LUCIO C. SANCHEZ, JR., PETITIONER, VS. HON. COURT OF APPEALS AND RURAL BANK OF ORMOC CITY, INC., RESPONDENTS.

Sanchez versus Rural Bank of Ormoc City

The Case

This is a petition filed by Lucio Sanchez, Junior against the Court of Appeals and the Rural Bank of Ormoc City, Incorporated. Sanchez asks the Supreme Court to set aside the appellate court's dismissal of his earlier petition for certiorari, and to declare void the order of the land registration court that allowed the bank to annotate its money claims as adverse claims on his registered sugar lands. The case matters for two reasons. First, it settles when certiorari may substitute for an ordinary appeal. Second, and more importantly for land registration, it draws the line between a claim that may be annotated as an adverse claim and a mere money claim that may not.

Procedural History

The Rural Bank of Ormoc City filed three petitions with the Court of First Instance of Leyte, sitting as a land registration court, asking that the Registers of Deeds of Tacloban and Ormoc Cities be directed to annotate its adverse claims on the certificates of title. Sanchez opposed the petitions and filed a counter-petition asking that the titles be returned to him without any annotation. In its order of July 10, 1974, the trial court granted the bank's petitions and directed the Registers of Deeds to annotate the adverse claims and thereafter to release the titles to the registered owners. That order was implemented at once, even before it became final and executory, and the annotations were made on the certificates of title.

Sanchez then went to the Court of Appeals on certiorari, pleading that an ordinary appeal was inadequate because of the delay it would entail. The Court of Appeals gave due course to the petition but, by-passing the principal issue, dismissed it on January 9, 1975. It held that appeal, not certiorari, was the only remedy, and that even if the trial judge erred in ordering the annotation, that error alone was not a ground for certiorari. Sanchez's motion for reconsideration was denied. He then came to the Supreme Court by petition, which the Court treated as a special civil action and submitted for decision without briefs.

Facts

The registered sugar lands in Tacloban and Ormoc Cities had been the subject of mortgage loans obtained from the Rural Bank of Ormoc City. Those mortgages had been fully paid and discharged, either by payment or by redemption after extra-judicial foreclosure. Sanchez claimed the lands belonged to him either as co-owner or as redemptioner.

The bank, however, still held certain unsecured money claims. These arose from personal loans it had extended on promissory notes signed by seven borrowers and co-signed by Sanchez as co-maker, as well as other unsecured loans where the registered owners Magno Amora and Ponciano Mangco, represented by Sanchez as attorney-in-fact, had likewise signed as co-makers. To secure these claims, the bank executed affidavits of adverse claim and sought to annotate them on the certificates of title. It refused to surrender the certificates to Sanchez unless the annotation was first made, saying it did not want to be at the losing end.

The Register of Deeds of Tacloban refused to register the adverse claim. The bank then went to the land registration court, which ordered the annotation. The order was carried out immediately, and the adverse claims were annotated on the certificates of title. Hence the dispute over whether a mere money claim may be registered as an adverse claim.

Issues

• Whether or not certiorari, rather than an ordinary appeal, was the proper remedy of Sanchez against the order of the land registration court.
• Whether or not a mere money claim, such as a personal loan granted by a bank on promissory notes signed by the borrower and co-signed by a co-maker, may be registered as an adverse claim on a Torrens certificate of title.
• Whether or not a judge who orders the annotation of such a money claim as an adverse claim commits grave abuse of discretion amounting to lack or excess of jurisdiction.

Applicable Provisions

Section 110 of the Land Registration Act, Act Number 496, provides:

Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed.

This provision is the measure of what may be annotated. It requires a claim of a part or interest in the registered land adverse to the registered owner, and it is the reason a purely personal money claim cannot be registered as an adverse claim.

Ruling

On the first issue, the Court held that the Court of Appeals clearly erred in dismissing the petition on the ground that appeal was the only remedy. It is settled doctrine that certiorari may be applied for notwithstanding the existence of the regular remedy of appeal when the broader interests of justice so require, or when an ordinary appeal is not an adequate remedy. Sanchez had correctly pleaded that an appeal would be ineffectual, because the banks required lien-free titles to the sugar lands as collateral before granting him badly needed crop loans, and the delay of an ordinary appeal would work injustice upon him while certiorari could promptly relieve him of the injurious effects of the order.

On the second issue, the Court held that a mere money claim may not be registered as an adverse claim on a Torrens certificate of title. Section 110 requires that the person registering an adverse claim must claim a part or interest in the registered land adverse to the registered owner. Purely money claims, such as those of the bank by virtue of unsecured personal loans granted on promissory notes signed by the borrowers and co-signed by Sanchez as co-maker, are not registrable as adverse claims against his registered lands. The claim asserted must affect the title or be adverse to the title of the registered owner. The Court explained that the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and it serves as a notice and warning to third parties dealing with the property that someone is claiming an interest in it or a better right than the registered owner.

The Court added that if the bank wanted the additional security of Sanchez's real properties beyond his personal signature, it should not have extended the loans without requiring a covering real estate mortgage. If the loans were due and it feared fraudulent removal or disposition of the debtor's properties, its proper course was to file a collection suit and seek an order of attachment under bond, not to execute and submit for registration a baseless adverse claim simply because it happened to be in possession of the certificates of title as a mortgagee whose lien had been fully discharged.

On the third issue, the Court held that a judge who orders the annotation of such a money claim as an adverse claim acts without any authority in law and commits a grave abuse of discretion amounting to lack of jurisdiction, which calls for the corrective writ of certiorari.

Doctrine

First, certiorari may be availed of even when appeal is available, where the broader interests of justice so require or where an ordinary appeal is not an adequate remedy. Second, under Section 110 of the Land Registration Act, only a claim of a part or interest in registered land adverse to the registered owner may be annotated as an adverse claim. A mere money claim, such as an unsecured personal loan on a promissory note, is a purely personal claim and is not registrable as an adverse claim. Third, a judge who orders the annotation of such a money claim acts without authority in law and commits grave abuse of discretion amounting to lack of jurisdiction, correctible by certiorari.

Disposition

The Court set aside the decision of the Court of Appeals, declared null and void the order of the land registration court directing the annotation of the bank's adverse claims, and ordered the bank to deliver the owner's copies of the certificates of title to the Registers of Deeds, pay the fees for cancellation of the annotations, and return the certificates to Sanchez and the registered owners, with costs against the bank.

Remember This

Memorize this line: a mere money claim is not a registrable adverse claim, because Section 110 requires a claim of a part or interest in the registered land adverse to the registered owner. Examiners use this case to test the limits of registrable adverse claims and the exceptional resort to certiorari despite the availability of appeal.