GONZALO PUYAT & SONS INC., PETITIONER AND APPELLEE, VS. PHILIPPINE NATIONAL BANK, OPPOSITOR AND APPELLANT.

The instant case arose from a petition by Gonzalo Puyat & Sons, Inc.
filed under Section 112 of the Registration Law, Act No. 496, in the Court of
First Instance of Rizal, sitting as cadastral court asking for the reannotation
in the subsequently issued certificates of title, of Entries Nos. 26980 and
41373, concerning a sale in its favor, originally appearing in the cancelled
Transfer Certificate of Title No. 31423 registered in the name of Ricardo
Santos.

The records show that to satisfy a favorable judgment obtained by Gonzalo
Puyat & Sons, Inc. against Santos in another case, the parcel of land
covered by Transfer Certificate of Title No. 31423 was sold at public auction
and awarded to said judgment creditor, the sole bidder therein. Upon expiration
of the redemption period, the sheriff issued the corresponding certificate of
sale in favor of Puyat, which deed was accordingly registered on August 12, 1957
and annotated at the back of said TCT No. 31423. It appears in the same
certificate, however, that said property was already subject to a registered
mortgage in favor of the Philippine National Bank as of March, 1946, prior to
the annotations in favor of Puyat. Subsequently, the Bank, foreclosing the
mortgage extra-judicially and having offered the highest bid in the ensuing
public auction, obtained a certificate of sale which was registered on December
20, 1957. It does not appear that the judgment creditor, Gonzalo Puyat &
Sons, Inc. was notified of the foreclosure and sale of the property.

At the expiration of the period to redeem the property, the Bank consolidated
its ownership over the same as a consequence of which TCT No. 31423 (in the name
of Ricardo Santos) was cancelled and TCT No. 55826 was issued in its name. The
encumbrance in favor of Gonzalo Puyat & Sons, however, was not carried in
said new title. The lot was later subdivided into two and sold to Dr. Salvador
R. Samson and Celedonia Medina Samson, who were issued TCT Nos. 63306 and 63305,
respectively. These last two titles, similarly, did not contain the annotation
of the sale to Puyat. Thereupon, Gonzalo Puyat & Sons, Inc. filed. in the
Court of First Instance of Rizal, sitting as a land registration court, a
petition for the purpose already stated at the beginning of this opinion.

Opposing the same, the Bank contested the jurisdiction of the court to pass
upon the petition on the ground that petitioner was seeking to enforce an
alleged right (to redeem the property), which should properly be ventilated in a
regular court, and disclaimed knowledge of the non-inclusion of any lien,
originally appearing in TCT No. 31423, in TCT No. 55826 subsequently issued in
its name.

Finding that the encumbrance in favor of petitioner was actually omitted in
the new titles without proper court authorization, the court, without resolving
the merits of the alleged right of petitioner on the property, granted the
petition and directed the reannotation of the said encumbranceon TCT Nos. 55826,
63305 and 63306. Hence, this appeal by the oppositor Bank.

There seems to be no controversy as to the fact of the petitioner’s position
as a junior encumbrancer, it having obtained a lien on the property subject to
the previous mortgage in favor of the Philippine National Bank. The only issue
here is whether the Register of Deeds of Rizal has authority to omit, without
any specific court order, to transfer or carry over the annotation of Puyat’s
junior lien appear ing in the cancelled certificate of title, to the new title
issued to the first mortgagee by reason of the consolidation of the latter’s
right upon foreclosure of its mortgage.

It is already well-settled that upon a proper foreclosure of a first
mortgage, all liens subordinate to the mortgageare likewise foreclosed, and the
purchaser at public auction held pursuant thereto acquires title free from the
subordinate liens.^[1] Ordinarily,
therefore, and unless representation is duly presented at the time of the
cancellation of the certificate of title by reason of the foreclosure of the
superior mortgage lien, that irregularities attended the foreclosure, such as
lack of notice to or non-inclusion of inferior lien holders in the foreclosure
suit or proceeding,^[2] the register of
Deeds is authorized to issue the new titles without carrying over the annotation
of subordinate liens. And that is what has happened in the case at bar. At the
time the Register of Deeds cancelled the old title of Santos, the mortgagor,
upon the consolidation of the first mortgagee’s right by virtue of the
foreclosure of the the first mortgage, and issued the new title in favor of the
Philippine National Bank as purchaser in the public auction, no irregularity was
brought to his attention. Hence the Register of Deeds correctly acted, even
without court order, in not carrying over to the new title, annotations of
inferior liens appearing in the old title. And this did not prejudice the right,
if any, of petitioner Puyat to questions, in an appropriate ordinary action, the
legality of the foreclosure proceedings or the effect of the alleged lack of
notice to it of such foreclosure. Certainly such questions can not be litigated
in a summary proceeding such as is contemplated under Section 112 of Act 496
invoked by petitioner Gonzalo Puyat & Sons, Inc.

Wherefore, the order of the lower court appealed from is hereby reversed,
without prejudice to the proper determination in an appropriate proceeding or
action, of appellee’s alleged right over the property. No costs.

Padilla, Bautista Angelo, Concepcion, Reyes, J. B. L., and Paredes,
JJ., concur.

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[1] El Hogar Filipino vs. Philippine National Bank,
64 Phil., 582; Capistrano vs. Philippine National Bank et al., 101 Phil., 1117;
56 Off. Gaz., [50] 7624; Bank of the P. I. vs. Noblejas, 105 Phil., 418; 56 Off.
Gaz., [20] 3640.

[2] Even in instances of this nature it has been
held that failure to so notify or include inferior lienholders does not
invalidate the foreclosure proceedings (Somes vs. Goverment, 62 Phil., 432) but
at most will leave the equity of redemption unforeclosed as against such
lienholder not notified or not-included as party-defendant (Sun Life Ass. Co. of
Canada vs. Gonzales, 52 Phil., 271; Government vs. Cajigaz, 55 Phil. 667)