GURBAX SINGH PABLA & CO., GURBAX SINGH PABLA, BELA SINGH PABLA, OJAGAR SINGH, DHAKAM SINGH, TALOK SINGH AND CIPRIANO TAN ENG KIAT, PETITIONERS AND APPELLEES VS. HERMOGENES REYES…

This is an appeal prosecuted by the respondents-appellants
against an order of the Court of First Instance of Manila dated November 29,
1949, compelling them to surrender owner’s duplicates of Transfer Certificates
of Title Nos. 8071 and 8072, so that the contract of lease entered into between
petitioners-appellees and the owner of the land covered by said certificates of
title be annotated thereon. John Tan Chin Eng is the owner of the land covered
by the above-mentioned certificates of title, and on July 23, 1948, he entered
into a contract (Exhibit A) with the petitioners-appellees, under the terms of
which petitioners-appellees were to construct thereon a three-story building of
concrete and of strong materials valued at from P80.000 to P90,000. The contract
also provided that the building shall become the exclusive property of the owner
of the land, but that the petitioners-appellees were to occupy, hold, or possess
it as lessees for a period of three years and six months from its completion,
without paying any rentals therefor, the sum spent in the construction being
considered as the rentals; that after the above period of three years and six
months petitioners-appellees were to continue occupying the said building for
another two years at a monthly rental of P2,000. This contract of lease was
filed and registered in ‘the office of the Register of Deeds of Manila on August
10, 1948, under Primary Entry No. 3352, Volume 15. At the time that the contract
was entered into there was an existing mortgage over the land in favor of Jose
Calvo and Carlos Calvo for the sum of P10,000. This mortgage in favor of the
Calvos was cancelled, and a new mortgage was executed by the owner in favor of
respondents-appellants herein, Honorable Hermogenes Reyes and his spouse Teodora
Taritoco, dated March 8, 1949, which was registered on the same date in the
office of the Register of Deeds of Manila under Primary Entry No. 5014. On May
14, 1949, the original contract of lease, Exhibit A, was amended by Exh. C, by
virtue of which the period under which the lessees were to hold and occupy the
property without rentals was extended to seven years and four months, and the
rental for the additional two years thereafter reduced to P1,148. This amended
contract of lease, Exhibit C, was also registered in the office of the Register
of Deeds of Manila under Primary Entry No. 5014, Volume 16, on May 20, 1949.

On May 25, 1949, counsel for petitioners-appellees wrote
respondents-appellants requesting them to allow him to take the certificates of
title to the office of the Register of Deeds of Manila for the annotation of the
contracts of lease entered into by the owner with them (Exhibit D), and on May
27, 1949, the son of respondents-appellants acknowledged receipt of the said
letter but informed counsel for the petitioners-appellees that the request could
not be granted without the written consent of the owner of the certificates of
title (Exhibit E). On June 16, 1949, respondents-appellants’ son wrote the owner
of the land (Exhibit M) demanding the payment of the overdue interest on the
mortgage with the following statement:

“* * * For this reason, I wish to request that you come over to my
office before 12:00 noon to pay the said interest before we can deliver your
Transfer Certificate of Title to Atty. Manuel P. Calanog who will take charge of
registering the lease contract between Mr. Singh Pabla and your goodself.”

On June 3, 1949, the petitioners-appellees filed a motion in
the Court of First Instance of Manila praying that an order issue to the owner
for the delivery of the owner’s duplicates of transfer certificates of title
Nos. 8071 and 8072 to the petitioners in order that the Register of Deeds of
Manila may be able to make the annotation thereon of the contract of lease,
Exhibit A, and its amendment, Exhibit C. Against this petition Hermogenes Reyes
and Teodora Tantoco filed an opposition, alleging that they had no knowledge
whatsoever of the contract of lease, Exhibit A, or of its amendment, Exhibit C,
and that the execution of the amendment, Exihibit C, violated the express
provision of the mortgage, to the effect that the owner could not sell, assign,
or encumber the mortgaged premises without the written consent of the
mortgagees. It is to be noted that with respect to the original contract of
lease, Exhibit A, no allegation is made in the opposition of the
respondents-appellants that they were not aware of the existence of the
contract, Exhibit A, their only allegation being that the only annotation on the
certificates of title at the time they entered into the contract of mortgage was
the mortgage in favor of Jose Calvo and Carlos Calvo. It is also to be noted
that respondents-appellants do not deny an express allegation of paragraph 13 of
the amended petition to the effect that notice was given to the public by a big
sign board placed on the premises while the building was under construction that
petitioners-appellees are the owners of the building. The amended petition
further states, without denial on the part of the respondents-appellants, that
as early as October 9, 1948, the Register of Deeds of Manila had demanded in
writing from the owner of the land the submission of his duplicate certificates
of title Nos. 8071 and 8072 in order that the lease executed by him in favor of
the petitioners-appellees may be given due course. At the hearing of the motion
no oral evidence was submitted; only documentary evidence was presented.

Thereafter the Court of First Instance of Manila issued the
order already mentioned above, directing respondents to surrender the
certificates of title to the Register of Deeds of Manila in order that
petitioners-appellees contract of lease may be noted thereon. It expressly
found that respondents-appellants had knowledge of the lease contract, Exhibit
A, but that respondents’ deed of mortgage of March 8, 1949, has priority over
petitioner’s amended contract of lease, Exhibit C. As regards the (supposed)
prohibition contained in the contract of mortgage, the court held that the
prohibition gives a right of foreclosure; in other words, that in spite of the
prohibition the amended contract of lease, Exhibit C, may not be considered as
null and void.

In this court on appeal claim is made on behalf of the
respondents-appellants that the court a quo erred in holding that
respondents-appellants had knowledge of the contract of lease, Exhibit A; that
it erred in holding that Tirso T. Reyes is the attorney-in-fact of the
respondents-appellants; that it erred in ordering the registration of the
contract of lease, Exhibit A; and that it erred in not holding that the
registration of the contracts, Exhibits A and C, will prejudice the rights and
interest of respondents-appellants.

It should be noted that all that the petitioners demand or pray
for is the surrender of the titles to the Register of Deeds so that their
contracts of lease, Exhibits A and C, may be noted thereon. The only issue,
therefore, is whether petitioners have a right to have said deeds registered.
It is not denied that the contracts have been executed by the registered owner
of the land, or that they have been lawfully executed, or that they have all the
qualities of registerable documents. Indeed, the owner is agreeable to the
registration. The objections interposed by respondents, who are mortgagees
merely, that they had no knowledge of the contract of lease, or that their
mortgage has priority, or that they will be prejudiced, are beside the issue.

The purpose of registering an instrument is to give notice
thereof to all persons (section 51, Act No. 496); it is not intended by the
proceedings for registration to seek to destroy or otherwise affect already
registered rights over the land, subsisting or existing at the time of the
registration. The rights of these parties, who have registered their rights, are
not put in issue when an instrument is subsequently presented for registration;
nor are its effects on other instruments previously registered put in issue by
the procedure of registration. Thus, the objections raised by
respondents-appellants that they had no knowledge of the contract of lease,
Exhibit A, before the property was mortgaged to them, or that the same violates
their contract of mortgage with the owner of the land—these are not passed upon
by the order for the registration of petitioners-appellees contract of lease.
The objections, as well as the relative rights of all parties who have
registered their deeds, shall be decided in the proper suit or proceeding when
the opportune occasion arises; but they are not now in issue, nor may they be
adjudicated upon, simply because petitioners-appellees have applied for the
registration of their contract of lease.

The impropriety and inconvenience of proceeding to determine
completely and in advance all the possible consequences of a document, upon all
parties affected thereby, in the proceeding for its registration becomes
apparent when, as in this case, important and complicated questions of fact and
of law were presented by the respondents-appellants about their alleged lack of
knowledge of the contracts of lease and the invalidity thereof. The court a quo
passed upon vital issues of fact upon the motion and the opposition thereto, and
upon the documents, letters, and receipts presented, without any other evidence
than the above. Yet the question of knowledge is mainly a question of fact and
requires inquiry into many and complicated circumstances, which can not be
satisfactorily shown except by testimony.

On the other hand, the supposed invalidity of the contracts of
lease is no valid objection to their registration, because invalidity is no
proof of their non-existence or a valid excuse for denying their registration.
The law on registration does not require that only valid instruments shall be
registered. How can parties affected thereby be supposed to know their
invalidity before they become aware, actually or constructively, of their
existence or of their provisions? If the purpose of registration is merely to
give notice, then questions regarding the effect or invalidity of instruments
are expected to be decided after, not before, registration. It must follow as a
necessary consequence that registration must first be allowed, and validity or
effect litigated afterwards.

The foregoing, however, must not be understood as an absolute
and invariable rule of procedure, for parties may, by mutual consent, submit
issues for determination at the time of the proceeding to register a document.
But the court should only proceed therewith (determination of the issues) upon
giving all the parties concerned sufficient opportunity to present their
respective sides and the evidence in support thereof, and that if this can not
be done, the determination of the issues should be reserved in a subsequent
proceeding and the registration of the document ordered.

In accordance with the above opinion, we find that the issues
raised by respondents-appellants, namely, that the contracts of lease, Exhibits
A and C, are invalid because they violate the contracts of mortgage executed in
favor of the owner of the land, that Tirso T. Reyes is not the attorney-in-fact
of the respondents-appellants, and that the respondents-appellants had no
knowledge of the execution of the contract of lease, Exhibits A and C—these
issues were not properly investigated because respondents-appellants did not
have the opportunity to present evidence thereon and did not even present copy
of their mortgage at the hearing, and the trial court decided the questions
without full and complete investigation. The ruling of the trial court on the
above issues should, therefore, be set aside and their determination reserved in
a proper proceeding.

Wherefore, the opposition to the motion for the surrender of
the certificates of title to the Register of Deeds of Manila is overruled, and
the order appealed from, in so far as it orders the surrender of the
certificates of title for the registration of the contracts of lease, is hereby
affirmed, but the other rulings are reversed, and the other issues raised by
respondents-appellants reserved for determination in a proper proceeding. With
costs against the respondents-appellants.

Paras, C. J., Bengzon, Padilla, Montemayor, and Jugo, JJ.,
concur.

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PABLO, M.:

Los opositores Hermogenes Reyes y Teodora Tantoco son
acreedores hipotecarios de los lotes con certificados de transferencia de titulo
Nos. 8071 y 8072 y, en virtud de una clausula de dicha hipoteca, el dueno no
puede vender, traspasar o gravar dichos lotes hipotecados sin el consentimiento
por escrito de los acreedores. El dueño, por tanto, no podia legalmente arrendar
dichas fincas a los hoy mocionantes sin dicho consentimiento. Si, en
contravencion de dicho contrato, el dueno los arrendo a los mocionantes, dicho
arrendamiento no debe ser anotado, en proteccion de los arrendatarios que no
obraron de buena fe, en los certificados de transferencia de titulo Nos. 8071 y
8072. La inscripcion en la Oficina del Registrador de Titulos de la hipoteca era
una notificacion a todo el mundo de que el propietario no podia gravar,
arrendar, etc., los lotes, sin consentimiento de los acreedores hipotecarios.

Si los mocionantes hubieran obrado con la prudencia ordinaria
de ver el titulo de dichos lotes en la Oficina del Registrador de Titulos,
habrian descubierto que el dueno no podia arrendarlos sin el consentimiento de
los acreedores hipotecarios. Es evidente que los mocionantes quieren subsanar la
falta de precaucidn con que debian haber obrado antes de arrendar los lotes, en
perjuicio de los acreedores hipotecarios.

Ordenar la anotacion del arrendamiento es proteger a los
arrendatarios que no obraron de acuerdo con las disposiciones legales y
conculcar los derechos legitimos de los acreedores, debidamente inscritos.

El
articulo 51 de la Ley No. 496 tiene aplicacion a los casos en que, sin
intervention de la otra parte o sin su conocimiento, el interesado consigue
inscribir escritura de traspaso, hipoteca, arrendamiento, embargo, etc. en la
Oficina del Registrador de Titulos. En tales casos, la inscripcion surtira el
efecto de notificacion a todos los que puedan tener reclamacion, y no en casos,
como el presente, en que los acreedores ya se oponen abiertamente a la anotacion
pedida, despues de notificados de la presentacion de la mocion. Cuando hay una
oposicion que alega violation de un derecho substantial, lo que procede es no
ordenar la inscription sino hacer que las partes presenten todas las pruebas en
apoyo de su respectiva alegacion, o que litiguen en el tribunal correspondiente,
suspendiendo toda action sobre la mocion en que se pide la presentacion al
registrador del duplicado del certificado de transferencia de titulo para la
anotacion.

Siguiendo la teoria de la mayoria, la notification a los
interesados solamente comenzara a tener lugar despues que se haya inscrito el
arrendamiento impugnado por orden de este Tribunal, y que desde esa fecha pueden
iniciar los pleitos que las partes quieran suscitar. Me parece que eso es
ceremonia innecessaria para este caso particular. Los acreedores ya han
planteado su oposicion a la anotacion. Su objecion esta fundada en los terminos
precisos del contrato de hipoteca; parte de las pruebas ya se han presentado; lo
que procede, en mi opinion, es devolver el expediente al juzgado de origen dando
a las partes oportunidad de presentar todas sus pruebas y despues decidir si
cabe o no la anotacion. Es hacer perder el tiempo a las partes interesadas y a
los juzgados obligarles a litigar despues que este Tribunal haya ordenado la
anotacion de dicho arrendamiento, y en el caso de que se decidiese que los
xnocionantes no tienen derecho a anotar la escritura de arrendamiento, entonces
se habra de ordenar la cancelacion de la anotacion ya ordenada por este
Tribunal. Habra algun juzgado inferior que se atreva a ordenar la cancelacion de
una anotacion ordenada por este Tribunal? Y para que fueron notificados los
acreedores de la vista de la mocion si, despues de todo, sin oir sus pruebas, se
ordena tal anotacion? Eso es contrario al espiritu que informa nuestro sistema
de legislacion: de proporcionar a las partes justa, pronta y no costosa
administracion de justicia.

Voto por la revocacion de la orden apelada y que se devuelva el
expediente para ulterior tramitacion, como tengo indicado.

Order affirmed in part and reversed in part.