G.R. No. 36965. March 31, 1933
THE PHILIPPINE NATIONAL BANK, PLAINTIFF AND APPELLANT, VS. MATIAS ATILES ET AL., DEFENDANTS AND APPELLEES.
IMPERIAL, J.:
Nos. 36965 and 36966, Nos. 5160 and 5213, respectively, of the Court of
First Instance of Occidental Negros, are involved in this appeal. The
Philippine National Bank brought the first action to foreclose certain
mortgages on real estate executed by the spouses, Matias Atiles and
Magdalena Sison, and to have its mortgage credits thereon declared
superior and preferential to whatever rights the other defendants,
Arcadio Y. Salva and Alfonso Severino, may claim in the mortgaged
properties. The second action was instituted by Alfonso Severino
against the Philippine National Bank and the register of deeds of the
above-mentioned province to have himself declared the sole owner of one
of the mortgaged properties, exclusive of any other right the
Philippine National Bank may claim therein; and to have the register of
deeds issue the corresponding transfer certificate of title free from
all liens and encumbrances and, particularly, without any annotation
thereon of the mortgage lien claimed by the aforementioned bank.
The Philippine National Bank appealed from the dispositive part of the
decision rendered by the trial court, reading as follows:
“Therefore,
the court holds that Alfonso Severino, the plaintiff in case No. 5213,
is entitled as owner of lots Nos. 331 of La Carlota and 1768 of Bago,
to obtain and receive transfer certificates of title to the aforesaid
lots, exclusive of whatever mortgage lien the Philippine National Bank
may have thereon, and the register of deeds is hereby ordered to issue
such certificates of title free from all liens and encumbrances, with
costs against the Philippine National Bank. The deed, Exhibit AA, is
hereby declared to have no further force or effect and the writ of
attachment issued in civil case No. 3751 of this court, is hereby given
precedence over the deed, Exhibit BB, with costs against the Philippine
National Bank. The defendant, Matias Atiles, is ordered to pay to the
Philippine National Bank the sum of P1,878.96, together with interest
at 9 per cent per annum on the sum of P1,452.68 from October 1, 1929,
until fully paid, plus a penalty of 10 per cent of the sum of P1,452.68
and of the sum of P842.62, together with interest at 9 per cent per
annum on the sum of P841.16 from October 1, 1929, until fully paid,
plus a penalty of 10 per cent of the last amount. A copy of this
judgment shall be attached to the records of civil cases Nos. 5213 and
5160 of this court. So ordered.”
Both cases were tried together and at the hearing the parties submitted the following:
“STIPULATION OF FACTS
“Counsel
for Alfonso Severino and Arcadio Y. Salva and for the Philippine
National Bank agree on the following stipulation of facts:“1.
That on August 7, 1918, the spouses, Matias Atiles and Magdalena Sison,
mortgaged to the Philippine National Bank lots Nos. 331 of the cadastre
of La Carlota and 1768 of the cadastre of Bago, Occidental Negros, P.
I., to secure the payment of a loan amounting to P300. This mortgage
was recorded as entry No. 3804 in the registry of deeds of Occidental
Negros on August 7, 1918, and was noted on the reverse side of the
certificates of title Nos. 5241 and 6102 corresponding, respectively,
to said lots, which certificates of title were issued in the name of
said spouses.“2. That on May 5, 1926, the provincial
sheriff of Occidental Negros presented to the register of deeds of the
same province, a notice dated April 22, 1926, of the attachment of lots
Nos. 331 of the cadastre of La Carlota and 1713 of the cadastre of
Bago, both of the Province of Occidental Negros, accompanied with a
copy of the writ of attachment issued by the Court of First Instance of
Occidental Negros in civil case No. 3751—Arcadio Y. Salva, plaintiff, vs.
Matias Atiles et al., defendants. No certification to the effect that
the defendants therein have been notified of such attachment appears in
the aforementioned documents. Neither has this attachment been noted on
the reverse side of the original certificate of title No. 5241 covering
lot No. 331 mentioned above.“3. That on December 11,
1926, the spouses, Matias Atiles and Magdalena Sison, constituted
another mortgage on the same lots, Nos. 331 of the cadastre of La
Carlota and 1768 of the cadastre of Bago, Occidental Negros, which was
presented to the register of deeds of Occidental Negros, and on
December 13, 1926, the corresponding memorandum thereof was noted on
the reverse side of the original certificates of title Nos. 5241 and
6102.“4. That on December 14, 1926, the provincial
sheriff of Occidental Negros presented to the register of deeds of this
province a copy of the writ of attachment of the aforesaid lots Nos.
331 and 1713 and of lot No. 1768 of the cadastre of Bago, Occidental
Negros, together with a copy of the writ of execution issued in the
aforementioned civil case No. 3751. These documents have not been
annotated on the reverse side of the original certificates of title
Nos. 5241 and 6102 covering the said lots Nos. 331 and 1768,
respectively.“5. That on December 31, 1926, the
Philippine National Bank, through the manager of its branch in Bacolod,
Occidental Negros, presented to the sheriff of Occidental Negros a
third party claim, under oath, alleging a better right to lots Nos. 331
and 1768 of the cadastres of La Carlota and Bago, Occidental Negros1,
which were attached by the said sheriff by virtue of the aforementioned
writ of execution issued in civil case No. 3751 of this same court,
entitled Arcadio Y. Salva vs. Matias Atiles et al.“6.
That on January 27, 1927, the provincial sheriff of Occidental Negros
presented a copy of the certificate of sale of the said lots to the
register of deeds of this province, which was recorded as entry No.
16568, and noted on the reverse side of original certificate of title
No. 6102 only, covering lot No. 1768.”
The pertinent facts established by the evidence are correctly summarized by the court as follows:
“1.
That on July 27, 1918, the spouses, Matias Atiles and Magdalena Sison,
obtained and received from the Philippine National Bank an agricultural
loan of P800 for which they executed a promissory note reading as
follows:“BACOLOD, NEGROS OCCIDENTAL, P. I.
“July 27, 1918
“P800.00
“On
or before the 27th day of July, 1923, for value received, we promise to
pay to the Philippine National Bank at its office in Manila, Philippine
Islands, the sum of Eight hundred pesos (P800) with interest thereon,
payable semi-annually, at the rate of eight (8%) per cent per annum,
from date until paid, and with interest at the same rate on all annual
installments overdue and unpaid. Annual payments of principal and
interest to be made as per amortization schedule attached to the
mortgage.
“MATIAS MATILES “MAGDALENA SISON (Par. XII of the first cause of action, second amended complaint.)
“2.
That in order to secure the payment of said loan, the aforementioned
spouses, on August 7, 1918, mortgaged their property consisting of lots
Nos. 331 of the cadastre of La Carlota and 1768 of the cadastre of
Bago, Occidental Negros, and executed the corresponding deed (Annex A
of the complaint) which was recorded on the same date as entry No. 3804
in the registry of deeds of Occidental Negros, and noted on the reverse
side of original certificates of title Nos. 5241 and 6102 corresponding
respectively to the lots in question, issued in the name of the
aforementioned spouses, Matias Atiles and Magdalena Sison. (Par. XIII
of the first cause of action, second amended complaint; par. 1 of the
stipulation of facts, Exhibit KK.)“3. That according to
the said mortgage deed (annex A), Matias Atiles and Magdalena Sison
bound themselves to pay to the mortgagee, Philippine National Bank, the
afore mentioned sum of P800 with interest at the rate of 8 per cent per
annum, in five annual installments of P201.21 payable on or before the
27th of July of every year from the date of the contract, as follows:“FIVE YEAR LOAN
Amount
of loan P800, interest 8 per cent annually, compounded semi-annually.
Loan repayable in five equal annual installments of P201.21 each.
year
payment
principal
outstanding(Par. XIV of the first cause of action, second amended complaint.)
“4.
That Matias Atiles and Magdalena Sison only paid the first three
installments and failed to pay the fourth and fifth corresponding to
the years 1922 and 1923. They, therefore, remained indebted to the
Philippine National Bank in the amount of P679.92 including interest
thereon computed up to September 30, 1929, which amount remains unpaid
in spite of demands made to that effect. (Pars. XV, XVI and XVII of the
first cause of action, second amended complaint.)“5. That
during the milling season of 1925-1926, Matias Atiles obtained from the
Philippine National Bank a credit on crops on which he received
advances amounting to P2,628.75, including the unpaid balance of the
preceding years, for the purpose of planting sugar cane on his hacienda Ayungon.
To secure the payment of said credit and the interest thereon at the
rate of 9 per cent per annum, Matias Atiles constituted a special
mortgage on all the crop produced on his hacienda Ayungon, in
favor of the Philippine National Bank, which mortgage was recorded as
entry No. 8596 in the registry of deeds on February 1, 1926. But after
a liquidation of Matias Atiles’ credit with interest thereon at 9 per
cent per annum computed up to September 30, 1929, and after he was
credited with the net proceeds of the sale of his sugar crop, he still
remained indebted to the Bank in the sum of P842.62. This sum, together
with 10 per cent thereof as attorney’s fees, has not been paid to date
in spite of repeated demands to that effect. (Pars. III, IV, V, VI, VII
and VIII of the second cause of action, second amended complaint.)“6.
That during the milling season of 1926-1927, Matias Atiles obtained
from the Philippine National Bank a credit on crops on which he
received advances amounting to P2,102.20 for the purpose of planting
sugar cane on his hacienda Ayungon. To secure the payment of
said credit and the interest thereon at the rate of 9 per cent per
annum, Matias Atiles constituted a special mortgage on all the crop
produced on his hacienda Ayungon, in favor of the Philippine
National Bank, which mortgage and its amendment were recorded as
entries Nos. 9438 and 10755 in the registry of deeds on June 7, 1926
and February 7, 1927, respectively. But after a liquidation of Matias
Atiles’ credit with interest at the rate of 9 per cent per annum
computed up to September 30, 1929, and after he was credited with the
net proceeds of the sale of his sugar crop, he still remained indebted
to the Philippine National Bank in the net amount of P1,878.96. This
amount together with 10 per cent thereof as attorney’s fees has not
been paid to date in spite of repeated demands to that effect. (Pars.
II, III, IV, V, VI, and VII of the third cause of action, second
amended complaint.)“7. That in civil case No. 3751 of this court entitled Arcadio Y. Salva vs.
Matias Atiies and the Philippine National Bank, a writ of attachment of
Matias Atiles’ properties was issued at the instance of the plaintiff,
Arcadio Y. Salva. On May 5, 1926, the provincial sheriff of Occidental
Negros executed said writ and presented to the register of deeds of the
same province, a copy of the said writ of attachment dated May 4, 1926,
together with a notice to the effect that lots Nos. 331 of the cadastre
of La Carlota and 1713 of the cadastre of Bago, Occidental Negros, were
under attachment. It does not, however, appear from said documents that
the defendant, Matias Atiles, has been notified of the attachment.
Neither was the same noted on the reverse side of the original
certificate of title No. 5241 covering the above-mentioned lot No. 331
of the cadastre of La Carlota. (Par. 2, Exhibit KK.)“8.
That, as additional security for the payment of the credits on crops
contracted by Matias Atiles and Magdalena Sison during the milling
seasons of 1925-1926 and 1926-1927, they executed a special mortgage on
said lots Nos. 331 of the cadastre of La Carlota and 1768 of the
cadastre of Bago in favor of the Philippine National Bank on December
11, 1926, which mortgage was duly recorded as entry No. 16336 in the
registry of deeds of Occidental Negros on December 13, 1926. (Par. VIII
of the third cause of action, second amended complaint; par. 3, Exhibit
KK); and a memorandum thereof was noted on the reverse side of the
original certificates of title Nos. 5241 and 6102 corresponding to said
lots, on said date of December 13, 1926.“9. That by
virtue of the judgment rendered by this court in civil case No. 3751,
sentencing the defendant, Matias Atiles, to pay to the plaintiff,
Arcadio Y. Salva, the sum of P4,070.76 with legal interest thereon from
February 23, 1926, a writ of execution was issued by the aforementioned
court. In an undated communication addressed to the provincial sheriff
of Occidental Negros, Attorney Enrique C. Locsin, counsel for the
plaintiff, Arcadio Y. Salva, instructed the said sheriff to attach lots
Nos. 331 of the cadastre of La Carlota and 1768 and 1713 of the
cadastre of Bago, besides the palay, in case of failure to pay the
amount of the judgment, and to advertise the sale at public auction of
the lots in question subject to the liens thereon in favor of the
Philippine National Bank, after duly serving the register of deeds with
the notice of the said sale at public auction (Exhibit DD). In
pursuance of said instructions, the sheriff on December 14, 1926,
presented to the register of deeds of Occidental Negros, for the
corresponding notation thereof, a copy of the certificate of attachment
of lots Nos. 331 of the cadastre of La Carlota and 1713 and 1768 of the
cadastre of Bago, together with a copy of the writ of execution. In the
two documents in question, there was no certification to the effect
that the judgment debtor has been notified of the attachment. Both
documents, however, have not been noted on the reverse side of the
original certificates of title Nos. 6241 and 5102 covering said lots
Nos. 331 and 1768 respectively. (Par. 4 of the stipulation of facts,
Exhibit KK; par.III of the first cause of action, second amended
complaint.)“10. That on December 20, 1926, the provincial
sheriff of Occidental Negros advertised the sale at public auction of
the said lots Nos. 1713 and 1768 of the cadastre of Bago, and 331 of
the cadastre of La Carlota (Exhibit EE), in compliance with the
instructions of Attorney Locsin contained in his communication (Exhibit
DD).“11. That on December 31, 1926, the Philippine
National Bank, through the manager of its branch at Bacolod, Occidental
Negros, filed a third party claim, under oath, with the sheriff,
alleging superior right to the lots Nos. 331 of the cadastre of La
Carlota and 1768 of the cadastre of Bago, which were attached by the
sheriff by virtue of the writ of execution issued in the aforementioned
civil case No. 3751 (Exhibit KK, par. 5; Exhibits II and JJ). Attorney
Enrique C. Locsin, who was then the counsel for Arcadio Y. Salva in the
civil case No. 3751, was notified of the third party claim by the
sheriff and was required to file a bond for P4,000 if he desired to
proceed with the attachment of the lots in question. (Exhibit JJ.)“12. That in answer to such requirement of the sheriff, Attorney
Locsin, in representation of his client Arcadio Y. Salva, addressed a
communication dated January 4, 1927, to the deputy-provincial sheriff,
requesting him to proceed with the auction sale of the properties in
question with the understanding that the purchaser thereof shall
acquire them subject to the recorded legal encumbrances thereon, their
order of preference to be later determined in a separate case between
the purchaser thereof and the Philippine National Bank. (Exhibit B.)“13.
That in view of such request, the sheriff, on January 11, 1927,
proceeded with the auction sale of the said lots Nos. 331 of the
cadastre of La Carlota and 1768 and 1713 of the cadastre of Bago, and
adjudicated them to Alfonso Severino, defendant in case No. 5160 and
plaintiff in case No. 5213, who wag the only bidder, for the sum of
P3,500 (Exhibits 1 and 2 of the Philippine National Bank), the
certificate of sale (Exhibit 2) issued by the provincial sheriff,
containing among other things the following:“And in
compliance with section 463 of the Code of Civil Procedure, I issue to
Mr. Alfonso Severino, the only bidder at the public auction, the
present certificate of sale of the above-mentioned lots Nos. 1713 and
331, subject to all liens and encumbrances in favor of the Philippine
National Bank, duly recorded in the registry of deeds of Occidental
Negros; and also of all the rights, interests and participation of the
defendant, Matias Atiles, in the aforesaid lot No. 1768, for the sum of
P3,500 which has been credited to the” account of the defendant, Matias
Atiles. * * * (Exhibit FF.)“14. That on January 27, 1927,
the provincial sheriff of Occidental Negros presented to the register
of deeds of the same province for the corresponding notation thereof, a
copy of the certificate of sale of the said lots Nos. 331 of the
cadastre of La Carlota and 1713 and 1768 of the cadastre of Bago
(Exhibit 2), which was recorded as entry No. 16568 and noted on the
reverse side of the original certificate of title No. 6102, covering
lot No. 1768 of the cadastre of Bago (par. 6, Exhibit KK). This was not
done, however, with respect to lot No. 331 of La Carlota.”
The appellant assigns the following alleged errors in the judgment appealed from:
“1. In holding that the deed, Exhibit AA, was of no further force and effect.
“2.
In not holding null and void the attachment by Arcadio Y. Salva in case
No. 3751 of the Court of First Instance of Occidental Negros, of lots
Nos. 331 of La Carlota and 1713 of Bago, belonging to the spouses,
Matias Atiles and Magdalena Sison.“3. In not holding that
the title of ownership of lots Nos. 331 of La Carlota and 1768 of Bago,
acquired by Alfonso Severino by virtue of the certificate of sale
(Exhibit FF) issued by the provincial sheriff of Occidental Negros, is
subject to the two mortgage liens (Exhibits AA and BB) in favor of the
Philippine National Bank.“4. In holding that the writ of
attachment issued in civil case No. 3751 of the Court of First Instance
of Occidental Negros was superior to and enjoyed preference over the
mortgage deed, Exhibit BB.“5. In holding that Alfonso
Severino, plaintiff in civil case No. 5213, is entitled, as owner of
lots Nos. 331 of La Carlota and 1768 of Bago, to obtain and receive
transfer certificates of title to the said lands, exclusive of whatever
mortgage lien the Philippine National Bank may have thereon, and in
ordering the register of deeds of Occidental Negros to issue said
certificates of title free from all liens and encumbrances, with costs
against the Philippine National Bank.“6. In ordering the
Philippine National Bank to pay the costs of civil cases Nos. 5160 and
5213 of the Court of First Instance of Occidental Negros.“7.
In not absolving the Philippine National Bank from the complaint filed
by Alfonso Severino in civil case No. 5213 of the Court of First
Instance of Occidental Negros, with costs against said Alfonso
Severino.“8. In not ordering the defendants, Matias
Atiles and Magdalena Sison, in civil case No. 5160 of the said Court of
First Instance of Occidental Negros, to pay to the Philippine National
Bank the following sums: (a) P679.92 with interest at the rate of 8 per cent per annum on the sum of P358.03 from October 1, 1929, until fully paid; (b)
P842.62 with interest at the rate of 9 per cent per annum on the sum of
P841.16 from October 1, 1929, until fully paid besides a sum equivalent
to 10 per cent of the said P841.16 as attorney’s fees;, and (c)
P1,878.96 with interest at the rate of 9 per cent per annum on the sum
of P1,452.68 from October 1, 1929, until fully paid, besides a sum
equivalent to 10 per cent of the aforesaid P1,452.68 as attorney’s fees.“9. In not ordering that in case the sums mentioned in the eighth
assignment of error, as well as the costs of the suit, are not
deposited with the clerk of the Court of First Instance of Occidental
Negros within three (3) months from the date of the judgment, the
provincial sheriff of Occidental Negros shall sell, at public auction,
lots Nos. 331 of La Carlota and 1768 of Bago and apply the proceeds
thereof to the payment of the sums mentioned in the eighth assignment
of error.“10. In not ordering Matias Atiles, Magdalena Sison and Alfonso Severino, defendants in civil case No. 5160, to pay the costs.”
Without discussing all the assignments of error nor following the order
in which they are enumerated, it being unnecessary to do so, we shall
endeavor to decide the questions raised in the appeal, which questions
may be formulated as follows: (1) Was the mortgage deed, Exhibit AA,
executed on August 7, 1918, in force on May 5, 1926, the date on Which
the register of deeds was notified of the writ of attachment obtained
by Arcadio Y. Salva? (2) Was the aforementioned writ of attachment
valid in spite of the fact that Matias Atiles, the defendant in civil
case No. 3751 in which the writ was issued, was not notified thereof?
and (3) What legal effect has the other mortgage deed, Exhibit BB,
issued on December 11, 1926?
The trial court based its
conclusion that the mortgage deed, Exhibit AA, had already been
cancelled, on the theory that the balance of P679.92 claimed in the
first cause of action had been carried over to the subsequent accounts
of the spouses Atiles, relative to the loans on crops obtained by them
from the bank, and that the second real estate mortgage, Exhibit BB,
was, really a novation of the first; in view of which, the court
inferred that the first mortgage could not affect the right acquired by
Severino on the ground that the second mortgage, or the alleged novated
mortgage was recorded at a later date than that of the writ of
attachment issued in civil case No. 3751.
As already stated,
the inaccuracy of this conclusion is due to the fact that the aforesaid
balance of P679.92 was considered as paid although the evidence shows
that it still remains unpaid, and that the mortgage deed, Exhibit BB,
was treated as a novation of the first mortgage. With respect to the
balance of P679.92 left from the original debt of P800, it cannot be
admitted that it had been settled or carried over to the subsequent
debts contracted by the spouses Atiles, through loans on crops for the
simple reason that, according to the court, these debtors admitted
under oath during the trial that they owed said balance and that it was
still unpaid. This admission excludes every possibility that the
balance in question had been carried over to the subsequent accounts,
otherwise, the Atiles would not have acquiesced to having a judgment
rendered against them for the three balances claimed separately in the
amended complaint.
With respect to the mortgage evidenced by
the deed, Exhibit BB, a perusal thereof shows that it can have no other
significance than that it was merely an amplification of the mortgages
on agricultural crops, previously executed by the Atiles in favor of
the Philippine National Bank. It has in no way affected the mortgage,
Exhibit AA, executed on August 7, 1918, and duly noted on the debtor’s
certificates of title. And the reason is obvious, taking into
consideration that both mortgages were executed to secure obligations
entirely separate and independent of one another. The mortgage
evidenced by Exhibit AA was executed to secure a loan of P800 while
that expressed in Exhibit BB was executed to secure loans on crops
advanced to the Atiles by their creditor.
Speaking now of
the efficacy of the writ of attachment obtained by Arcadio Y. Salva in
civil case No. 3571, the court found, and the parties stipulated, that
the defendant in the case, Matias Atiles, had not been notified of said
attachment or of the notice thereof served on the register of deeds by
the sheriff. This failure to notify rendered the said writ of
attachment ineffectual according to the doctrine enunciated in the case
of Chua Pua Hermanos vs. Register of Deeds of Batangas (50
Phil., 670), in which the court said: “Under section 429 of the Code of
Civil Procedure the leaving of such copy with the register of deeds,
with a description of the property and certification of notice to the
judgment debtor, is essential to the effectuation of an attachment.
Where this step is not taken the attachment is necessarily ineffectual.”
With respect to the last proposition, we are of the opinion that the
mortgage, Exhibit BB, was executed and recorded after notice of the
writ of attachment had been served on the register of deeds, but,
inasmuch as the said writ produced no legal effect whatever, it is
obvious that said mortgage prejudiced the right subsequently acquired
by Severino at the auction sale conducted by the sheriff with respect
to the two lots in question. Neither can Severino allege that he was an
innocent purchaser thereof, inasmuch as the two mortgages had already
been noted on the certificates of title to said lands. Furthermore, it
was clearly stated in the certificate of sale issued to him by the
sheriff that the lots in question were adjudicated to him subject to
the liens existing thereon in favor of the Philippine National Bank.
In view of the foregoing considerations, the judgment appealed from is
hereby reversed, and the spouses, Matias Atiles and Magdalena Sison,
are ordered to pay to the Philippine National Bank the following sums:
P679.92 with interest at the rate of 8 per cent per annum on the sum of
P358.03 from October 1, 1929, until fully paid; P842.03 with interest
at the rate of 9 per cent per annum on the sum of P841.16 from October
1, 1929, until fully paid, in addition to ten per cent (10%) of P841.16
as attorney’s fees; and P1,878.96 with interest at the rate of 9 per
cent per annum on the sum of P1,452.68 from October 1, 1929, until
fully paid, in addition to ten per cent (10%) of P1,452,68 as
attorney’s fees. The above-mentioned sums shall be paid to or deposited
with the clerk of court within three months from this date, and in case
of failure to do so, the properties known as lots Nos. 331 of La
Carlota and 1768 of the cadastre of Bago, shall be sold at public
auction in accordance with the law.
The complaint filed in case No. 36966 is hereby dismissed.
The
costs of both instances in the case No. 36965 shall be charged against
Arcadio Y. Salva and Alfonso Severino, and the costs of both instances
in the case No. 36966 shall be charged exclusively against Alfonso
Severino. So ordered.
Villamor, Ostrand, Villa-Real, and Vickers, JJ., concur.