PEDRO S. CRUZ AND CYNTHIA CRUZ, PLAINTIFFS-APPELLEES, VS. MACLIN REALTY DEVELOPMENT COMPANY, INC., DEFENDANT-APPELLANT.

Cruz versus Maclin Realty Development Company

The Case

This is a petition filed by spouses Pedro Cruz and Cynthia Cruz against Maclin Realty Development Company, Incorporated, seeking to compel the surrender of the owner's duplicate copy of a transfer certificate of title so that a deed of real estate mortgage may be annotated upon it. The case matters because it marks the boundary between a summary remedy for the surrender of a withheld title under the Property Registration Decree and a full-blown action to annul the very contract that the annotation would record. The Court teaches that the validity of the mortgage is beyond the scope of the surrender proceeding, and that the proper forum for that question is a separate action.

Procedural History

The spouses Cruz filed with the Regional Trial Court of Calamba City a petition for surrender of the owner's duplicate of title and for annotation of the deed of real estate mortgage, invoking Section 107 of Presidential Decree Number 1529. After trial on the merits, the trial court rendered its Decision dated February 11, 2002, granting the petition. It directed Maclin Realty to surrender the owner's duplicate of the title to the Register of Deeds of Calamba for annotation of the real estate mortgage dated May 25, 1998, and provided that should it fail to do so, the owner's duplicate would be cancelled and a new certificate issued in lieu thereof. Maclin Realty moved for reconsideration and to suspend the proceedings, but the trial court denied both motions in an Order dated April 21, 2003. Maclin Realty then appealed to the Supreme Court, assigning as errors the trial court's refusal to resolve the validity of the promissory note and deed of real estate mortgage, its holding that it had no jurisdiction over that question, its failure to suspend proceedings, and its conclusion that the spouses Cruz were entitled to the remedy under Section 107.

Facts

Maclin Realty obtained from the spouses Cruz a loan in the amount of 6,044,219.76 pesos, evidenced by a promissory note executed by Henry Crisostomo as its authorized representative. As collateral, Maclin Realty executed a deed of real estate mortgage over a parcel of land in Calamba, Laguna, consisting of 10,000 square meters and covered by Transfer Certificate of Title Number 410959. The owner's duplicate copy of the title was delivered to the spouses Cruz, but Maclin Realty later borrowed it back.

Maclin Realty failed to pay the loan. The spouses Cruz demanded the return of the owner's duplicate so that they could annotate the mortgage or foreclose it, but Maclin Realty refused. Because the owner's duplicate was not in their hands, the Register of Deeds of Calamba would not allow the annotation of the real estate mortgage on the original of the title. The spouses Cruz then filed an adverse claim on the original of the title and eventually brought the petition for surrender under Section 107.

Maclin Realty resisted, averring among others that the promissory note and the real estate mortgage did not express the true intent of the parties, that Henry Crisostomo was not duly authorized to sign them, and that the obligation was conditional and not yet due. It later filed a separate complaint with the Regional Trial Court of Pasig City for the annulment of the promissory note and deed of real estate mortgage.

Issues

• Whether or not the trial court erred in not resolving the alleged invalidity of the promissory note and deed of real estate mortgage.
• Whether or not the trial court erred in not suspending the proceedings pending the determination by the Regional Trial Court of Pasig City of the validity of the promissory note and deed of real estate mortgage.

Applicable Provisions

Section 107 of Presidential Decree Number 1529, the Property Registration Decree, provides:

Section 107. Surrender of withheld duplicate certificates. Where it is necessary to issue a new certificate of title pursuant to an involuntary instrument which divests the title of the registered owner against his consent or where a voluntary instrument cannot be registered by reason of the refusal or failure of the holder to surrender the owner's duplicate certificate of title, the party in interest may file a petition in court to compel the surrender of the same to the Register of Deeds. The Court, after hearing, may order the registered owner or any person withholding the duplicate certificate to surrender the same and direct the entry of a new certificate or memorandum upon such surrender. If the person withholding the duplicate certificate is not amenable to the process of the court, or if for any reason the outstanding owner's duplicate certificate cannot be delivered, the court may order the annulment of the same as well as the issuance of a new certificate of title in lieu thereof. Such new title and all duplicates thereof shall contain a memorandum of annulment of the outstanding duplicate.

This is the very remedy the spouses Cruz invoked, and it supplies the procedure for compelling a withholding owner to surrender the duplicate so that a voluntary instrument may be registered.

Ruling

On the first issue, the Court held that the trial court did not err. The main purpose of the petition was to have the deed of real estate mortgage annotated on the title, and the petition was filed pursuant to Section 107, which expressly provides the procedure a party may take so that the registration of any instrument or deed affecting registered land may be recorded when the owner neglects or refuses to surrender the duplicate certificate. The Court declared that the validity of the promissory note and deed of real estate mortgage is beyond the scope of a proceeding for surrender of the owner's duplicate copy of the title. It noted that Maclin Realty had itself filed a complaint with the Regional Trial Court of Pasig City for the annulment of those documents, a step diametrically opposed to its position that the Calamba court should first resolve their validity. The trial court therefore could not be faulted for holding that it had no jurisdiction to rule on the validity of the contracts, which should be resolved in another case.

On the second issue, the Court held that there was nothing to suspend. When Maclin Realty filed its motion to suspend proceedings dated April 5, 2002, the trial court had already rendered its Decision dated February 11, 2002, and hence there were no more proceedings to suspend. The Court closed by applying the settled doctrine that factual findings of trial courts are entitled to great respect and even finality on appeal, absent arbitrariness or overlooked facts of weight and influence.

Doctrine

A petition for the surrender of a withheld owner's duplicate certificate of title under Section 107 of the Property Registration Decree is a summary remedy confined to compelling the surrender of the duplicate and directing the entry of a new certificate or memorandum. The validity of the instrument sought to be annotated is beyond the scope of that proceeding and must be litigated in a separate action. A party who files its own action to annul the very contract cannot simultaneously insist that the surrender court first resolve that contract's validity. And a motion to suspend proceedings filed after judgment has already been rendered is futile, because there are no proceedings left to suspend.

Disposition

The Supreme Court affirmed the appealed Decision in its entirety, upholding the order for Maclin Realty to surrender the owner's duplicate of the title for annotation of the real estate mortgage, with cancellation and issuance of a new certificate should it fail to comply.

Remember This

Memorize this line: the validity of the mortgage is beyond the scope of a proceeding for surrender of the owner's duplicate title under Section 107. Examiners use this case to test whether a candidate can separate the summary remedy for surrender of title from the separate action to annul the contract, and to catch the procedural trap of moving to suspend proceedings after judgment has already been rendered.