's portion remained subject to the mortgage lien. By Article 2126 of the Civil Code, a mortgage directly subjects the property to the fulfillment of the obligation, whoever the possessor may be. A sale or transfer cannot affect or release the mortgage, as a recorded real estate mortgage is a right in rem that subsists notwithstanding changes of ownership. The mortgage lien is inseparable from the property and follows it regardless of subsequent purchasers, whether the transfer was with or without the mortgagee's consent. Furthermore, the indivisibility of a mortgage means each parcel under mortgage answers for the totality of the debt. Mallorca was bound by the mortgage lien because the mortgage was registered, she petitioned for annotation of her interest which led to the issuance of a title with the lien noted, and her own co-owner's copy of the title carried the PNB's mortgage lien. Her failure to exercise her right of redemption also estopped her from denying the lien. On the issue of the cadastral court's jurisdiction: The Court ruled that the cadastral court has jurisdiction. The precedents cited by appellant involved unresolved issues, whereas in this case, the question of whether Mallorca's share was encumbered had already been passed upon in the redemption case she herself initiated. PNB's petition to consolidate title falls under the rule that a cadastral court has jurisdiction to entertain a petition for the cancellation of an outstanding certificate of title where the registered owner has been lawfully divested of title, especially when there is no substantial controversy regarding the cancellation of an encumbrance noted on a Torrens certificate of title filed within the record of the land registration case.
Main Doctrine
A mortgage lien follows the property regardless of subsequent transfers, and the property remains subject to the mortgage obligation, even if the transferee was not a party to the original loan, especially when the mortgage is duly registered and annotated on the title.