Lim v. Register of Deeds
REITERATIONFacts
The Antecedents: Petitioners Manuel Lim and Emilia Quintos de Lim mortgaged four parcels of land on December 2, 1940, to the Agricultural and Industrial Bank for P10,500.00. They paid the balance in full on June 5, 1944, and the bank executed a deed of cancellation. The deed of cancellation and the transfer certificate of title were filed with the Register of Deeds of Manila on October 3, 1944, and an entry was made in the Day Book. However, the documents were lost or destroyed during the liberation of Manila. Procedural History: On February 24, 1947, the Court of First Instance of Rizal ordered the Register of Deeds to issue a new duplicate title. To facilitate the annotation of the mortgage cancellation, petitioners obtained a new deed of cancellation from the RFC (successor of the Agricultural and Industrial Bank), which included the annotation: ". . . subject to such further disposition as the Government may adopt regarding transactions consummated during the Japanese occupation." Petitioners demanded registration without this annotation, but the Register of Deeds refused, citing Circular No. 14 of the Department of Justice. Petitioners filed a petition to compel registration without the annotation. The Court of First Instance of Rizal upheld the Register of Deeds' refusal. The Petition: Petitioners appealed to the Supreme Court, arguing that the annotation was illegal and not based on any provision of law, and that they should not be blamed for the loss of the original documents. They sought to compel the Register of Deeds to register the cancellation without the annotation.
Issue(s)
Whether the annotation required by Circular No. 14 of the Department of Justice is legal and binding on the Register of Deeds. Whether the Register of Deeds can be compelled to register the deed of cancellation without the questioned annotation.
Ruling
The Supreme Court reversed the order of the lower court. It ordered the respondent Register of Deeds to register the deed of cancellation of the mortgage without the annotation in question.
Ratio Decidendi
On the legality of the annotation and the Register of Deeds' duty: The Court held that the annotation "subject to such further disposition as the Government may adopt regarding transactions consummated during the Japanese occupation" would constitute an encumbrance on the title. Such an encumbrance could not have been noted on the original title or deed of cancellation, which were lost. Section 39 of Act No. 496 provides that subsequent purchasers in good faith hold the title free from encumbrances not noted on the certificate. Therefore, the Secretary of Justice had no authority to order the Register of Deeds, through Circular No. 14, to insert such an annotation, and the Register of Deeds was not bound to comply. Compliance would be contrary to the Constitution as it would impair the obligation of contracts and deprive persons of property without due process of law. The Court clarified that the Secretary of Justice's power to issue circulars under Section 79(B) of the Administrative Code is limited to those not contrary to law, and this circular was contrary to law. Furthermore, the Court noted that even if the annotation were not an encumbrance and the Secretary had the power to issue the circular, it would be rendered moot by previous rulings in Haw Pia vs. China Banking Corporation and Hongkong and Shanghai Banking Corporation vs. Perez Samanillo, which held that obligations contracted during the Japanese occupation and paid to creditors or their representatives were valid and released the obligations. The Philippine Congress had not enacted any law to the contrary, making the Supreme Court's rulings the adopted disposition of the government. On the effect of the new deed of cancellation: The Court addressed the fact that the new deed of cancellation from the RFC contained the annotation. It reasoned that this did not bar the decision because the original deed, filed in 1944, did not contain the annotation. The Register of Deeds' refusal was based solely on Circular No. 14, not on the annotation in the new deed. The annotation in the new deed was presumed to be inserted only in conformity with the circular, as the RFC is a government banking institution. Even if the RFC were not a party, it could not suffer damages from the omission of the annotation due to the reasons already set forth.
Main Doctrine
The Secretary of Justice cannot validly issue circulars that are contrary to law, such as requiring annotations on titles that impair the obligation of contracts or deprive persons of property without due process. A Register of Deeds is not bound to comply with such illegal instructions, and a deed of cancellation of mortgage should be registered without an illegal annotation.