Four lots were mortgaged by the spouses Jose and Marcelina Aquino to Guillermo Ponce and his wife Adela (since deceased) as security for a loan of P2,200,000.00. The mortgages were registered. Two of the lots, those covered by TCTs Nos. 92836 and 92837, were afterwards sold by the Aquinos to the Butuan Bay Wood Export Corporation, which caused an adverse claim to be annotated on the certificates of title.
Gregorio Y. Limpin, Jr. obtained a money judgment against Butuan Bay Wood Export Corporation in Court of First Instance of Davao. To satisfy the judgment, the lots covered by TCTs Nos. 92836 and 92837 were levied upon on and sold at public auction to Limpin as the highest bidder for the sum of P517,485.41.
On order of the trial court, the covering titles were cancelled and issued to Limpin. Limpin sold the two lots to Rogelio M. Sarmiento. By virtue of said sale, TCTs Nos. 285450 and 285451 were cancelled on November 4, 1983, and TCT’S were replaced in Sarmiento's name.
Ponce filed suit against the Aquino spouses for judicial foreclosure of the mortgage over the Aquinos' four lots. Judgment was rendered in favor of Ponce. After the judgment became final, the Trial Court, directed the sale at public auction of the 4 mortgaged lots to satisfy the judgment.
The 4 lots, including those formerly covered by TCTs Nos. 92836 and 92837, were sold to Ponce himself whose bid was the highest and exactly correspond to the judgment debt. On the same day, the sheriff's certificate of sale was registered.
Ponce then moved for the confirmation of the sale and the issuance of a writ of possession in his favor covering the four lots. But the Trial Court confirmed only the sale of the lots covered by TCTs Nos. 02839 and 92840, refusing to confirm the sale or issue a writ of possession in regard to the lots covered by TCTs Nos. 92836 and 92837 on the ground that those titles had already been cancelled and new ones issued to Gregorio F. Limpin.
Limpin refused to participate in the hearings contending that the Court had no jurisdiction over his person; but he did comment that the mortgage over the lots covered by TCTs Nos. 92836 and 92837 had been released by Ponce by virtue of a "Partial Release of Real Estate Mortgage". The Trial Court denied Ponce's motion for reconsideration, whereupon he sought corrective relief by filing a special civil action for certiorari and mandamus in the Intermediate Appellate Court, impleading Limpin and Sarmiento, as private respondents.
IAC set aside the judgment of the Trial Court and issue a writ of possession to Ponce with respect thereto, subject to Sarmiento's equity of redemption.
Issue:
Whether or not IAC erred in according superiority to the mortgage rights of Ponce over the levy and sale in favor of Limpin and the subsequent sale to Sarmiento.
Held:
NO. The superiority of the mortgagee's lien over that of a subsequent judgment creditor is now expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the effect of levy on execution that it shall create a lien in favor of a judgment creditor over the right title and interest of the judgment debtor in such property at the time of the levy, subject to the liens or encumbrances then existing.
Using jurisprudence in Santiago v Dionisio, the Court in that case held that:
... [T]he effect of the failure to implead a subordinate lienholder or subsequent purchaser or both is to render the foreclosure ineffective as against them, with the result that there remains in their favor the "unforeclosed equity of redemption." But the foreclosure is valid as between the parties to the suit.
Applied to this case, this means that the sale to Ponce, as the highest bidder in the foreclosure sale of the two lots in question should have been confirmed, subject to Limpin's (and now Sarmiento's equity to redemption. The registration of the lands, first in the name of Limpin and later of Sarmiento, was premature. At most what they were entitled to was the registration of their equity of redemption.
It is well settled that a recorded mortgage is a right in rem, a lien on the property whoever its owner may be. The recordation of the mortgage in this case puts the whole world on constructive notice of its existence and warned everyone who thereafter dealt with the property on which it was constituted that he would have to reckon with that encumbrance. Hence, Limpin's subsequent purchase of the "interests and participation" of Butuan Bay Wood Export Corporation in the lots covered by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said mortgage.
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Additional rulings not related to topic:
* The fact that at the time Ponce foreclosed the mortgage on October 21, 1983, the lots had already been bought by Limpin and subsequently sold to Sarmiento is of no consequence, since the settled doctrine is that the effects of the foreclosure sale retroact to the date of registration of the mortgage, i.e., March 1, 1973 in the present case.
* As regards the claim that Ponce executed a deed of partial release of his mortgage on July 20, 1977, the evidence discloses that Ponce and Jose Aquino, the mortgagor, thereafter executed separate affidavits dated December 1, 1983, stating that the said partial release was void, not only for want of consideration but also for lack of the signatures of Ponce's two sons who at the time of the execution of the document, were co-mortgagees as successors and heirs of Mrs. Adela Ponce. Moreover, the Deed of Partial Release was not registered but had simply been attached.
Held:
NO. The superiority of the mortgagee's lien over that of a subsequent judgment creditor is now expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the effect of levy on execution that it shall create a lien in favor of a judgment creditor over the right title and interest of the judgment debtor in such property at the time of the levy, subject to the liens or encumbrances then existing.
Using jurisprudence in Santiago v Dionisio, the Court in that case held that:
... [T]he effect of the failure to implead a subordinate lienholder or subsequent purchaser or both is to render the foreclosure ineffective as against them, with the result that there remains in their favor the "unforeclosed equity of redemption." But the foreclosure is valid as between the parties to the suit.
Applied to this case, this means that the sale to Ponce, as the highest bidder in the foreclosure sale of the two lots in question should have been confirmed, subject to Limpin's (and now Sarmiento's equity to redemption. The registration of the lands, first in the name of Limpin and later of Sarmiento, was premature. At most what they were entitled to was the registration of their equity of redemption.
It is well settled that a recorded mortgage is a right in rem, a lien on the property whoever its owner may be. The recordation of the mortgage in this case puts the whole world on constructive notice of its existence and warned everyone who thereafter dealt with the property on which it was constituted that he would have to reckon with that encumbrance. Hence, Limpin's subsequent purchase of the "interests and participation" of Butuan Bay Wood Export Corporation in the lots covered by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said mortgage.
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Additional rulings not related to topic:
* The fact that at the time Ponce foreclosed the mortgage on October 21, 1983, the lots had already been bought by Limpin and subsequently sold to Sarmiento is of no consequence, since the settled doctrine is that the effects of the foreclosure sale retroact to the date of registration of the mortgage, i.e., March 1, 1973 in the present case.
* As regards the claim that Ponce executed a deed of partial release of his mortgage on July 20, 1977, the evidence discloses that Ponce and Jose Aquino, the mortgagor, thereafter executed separate affidavits dated December 1, 1983, stating that the said partial release was void, not only for want of consideration but also for lack of the signatures of Ponce's two sons who at the time of the execution of the document, were co-mortgagees as successors and heirs of Mrs. Adela Ponce. Moreover, the Deed of Partial Release was not registered but had simply been attached.
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