Employees' Club v. China Banking Corporation
REITERATIONFacts
The Antecedents: China Banking Corporation (appellant) was a mortgage creditor of the Intestate Estate of Jose Javier Go Chioco. Jose Javier Go Chioco had mortgaged his property at No. 419 Dasmariñas Street, Binondo, Manila, to secure a loan. While a civil case for debt recovery was pending, the administrator of the intestate estate leased the third floor of the mortgaged property to The Employees' Club, Inc. (appellee) for three years, from December 10, 1932, to November 30, 1935. The lease contract stipulated that in case of sale, the lessor would impose upon the purchaser the obligation to respect the lease. Procedural History: The trial court ordered the appellant, who possessed the duplicate transfer certificate of title, to surrender it to the register of deeds for the notation of the lease contract. The appellant opposed this order, arguing that the lease contract was not registerable as it did not create a real right and did not fall under the exceptions provided by the Civil Code and the Mortgage Law (lease exceeding six years, rent paid in advance for three years, or express covenant for inscription). The Petition: The appellant appealed the trial court's order, contending that the lease contract was not registerable.
Issue(s)
Whether a lease contract for a term of three years, with no rent paid in advance and no express covenant for inscription, is registerable under Act No. 496. Whether the provisions of Act No. 496 regarding the registration of interests in registered land supersede or modify the provisions of the Civil Code and the Mortgage Law concerning the registerability of lease contracts.
Ruling
The Supreme Court affirmed the order of the trial court, compelling the appellant to surrender the duplicate transfer certificate of title for the notation of the lease contract. The Court held that under Act No. 496, all interests in registered land are susceptible of registration to affect third persons, and this includes lease contracts, irrespective of their term or rent payment, provided the instrument is filed and a memorandum is made on the certificate of title.
Ratio Decidendi
On the registerability of the lease contract under Act No. 496: The Court clarified that the appellant's reliance on the Civil Code and the Mortgage Law was misplaced because the property in question was registered under Act No. 496, which governs the Torrens system. Sections 51 and 52 of Act No. 496 expressly provide that all conveyances, mortgages, leases, and other instruments affecting registered land that would otherwise affect the real estate are notice to all persons from the time of their registration. Section 52 specifically mandates that all interests in registered land less than an estate in fee simple shall be registered by filing the instrument with the register of deeds and making a memorandum on the certificate of title. The Court emphasized that the term "all interests" in Section 52 is broad and includes interests arising from a contract of lease. Therefore, the lease contract, even if it did not create a real right under the Civil Code or Mortgage Law, was registerable under Act No. 496 to affect third persons. On the precedence of Act No. 496 over the Civil Code and Mortgage Law: The Court held that Act No. 496, being the law governing registered land under the Torrens system, dictates the rules for registration. The appellant's argument that Section 52 of Act No. 496 was inapplicable because the Spanish text of the law was relied upon was dismissed, citing the rule that the English text prevails when the law was originally enacted in English. The Court found the Spanish translation of "all interests in registered land" to be inaccurate for restricting its meaning to "real rights." Furthermore, the phrase "which would under existing laws" in Section 51 does not exclusively refer to the Mortgage Law or Civil Code but also includes Act No. 496 itself, which requires the inscription of all rights or interests in registered land. The Court also noted that while Article 1571 of the Civil Code grants a purchaser the right to terminate a lease, this does not prevent the lease from being inscribed in the registry to protect the lessee against other liens, and the applicability of Article 1571 was deemed premature to decide at that stage.
Main Doctrine
Under Act No. 496 (Torrens system), all interests in registered land, including lease contracts, are susceptible of registration to affect third persons, regardless of whether they create a real right or are merely personal covenants, and irrespective of the lease term or rent payment, provided the instrument is filed and a memorandum is made on the certificate of title.