Cahayag v. Commercial Credit Corp.
REITERATIONFacts
The Antecedents: Petitioner Dulos Realty was the registered owner of several residential lots. On December 20, 1980, Dulos Realty obtained a loan from respondent Commercial Credit Corporation (CCC) for P300,000, securing it with a real estate mortgage over these properties. Subsequently, Dulos Realty entered into various Contracts to Sell and a Deed of Absolute Sale with petitioners Cahayag, Rivera, Escalona, and Baldoza for some of these lots. Dulos Realty defaulted on its loan, leading CCC to initiate extrajudicial foreclosure proceedings. CCC emerged as the highest bidder at the auction sale held on November 17, 1981. A Certificate of Sale was issued to CCC, and later, an Affidavit of Consolidation was annotated on the titles, resulting in the cancellation of Dulos Realty's titles and the issuance of new titles in CCC's name. Subsequently, CCC sold the properties to respondent Qua. Procedural History: Following the sale to Qua, she filed ejectment suits against Dulos Realty, Cahayag, Rivera, Escalona, and Baldoza, obtaining favorable decisions from the Metropolitan Trial Court (MTC). On December 5, 1988, the petitioners filed a Complaint before the Regional Trial Court (RTC) of Makati City, seeking the annulment of the sheriff's sale and other documents, alleging that the real estate mortgage did not include the houses and that the foreclosure was invalid. The RTC ruled in favor of the petitioners, finding the foreclosure invalid. However, the Court of Appeals (CA) reversed the RTC's decision, upholding the validity of the extrajudicial foreclosure and ruling that CCC, and subsequently Qua, had a better right to the properties. The CA found that the mortgage included the buildings and improvements, that the mortgage was annotated prior to the contracts to sell, and that the petitioners failed to redeem the properties within the redemption period. The CA also found the sale to Baldoza void as Dulos Realty was no longer the owner. The Petition: Consolidated Rule 45 Petitions were filed with the Supreme Court seeking to nullify the CA's decision and resolution. Petitioners argue that the real estate mortgage only covered the lands and not the housing units, that Dulos Realty was not the absolute owner of the properties at the time of the mortgage due to prior contracts to sell and a deed of absolute sale, and that they possess a better right to the properties than respondent Qua. They also contend that Qua is not an innocent purchaser for value and that the mortgage was void for lack of prior written approval from the Housing and Land Use Regulatory Board (HLURB). Specifically, petitioner Baldoza argues that her Deed of Absolute Sale was preceded by a Contract to Sell executed before the mortgage registration, which the CA allegedly ignored. The Supreme Court denied the petitions, affirming the CA's decision. The Court found that the mortgage clearly included buildings and improvements, that the contracts to sell and deed of absolute sale were executed after the mortgage was constituted and registered, thus binding the petitioners. The Court also ruled that the redemption period had expired, making CCC's title absolute, and that the sale to Baldoza was invalid because Dulos Realty was no longer the owner at the time of the sale. The Court further held that the issue of HLURB approval was raised too late and that the argument regarding Exhibit "L" was not properly presented.
Issue(s)
Whether the real estate mortgage covered only the lands or also the housing units. Whether Dulos Realty was the owner of the properties it mortgaged at the time of execution, considering the various Contracts to Sell and Deed of Absolute Sale. Who, between the petitioners-buyers and respondent Qua, has a better right over the properties. Whether the Deed of Absolute Sale in favor of Baldoza was preceded by a Contract to Sell and full payment of the purchase price, and if so, what is the effect on the transfer of ownership. Whether the mortgage is void for lack of prior written approval from the HLURB.
Ruling
The Supreme Court denied the petitions and affirmed the Court of Appeals' decision. Respondent Qua was declared the lawful owner of the properties.
Ratio Decidendi
On the coverage of the Real Estate Mortgage: The Court held that the mortgage covered the housing units as well. The Deed of Real Estate Mortgage contained a provision stating it covered the mortgaged properties "together with all the buildings and/or other improvements now existing or which may hereafter be placed or constructed thereon." This catch-all phrase clearly included the housing units, making the contra proferentem rule inapplicable as there was no ambiguity. On the ownership of the mortgaged properties at the time of mortgage: The Court found that the Contracts to Sell and the Deed of Absolute Sale were executed after the constitution and registration of the Real Estate Mortgage. Therefore, these subsequent contracts could not impede the mortgage. The Court clarified that a contract to sell does not transfer ownership until full payment of the purchase price, and in this case, there was no evidence of full payment by petitioners Cahayag, Rivera, and Escalona. For Baldoza, the Deed of Absolute Sale was executed almost three years after the mortgage. On who has a better right over the properties: The Court ruled that respondent Qua has a better right. The registration of the Real Estate Mortgage on February 3, 1981, established a real right binding on subsequent buyers. The Contracts to Sell in favor of Cahayag (March 29, 1981), Rivera (August 12, 1981), and Escalona (January 13, 1983) were all executed after the mortgage was registered, giving them constructive notice. The Court distinguished this case from Dela Merced v. GSIS, noting that in Dela Merced, the contract to sell predated the mortgage and involved full payment and execution of a deed of sale before foreclosure, unlike in this case. The redemption period for the foreclosure sale expired on March 8, 1983, without redemption, consolidating absolute title in CCC, which was then validly sold to Qua. On the Deed of Absolute Sale in favor of Baldoza: The Court affirmed the CA's conclusion that Qua had a better title, but clarified the reasoning. While the CA declared the sale void, the Supreme Court stated that the sale was valid at its perfection stage. However, the principle of nemo dat quod non habet applies at the consummation stage (delivery). Since Dulos Realty was no longer the owner when it executed the Deed of Absolute Sale in favor of Baldoza on December 10, 1983 (title having been consolidated in CCC on November 10, 1983), it could not validly transfer ownership to Baldoza. Thus, while the sale was valid, the transfer of title was not. On the alleged lack of HLURB approval: The Court ruled that this argument could not be raised for the first time on appeal. The issue was not raised in the trial court, and allowing it now would violate principles of fair play and due process, as respondents would not have had the opportunity to present evidence to rebut it. The exceptions to the rule against changing theories on appeal were found not applicable.
Main Doctrine
The registration of a real estate mortgage binds subsequent buyers under contracts to sell, even if those contracts were executed prior to the mortgage, provided the registration occurred before the contracts to sell. Furthermore, the principle of 'nemo dat quod non habet' applies at the consummation stage of a sale, not at the perfection stage, meaning a seller need not be the owner at the time of perfection, but must be at the time of delivery or consummation.