FIDELITY AND SURETY COMPANY OF THE PHILIPPINES, PETITIONER, VS. THE COURT OF APPEALS AND SIXTO A. CARLOS, RESPONDENTS.

In a foreclosure proceeding instituted
before the war by the Monte de Piedad y Caja de Ahorros vs. Angela
Aguilar de Guzman and Fortunato A. Guzman, Case No. 57776 of the Court of First
Instance of Manila, the herein respondent Sixto A. Carlos was the purchaser at
public auction of the mortgaged property. The sale was confirmed by the Court of
First Instance of Manila on December 4, 1941, subject only to the right of
redemption of the herein petitioner, Fidelity and Surety Company of the
Philippines, as holder of a second mortgage on said property. This reservation
was made because the petitioner, as second mortgagee, had not bean included in
the foreclosure proceeding filed by the Monte de Piedad y Caja de Ahorros, as
first mortgagee. The herein petitioner instituted a separate foreclosure
proceeding against the Guzman spouses (Civil Case No. 59593 of the Court of
First Instance of Manila), in which judgment of foreclosure was rendered on
August 18, 1941. This judgment was appealed by the Guzman spouses to the Court
of Appeals wherein the case was pending until August, 1943, when the Guzman
spouses paid their obligation to the petitioner in Japanese military notes and
the parties moved for the dismissal of the appeal in view of an amicable
settlement. On August 11, 1945, the herein respondent filed a petition in the
Court of First Instance of Manila in G. L. R. O. Cad. Record No. 392, praying
that the Register of Deeds of Manila be ordered to cancel in the certificate of
title the annotation covering the right of redemption in favor of petitioner.
After hearing, the Court of First Instance of Manila issued an order granting
the petition. Upon appeal by the petitioner, the Court of Appeals affirmed the
order of the Court of First instance of Manila. The petitioner has come to us by
way of certiorari, seeking the reversal of the decision of the Court of Appeals.

The Court of First Instance of Manila predicated its the has der its order
granting the petition of herein respondent on ground that the right of
redemption of the petitioner expired. The Court of Appeals, in affirming the or
of the Court of First Instance of Manila, premised conclusion on the ruling that
the payment made by Angela Aguilar de Guzman and Fortunato R. Guzman to the
petitioner in Japanese military notes was valid and therefore wiped out the
second mortgage in favor of the petitioner.

The main contention of the
herein petitioner is that the Court of First instance of Manila, as a court of
land registration, and the Court of Appeals on appeal, had no jurisdiction of
the case if their decision necessarily involves the validity or invalidity of
the payment in question.

In G.R. No. L-2020, La Orden de Padres
Benedictinos de Filipinas vs. The Philippine Trust Company,^[1] decided on December 29, 1949, we made the
following pronouncement: “In support of first assignment of error, appellant
cites the case of Castillo vs. Ramos,^[2] G. R. No. L-1031, decided by this Court in
July, 1947, wherein it was held that the validity of payment with Japanese
military notes during the war of a pre-war obligation in genuine Philippine
currency, is such a transcendental question that it is beyond the special and
limited jurisdiction of a Court of First Instance acting as a court of Land
Registration. However, in view of the decision of this Court in the case of Haw
Pia vs. China Banking Corporation, G. R. No. L-554 in which it was
ruled that payments made with Japanese war notes during the occupation of
obligations contracted before the war, to the creditors or his legal
representatives, and accepted by them, are valid and release the said
obligations, there no longer is any doubt as to the validity of similar
payments. As was said in the case of Castillo vs. Ramos, supra, if
there is no substantial controversy between the parties about the cancellation
of any encumbrance noted in any certificate title as there can be no serious
controversy between petitioner and oppositor in the present case because the
payment of the loan and the execution of the corresponding deed of cancellation
of the second mortgage not denied, then the lower court had jurisdiction to
order the inscription of the deed of cancellation and the cancellation of the
annotations on the back of the certificates of title.”

As payment by the
Guzman spouses in Japanese military notes to the petitioner is admitted herein,
the ruling above quoted is perfectly applicable. This result makes it
unnecessary for us to pass upon petitioner’s contention that its right of
redemption has not yet expired.

Wherefore, the appealed decision of the
Court of Appeals is hereby affirmed, with costs against the petitioner.

So
ordered.

Moran, C. J., Ozaeta, Pablo, Bengzon, Montemayor, and
Reyes, JJ., concur.
Padilla, J., see concurring opinion.
Tuason, J., joins Justice Padilla in his opinion.
Feria and Torres, JJ., took no part.

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^[1] 85 Phil., 217,
^[2] 78 Phil., 809.
^[3] 85 Phil., 217.

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CONCURRING OPINION

PADILLA, J.:

I concur in the result.
There seems to be no need o£ invoking the rule laid down in the case of “La
Orden d«i Padres Benedictinos de Filipinas vs. The Philippine Trust
Co.^[3]“G. R. No. L-2020, 29 December
1949, because, cording to the majority opinion, the debtors paid to the
petitioner the debt the payment of which was secured by a second mortgage on the
property “and the parties moved for the dismissal of the appeal (then pending in
the Court of Appeals) in view of an amicable settlement,” and because the right
of redemption had already expired, as found by the trial court. But if the
ground for affirming the order of cancellation of the right of redemption in
favor of the petitioner appealed from is the rule laid down in the case referred
to, then I dissent from such ground for the same reasons stated in my opinion in
said case.