G.R. No. 111935. September 05, 1997
HILARIO T. DE LOS SANTOS, PETITIONER, VS. COURT OF APPEALS, EMILIO MILLER, SR., ROSEMARIE OLAZO, AND MANUEL SERRANA, JR., RESPONDENTS.
MENDOZA, J.:
Regional Trial Court of Makati for “Removal of Cloud and Delivery of Title”
against private respondents Emilio Miller, Sr., Rosemarie Olazo, and Manuel
Serrana, Jr. Miller, Sr., was petitioner’s business partner in the MS Rice Mill
Company, while Olazo and Serrana, Jr. were officials at Manphil Investment
Corporation (Manphil). Petitioner alleged that he and Miller, Sr., obtained a
loan from Manphil on September 30, 1982 in consideration of which he
(petitioner) mortgaged his house and lot covered by TCT No. 337164; and that
out of the profits of MS Rice Mill Company, respondent Miller, Sr.
surreptitiously paid the loan from Manphil in full, but despite the fact that said
payment resulted in the extinguishment of the real estate mortgage, private
respondent maliciously refused to return his title. Petitioner therefore prayed
that private respondents be ordered to surrender TCT No. 337164 to him and to
execute a Deed of Cancellation of Mortgage to be annotated on the back of the
title.
The RTC of Makati (Branch 150) dismissed petitioner’s complaint
and ordered him to pay private respondents P15,000.00 as attorney’s fees
and the costs. On appeal the decision was affirmed. The Court of Appeals held
that petitioner and respondent Miller, Sr.’s loan from Manphil was not a
partnership obligation but was secured by them in their private capacities with
their respective private properties as collateral; and that the funds used by
respondent Miller, Sr. to pay did not come from the partnership because at that
time, the partnership only had “Cash on Bank” of P2,000.00, “Current
Assets” of P26,807.60, and “Fixed Investment” of P354,574.68, a
total of P381,382.28, which the Court of Appeals noted could not pay off
the principal of the P450,000.00 loan. The money came from respondent
Miller, Sr.’s wife Felisa. Respondent Miller, Sr. had to advance the amount
otherwise he would run the risk of losing his properties which were mortgaged to
Manphil together with petitioner’s property covered by TCT No. 337164. Pursuant
to the agreement petitioner had with respondent Miller, Sr. after obtaining the
loan, if petitioner failed to pay his share (50%) of the semi-annual
amortization, respondent Miller, Sr. would advance the necessary amount. Having
fully paid the loan respondent Miller, Sr. was subrogated to Manphil’s rights.
Consequently, respondent Miller, Sr. could not be compelled to return
petitioner’s title until petitioner had fully settled his obligation to
respondent Miller, Sr.
Petitioner filed this petition contending that under his
agreement with respondent Miller, Sr., the latter is entitled to be repaid what
the latter has advanced in petitioner’s behalf, and that ownership of petitioner’s
land and the bungalow thereon in which petitioner and his family reside should
not have “reverted automatically” to respondent Miller, Sr.
Petitioner is under a misapprehension. The Court of Appeals did
not hold that by virtue of respondent Miller, Sr.’s payment in full of the loan
to Manphil, the latter automatically became the owner of petitioners property
covered by TCT No. 337164, only that respondent Miller, Sr. succeeded to
Manphil’s rights as petitioner’s creditor under Art. 1303 which provides:
Art. 1303. Subrogation transfers to the person subrogated the
credit with all the rights thereto appertaining, either against the debtor or
against third persons, be they guarantors or possessors of mortgages, subject
to stipulation in a conventional subrogation.
The Court of Appeals erred, however, in holding that respondent
Miller, Sr. cannot be compelled to return petitioner’s TCT No. 337164 to him
until he ha been repaid what he had advanced in behalf of petitioner. It is
disputed that petitioner’s mortgage to Manphil annotated at the back of said
title had already been cancelled in 1983, apparently upon payment of the
loan. There is therefore no more mortgage to which the property covered by the
title is subject and therefore no basis for Miller Sr.’s refusal to return the
title to petitioner.
WHEREFORE, the decision of the Court of Appeals is
REVERSED and private respondent Emilio Miller, Sr. is ORDERED to return
petitioner Hilario T. de los Santos’ Transfer Certificate of Title No. 337164
to petitioner without prejudice to his instituting a separate action to collect
the latter’s debt.
SO ORDERED.
Romero, Puno, and
Torres, Jr., JJ., concur.
Regalado, (Chairman), J., on
leave.