JESUS G. CRISOLOGO AND NANETTE B. CRISOLOGO, PETITIONERS, VS. JEWM AGRO-INDUSTRIAL CORPORATION, RESPONDENT.

Crisologo versus JEWM Agro-Industrial Corporation

The Case

This is a petition for certiorari under Rule 45 of the Rules of Court filed by Spouses Jesus and Nannette Crisologo against JEWM Agro-Industrial Corporation. The spouses ask the Supreme Court to reverse the Court of Appeals, which had dismissed their special civil action under Rule 65 and upheld the orders of a Davao City trial court in an action for cancellation of lien. The case matters because it fixes who must be summoned when a registered owner asks a court to erase the annotations on a certificate of title. The answer is every person whose lien appears on the title, and the failure to join them is grave abuse of discretion that voids the proceedings.

Procedural History

Several collection suits for sums of money were filed against So Keng Kok, the owner of two parcels of land. The Crisologos sued in a Davao City regional trial court, Branch 15, and won a final judgment ordering Robert Limso and So Keng Kok to pay them solidarily. JEWM, for its part, traced its title to a compromise judgment in its favor rendered by another branch of the same court, Branch 8, and later bought the properties from the buyer in that case.

When the Crisologos moved for execution, the sheriff scheduled a public auction that included the two parcels now registered in JEWM's name. JEWM filed a third party claim, which was denied, and then brought a separate action for cancellation of lien with a prayer for injunction before Branch 14. The Crisologos appeared in that court and asked to be recognized as parties, but Branch 14 denied their motions in orders dated September 27, October 7, and November 9, 2010, and granted JEWM's writ of preliminary injunction. The Crisologos went up to the Court of Appeals by petition for certiorari under Rule 65. While that petition was pending, Branch 14 rendered judgment on the merits in favor of JEWM, making the injunction permanent and ordering the Register of Deeds to cancel all liens and encumbrances on the two titles. The Court of Appeals denied the amended petition on May 6, 2011, holding that the injunction was already a fait accompli, that is, an accomplished fact, and that the failure to file a motion to intervene under Rule 19 barred recourse to Rule 65. Hence this petition for review on certiorari before the Supreme Court.

Facts

So Keng Kok owned two parcels of land covered by two transfer certificates of title. Various creditors, including the Crisologos, attached the properties in their respective collection cases, and the levies were annotated at the back of the titles. The Crisologos obtained a final and executory judgment in their favor and caused a writ of execution to issue in June 2010. The sheriff then issued a notice of sale setting the auction for August 26, 2010, and the notice included the two parcels now registered in the name of JEWM.

JEWM had acquired the properties through a chain of transfers that began with a compromise judgment in its favor in October 1998. New titles were issued in its name, but the old annotations and a notice of lis pendens remained on them. When the auction was scheduled, JEWM filed a third party claim and an urgent motion to exclude the properties from the sale. The motion was denied, and the Crisologos posted a bond so that the execution could proceed.

JEWM then filed its separate action for cancellation of lien before Branch 14, impleading the Register of Deeds, the sheriff, and John and Jane Does. The Crisologos appeared and insisted they were the persons sued as John and Jane Does, but the trial court refused to recognize them and required a motion to intervene, which they never filed. The trial court granted the injunction, later made it permanent, and declared the defendants in default. The Court of Appeals refused to disturb these orders.

Issues

• Whether or not the Court of Appeals erred in holding that an action for cancellation of annotations may proceed without notice to and without impleading the parties whose liens were annotated on the certificates of title.
• Whether or not the Court of Appeals erred in holding that a motion to intervene under Rule 19 was the only way a real party in interest could participate in the proceedings.
• Whether or not the Court of Appeals erred in denying the application for a temporary restraining order or writ of preliminary injunction.
• Whether or not the Court of Appeals erred in holding that the issues raised before it had been mooted by the trial court's judgment on the merits.

Applicable Provisions

Section 108 of Presidential Decree Number 1529, the Property Registration Decree, provides:

Section 108. Amendment and alteration of certificates. No erasure, alteration or amendment shall be made upon the registration book after the entry of a certificate of title or of a memorandum thereon and the attestation of the same by the Register of Deeds, except by order of the proper Court of First Instance. A registered owner or other person having an interest in registered property, or, in proper cases, the Register of Deeds with the approval of the Commissioner of Land Registration, may apply by petition to the court upon the ground that the registered interests of any description, whether vested, contingent, expectant inchoate appearing on the certificate, have terminated and ceased; or that new interest not appearing upon the certificates have arisen or been created; or that an omission or error was made in entering a certificate or memorandum thereon, or on any duplicate certificate; or upon any other reasonable ground; and the court may hear and determine the petition after notice to all parties in interest, and may order the entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon a certificate, or grant any other relief upon such terms and conditions, requiring security or bond if necessary, as it may consider proper.

This is the provision that requires notice to all parties in interest before a court may cancel an annotation, and the Crisologos are precisely such parties because their liens appear on the titles.

Section 7 of Rule 3 of the Rules of Court provides:

Section 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.

This is the rule the trial court disobeyed when it refused to join the Crisologos despite their repeated pleas.

Ruling

On the first issue, the Court ruled for the Crisologos. It held that in an action for cancellation of a memorandum annotated at the back of a certificate of title, the indispensable parties include those whose liens appear as annotations, pursuant to Section 108 of the Property Registration Decree. The Court recalled its earlier holding that the cancellation of an annotation cannot be ordered without notice to the parties annotated on the title itself. Since the Crisologos' liens were undisputed annotations on the two titles, they stand to be benefited or injured by any order of cancellation and are as indispensable as JEWM itself. They should have been joined as defendants under Section 7 of Rule 3, whose purpose is the complete determination of all possible issues, not only among the parties but also as to other persons affected by the judgment.

On the second issue, the Court again sided with the Crisologos. It held that although intervention under Rule 19 could have been availed of, the failure to use it should not prejudice them, because it was the trial court's duty under the rule on joinder to recognize them with or without a motion to intervene. A simple perusal of the certificates of title would have shown their adverse rights. The Court noted that it had already found the trial judge guilty of gross ignorance of the law in a related administrative case for refusing to recognize the spouses as indispensable parties.

On the third issue, the Court held that certiorari under Rule 65 was the proper remedy. Appeal was not adequate because only original parties can appeal, and the Crisologos were never impleaded. Annulment of judgment presupposed a final judgment, and the assailed orders were interlocutory. The Court acknowledged that under ordinary circumstances a person who was not a party below lacks standing to file a Rule 65 petition, but it treated this case as an exception, since the absence of an indispensable party renders all subsequent actions of the court null and void, and technical rules must yield to substantial justice.

On the fourth issue, the Court held that the judgment on the merits could not moot the petition, because a judgment rendered without the indispensable parties is void and can be ignored wherever it shows itself.

Doctrine

First, under Section 108 of the Property Registration Decree, a court may hear and determine a petition to cancel or alter an annotation only after notice to all parties in interest. Second, persons whose liens are annotated at the back of a certificate of title are indispensable parties in an action to cancel those annotations and must be joined under Section 7 of Rule 3. Third, the court itself has the duty to cause their joinder, and the absence of a motion to intervene does not excuse the court or bar the party. Fourth, the absence of an indispensable party renders the proceedings and all subsequent orders void for want of authority to act, as to absent and present parties alike. Fifth, while a non-party generally lacks standing to file a petition for certiorari, the Court may relax the rule where the denial of standing would prolong a denial of due process and multiply suits.

Disposition

The petition was granted. The Court nullified and set aside the Decision of the Court of Appeals and the three Orders of the Regional Trial Court, Branch 14, Davao City, and remanded the civil case to the trial court for further proceedings.

Remember This

Memorize this line: a person whose lien is annotated on a certificate of title is an indispensable party to any action to cancel that annotation, and a judgment rendered without that person is void. Examiners use this case on compulsory joinder, on the notice requirement under Section 108 of the Property Registration Decree, and on the liberality of Rule 65 when indispensable parties are shut out.