Penticostes v. Development Bank of the Philippines
NEW DOCTRINEFacts
The Antecedents: Respondents spouses Alexander de Guzman and Natividad Mabalot obtained a mortgage loan from the Development Bank of the Philippines (DBP), offering Transfer Certificates of Title (TCT) Nos. 77533 and 76343 as collateral. Subsequently, a portion of the land under TCT No. 76343 was leased to petitioner Prudencio S. Penticostes, Sr. on February 4, 1982, and the land under TCT No. 77533 was sold to petitioner Prudencio Penticostes, Jr. on February 26, 1987. Procedural History: Petitioners attempted to register their deeds of sale and lease contract with the Register of Deeds of Tarlac, but were refused without the owner's duplicate copies of the titles. They then approached DBP to borrow the titles, but DBP refused, citing the outstanding mortgage obligation of the respondent spouses. Petitioners offered to assume the unpaid obligation but did not actually pay it. Consequently, petitioners filed a complaint in the Regional Trial Court (RTC) of Tarlac seeking to compel the surrender of the titles for registration and damages. Various motions to dismiss, motions for default, and answers were filed by the respondents. The RTC denied a motion for inhibition filed by petitioners. The RTC also denied motions to declare respondents in default, citing provisions of the Rules of Court and the compulsory nature of counterclaims. A pre-trial conference was held, resulting in a stipulation of facts and a directive for parties to submit memoranda. On April 28, 1989, the RTC rendered a decision dismissing the complaint for lack of merit. The Petition: Petitioners appealed to the Supreme Court, assailing the RTC's decision and arguing that respondents should have been declared in default for failure to file timely answers. They also questioned the dismissal of their complaint.
Issue(s)
Whether respondents were in default for failure to file timely answers. Whether petitioners may compel the surrender of the duplicate titles from DBP for registration under the Comprehensive Agrarian Reform Program (CARP) despite an outstanding mortgage obligation. Whether the Register of Deeds' refusal to annotate the deeds of sale and lease contract was in order.
Ruling
The petition is DISMISSED for lack of merit. The Supreme Court affirmed the decision of the Regional Trial Court.
Ratio Decidendi
On the issue of default: The Supreme Court found no cogent basis for the petitioners' allegation that respondents were in default. The Register of Deeds and DBP filed timely motions to dismiss, which interrupted the period to file an answer. DBP subsequently filed its answer before its motion to dismiss was resolved. The De Guzman spouses also filed a motion for a complete copy of the complaint and an extension of time to file their answer, which interrupted the period, and they subsequently filed their answer with a counterclaim. Furthermore, even if any respondent had failed to file an answer on time, the Court noted that when a complaint states a common cause of action against several defendants, and some answer while others do not, the case shall be tried against all upon the answers filed, as per Section 4, Rule 18 of the Rules of Court. On the issue of compelling the surrender of titles for CARP registration: The Supreme Court agreed with the trial court's disquisition that petitioners could not compel the surrender of the duplicate titles. The Court emphasized that the respondent spouses' obligation to deliver the titles was unavailing because the titles were in the possession of DBP as security for an unpaid mortgage loan. The mortgage contract prohibited the mortgagors from conveying or encumbering the mortgaged property without the written consent of the bank. Therefore, it was legally and physically impossible for the respondent spouses to surrender titles not in their possession. With respect to DBP, petitioners failed to show any legal basis to compel the surrender of the titles, as DBP stood firm on its contractual right as a secured creditor. Petitioners, not being privies to the mortgage contract, could not invoke the CARP Law to obtain the titles without disturbing DBP's secured rights. The Court reiterated that a party's right cannot rise higher than its source, and petitioners' right to the titles stemmed from the respondent spouses, who had already encumbered them. On the issue of the Register of Deeds' refusal: The Supreme Court held that the Register of Deeds' refusal to annotate the deeds of sale and lease contract without the presentation of the owner's duplicate copies of the titles was in order, pursuant to Section 53 of P.D. 1529 (Property Registration Decree). The CARP Law, specifically Section 6, requires registration of such transactions. However, the law does not require compliance under impossible conditions. Since the duplicate titles were in the possession of DBP as collateral for an unpaid loan, and DBP had the right to refuse their release, petitioners could not fulfill the requirement for registration. The Court concluded that there was no legal ground to compel the surrender of the titles, making the Register of Deeds' action proper.
Main Doctrine
A bank mortgagor cannot be compelled to surrender the duplicate title of a mortgaged property for registration purposes under the Comprehensive Agrarian Reform Program (CARP) when the mortgage obligation has not been fully paid, as the bank has a right to retain the title as security for the unpaid loan.