ST. DOMINIC CORPORATION, PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT, HON. RICARDO P. TENSUAN, RTC BRANCH LXXXIII, QUEZON CITY, FRANCISCA B. BUSTAMANTE, FLAVIANO BUSTAMANTE…

Arising from a common set of facts, these petitions are before us
for concurrent disposition.

G. R. No. 70623 entitled “St. Dominic Corporation v. The
Intermediate Appellate Court, et al.” is a petition to review on certiorari the decision of the respondent
appellate court, dated January 31, 1985 in AC-G.R. SP No. 00513 entitled
“Francisca B. Bustamante, et al.,
v. Hon. Ricardo P. Tensuan, et
al.,” which set aside the orders of the then Court of First Instance of
Rizal at Quezon City, in Civil Case No. Q-11895, as well as the resolution
dated April 16, 1985
denying the petitioner’s motion for reconsideration.

On the
other hand, G. R. No. L-48630, is a petition for certiorari assailing the
order of respondent Judge Ulpiano Sarmiento, dated April 27, 1976, directing the issuance of a writ of
possession against the petitioners covering the same property involved in G. R.
No. 70623.

The facts are not
disputed.

On February
27, 1968, Civil Case
No. Q-11895 entitled “Ricardo Castulo and Juan V. Ebreo v. Carlos Robes and wife Adalia Francisco and
People’s Homesite and Housing Corporation” was filed seeking the
cancellation of Transfer Certificate of Title No. 83783 in the name of the
spouses Carlos Robes and Adalia Francisco, covering Lot No. 8, Block 101 of the
Malaya Subdivision, People’s Homesite and Housing Corporation (PHHC).  The original complaint was superseded by an
amended complaint filed on February 24, 1969.

It appears that sometime
in 1961, the PHHC awarded the property in question to one Cristobal Santiago,
Jr., in whose favor a final deed of sale was executed and Transfer Certificate of
Title (TCT) No. 83783 was issued.

Subsequently, the Robes
spouses mortgaged the realty to the Manufacturer’s Bank and Trust
Company.  The mortgage lien was duly annotated on TCT 84387 on February
9, 1965.

Thereafter, on February
2, 1968, Civil Case
No. Q-11895 was filed.

Claiming legal interest
in the property, the Bustamante spouses were allowed to intervene in the case.

On March
25, 1968, a notice
of lis pendens was annotated on TCT 84387 at the instance of the
Bustamante spouses.

For failure of the Robes
spouses to pay the mortgage obligation, the Manufacturer’s Bank and Trust
Company foreclosed the lot and caused the same to be sold at public auction on December
14, 1974.

The property was purchased
by Aurora Francisco in whose favor a certificate of sale was issued.  The levy on execution was annotated on TCT
84387 on March 16, 1974.

No redemption of said
property was effected. 
Thus, on March 5, 1976, TCT 84387 in the name of the Robes spouses
was cancelled and in lieu thereof, TCT 217192 was issued to Aurora
Francisco on the same date.  The notice
of lis pendens on the title of the Robes spouses, however, was
not carried over to TCT 217192.

On April 20, 1976, before
the sale of the land to St. Dominic, Aurora Francisco applied for a writ of
possession in LRC Case No. 851 (76) before Branch IX of the then Court of First Instance of Rizal in
Quezon City.

On
April 27, 1976,
said court issued the writ of possession.

The lower court (Branch
IX, Court of First Instance of Rizal) having stood firm in the grant of the
writ of possession and having denied the motion to quash the same, the
Bustamante spouses filed with this Court a petition for certiorari,
docketed as G. R. No. L-48630 entitled “Flaviano Bustamante, et al., v.
Hon. Sarmiento, etc., et al.”, now before us for resolution.

On September
15, 1976, Aurora
Francisco sold the property to petitioner, St. Dominic Corporation.  Consequently, TCT 222337 was issued to petitioner corporation. 
As earlier stated, no notice of any lien or encumbrance appears on the
title.

Meanwhile,
Civil Case No. Q-11895
proceeded to judgment.  The dispositive
portion of the decision reads:

“WHEREFORE, all the foregoing premises considered, judgment is
hereby rendered as follows:

“a)     declaring null
and void the allocation and sale of PHHC (now NHA) to defendant Cristobal
Santiago, Jr., of Lot 8, Block 101 of subdivision plan Psd-88807, and
cancelling Transfer Certificate of Title No. 83783 issued therefor in his name;

“b)     declaring null
and void and without force and effect the sale of said lot by Cristobal
Santiago, Jr., to spouses Adalia Francisco and Carlos Robes, and cancelling
Transfer Certificate of Title No. 84387 issued therefor in their names;

“(c)    directing defendant
PHHC (now NHA), to process the application to purchase said subject lot filed
by intervenor Francisca Banzon
Bustamante and to execute or cause to be executed the requisite documents for
the award of said lot to her.

“The complaint praying that an award of the subject lot be
ordered made in favor of plaintiffs Ricardo S. Castulo and Juan V. Ebreo, is
hereby dismissed for lack of showing that they or either of them ever filed the
requisite application to purchase the same. 
All other counterclaims are hereby dismissed
for lack of merit.” (Annex “A”, p. 26, Rollo –
G.R. No. 70623).

When the judgment became
final, the Bustamante spouses applied for a writ of execution.

On June 29,
1982, Presiding
Judge Tensuan issued an order granting the application for writ of execution
with the qualification, however, that “said writ may not be enforced
and/or implemented as against the St. Dominic Corporation.”

The Bustamante spouses
moved for a reconsideration, arguing that the order of
the court dated June 29, 1982 in effect amended a final and executory
judgment in violation of law.  In an
order dated November 26, 1982, Judge Tensuan denied the motion.  Whereupon, the Bustamante
spouses filed a petition for certiorari and mandamus docketed as
AC-G.R. SP No. 00513, before the Intermediate Appellate Court.  Herein petitioner, St. Dominic Corporation
and Aurora Francisco who were not parties to Civil Case No. Q-11895, were made
respondents in the petition questioning the orders of Judge Tensuan exempting the petitioner corporation from the
enforcement of the trial court’s judgment and denying reconsideration thereof.

On January 31, 1985, the Intermediate Appellate Court rendered judgment.  The dispositive portion of the decision
reads:

“WHEREFORE, the writs of certiorari
and mandamus prayed for are granted; the orders of September 24, 1982
and November 26, 1982 complained of are hereby set aside; and the respondent
Judge is hereby ordered to cause the issuance of a writ of execution in strict conformity with the dispositive portion of
the final and executory decision in subject Civil Case No. Q-11895.  Costs against the private respondents.” (p. 55,
Rollo-G.R. No. 70623)

On February
18, 1985, the
petitioner filed its motion for reconsideration and on February
18, 1985, Aurora
Francisco followed suit.  In a minute
resolution dated April 16, 1985, both motions were denied by the respondent
appellate court.  Thus, the petition
filed by St. Dominic Corporation in G. R. No. 70623.

The appellate court’s
ruling in AC-G. R. SP No. 00513 is tainted with error.

The trial court’s
statement exempting from execu­tion one not a party to the case nor privy
to the interests of the parties
therein, from the effects of its pronouncements,
cannot be considered an amendment of its final and executory judgment in Civil Case No. Q-11895.

Justice
Lino M. Patajo’s dissent in AC-G. R. SP No. 00513 is clear and to the point elucidating
the correct doctrine thus:

“I believe that respondent Court cannot be held as having
abused its discretion or exceeded its jurisdiction in issuing the questioned
orders.  I find no merit in the
contention of petitioners that in so providing in said orders that its decision
should not be enforced or executed
against St. Dominic, respondent Court had actually amended its decision which
had already become final.  Respondent
Court was merely applying the provision of Rule 39, Section 49(b) which
provides that the decision of the Court in cases other than those
provided for in sub-paragraph (a) of said section (judgment against specific
thing, probate of a will, administration of the estate of a deceased person, or
in respect to the personal, political, or legal condition or status of a
particular person or his relationship to another) is conclusive only between
the parties and their successors-in–interest by title subsequent to the
commencement of the action.  x x x.” (Annex “H”, p. 58, Rollo – 70323)

Indeed, a judgment cannot
bind persons who are not parties to the action (Vda. de Sengbengco y. Arellano,
1 SCRA 711; Hanopol v. Pilapil, 7 SCRA 452; and Hollero v. Court of Appeals, 11
SCRA 310).  It is elementary that
strangers to a case are not bound by the judgment rendered by the court (Bien
v. Sunga, 117 SCRA 249) and such judgment is not available as an adjudication
either against or in favor of such other person.  A decision of a court will not operate to
divest the rights of a person who has not and has never been a party to a litigation, either as plaintiff or defendant (Granados v.
Monton, 86 Phil., 42).  Verily, execution
of a judgment can only be issued against one who is a party to the action, and
not against one who, not being a party in the case, has not yet had his
day in court (City of Bacolod, et al., v. Hon. Enriquez, et al., 101 Phil.,
644; Tayson V. Angeles v. Icasiano, et al., 83 Phil., 921; Manza v. Hon.
Vicente Santiago, etc., 96 Phil., 938; and Angara v. Gorospe, et al., 101
Phil., 79).

It is clear from the
records that petitioner St. Dominic Corporation had never been impleaded as a
party to Civil Case No. Q-11895 filed by Ricardo Castulo and Juan V.
Ebreo.  The complaint had for its purpose
the nullification of the award to Cristobal Santiago, Jr., and the
subsequent sale between Santiago
and the spouses Adalia Francisco and Carlos Robes.  Such proceedings neither involved nor
affected St. Dominic Corporation. 
Judgment therein was directed only against the titles of Cristobal Santiago,
Jr., and the Robes spouses.  The trial
court could not execute the same against the petitioner as to deprive it of its
property without due process of law. 
This is what the trial court made explicit in its order of
execution.  Its decision could not reach
the petitioner’s rights.  Yet, the
respondent appellate court declined to pass upon this principal issue in a
rather ambiguous ruling.

In its decision the Court
of Appeals held:

“Decidedly, the present certiorari and mandamus
proceedings is not the appropriate forum for the determination of the legal
effect, if any there be, of the aforesaid final and executory judgment nullifying or declaring
the nullity of the sale of subject property in question by Cristobal Santiago,
Jr., to spouses Adalia Francisco and Carlos Robes and cancelling TCT No.
T-83783 in their names, on the alleged subsequent auction sale to respondent
Aurora Francisco and from the latter to St. Dominic Corporation over the same
property involved in said judgment.  x x
x Whether or not the foreclosure proceedings, auction sale and subsequent transactions had on subject
property during the pendency of the litigation thereover in the court below are
subject to the outcome of said case, need not be passed upon in this
disposition.  What We
are concerned with here are the assailed orders of the respondent court.  x x x” (Annex “H”, p. 55, Rollo – 70623).

The determination of
whether or not the foreclosure proceedings, auction sale, and subsequent
transactions had on the subject property, during the pendency of the litigation
are subject to the outcome of said case bears heavily on the issues at
hand.  The answer is determinative of
whether or not the trial court’s order of execution should affect or be issued
against the petitioner.

Anent the effect of the
trial court’s judgment on the mortgagee bank’s rights and on the foreclosure of
the property in question, this Court has held that where a Torrens title was
issued as a result of regular land registration proceedings and was in the name
of the mortgagor when given as a security for a bank loan, the subsequent declaration
of said title as null and void is not a ground for nullifying the mortgage
rights of the bank which had acted in good faith (Philippine National
Cooperative Bank v. Carandang-Villalon, 139 SCRA 570).  As a matter of fact, there are instances when
even a fraudulent and forged document of sale may become the root of a
valid title if the certificate had already been transferred from the name of the true owner to the name indicated
by the forger (Duran v. Intermediate Appellate Court, 138 SCRA
489).  Here, there is no forgery or fraud
involved.

A mortgagee has the right to rely on what
appears on the face of the certificate of title.  In the absence of anything to excite
suspicion, it is under no obligation to look beyond the certificate and
investigate the title of the mortgagor appearing on the face of said
certificate.  There is no showing in the
records that the mortgagee bank was aware of any shadow affecting the title of
the mortgaged property when it was mortgaged. 
As will be explained later, the intervenors are only prospective
awardees of the disputed lot.  They are not the owners.  They have no title to the land.

The main purpose of the
Torrens System is to avoid possible conflicts of title real estate, and to
facilitate transactions relative thereto by giving the public the right to rely
upon the face of a Torrens certificate of title and to dispense with the need
of inquiring further, except when the party concerned had actual knowledge of
facts and circumstances that should impel a reasonably cautious man to
make such further inquiry (Pascua v. Capuyoc, 77 SCRA 78).  Thus, where innocent third persons relying on
the correctness of the certificate of
title thus issued, acquire rights over the property, the court cannot
disregard such rights (Director of Land
v. Abache, et al., 73 Phil. 606).  The
lien of the petitioner, an innocent mortgagee for value must be respected and
protected (Blanco v. Esquierdo, 110 Phil., 494).

The title to the property
given as security to the Manufacturer’s Bank and Trust Co., by the spouses
Robes was valid, regular, and free from any lien or encumbrance.  The mortgage was executed prior to the institution of Civil Case No. Q-11895, thus establishing it as a
lien superior to whatever claims the plaintiffs therein may have as a result of
the subsequent litigation.  An inquiry
beyond the face of the mortgagor’s title would certainly have yielded no flaw
at that time.  This
being so, the adverse claim in Civil Case No. Q-11895 could not affect
the rights of the mortgagee.  The he fact
that the foreclosure of the mortgage and the subsequent
auction sale were effected after the annotation of the
adverse claim is of no moment.  The
foreclosure sale retroacts to the date of registration of the mortgage (Bank of
the Philippine Islands v. Noblejas, 105 Phil., 418).

A person who takes a
mortgage in good faith and for a valuable consideration, the record showing a
clear title in the mortgagor, will be protected against any equitable titles to
the premises or equitable claims on the title, in favor of third persons, of
which he had no notice, actual or constructive. 
The protection extends to a purchaser at a Sheriff’s sale under
proceedings on the mortgage although such purchaser had notice of the alleged
equity (59 CJS, Sec. 233, pp. 303-304).

Any subsequent lien or
encumbrance annotated at the back of the certificate of title cannot in any way
prejudice the mortgage previously registered and the lots subject
thereto pass to the purchaser at public auction free from any lien or encumbrance
(Gonzalo Puyat & Sons, Inc., v. Philippine National Bank, 4 SCRA
1257).  Otherwise, the value of the
mortgage could be easily destroyed by a subsequent record of an adverse claim,
for no one would purchase at a foreclosure sale if bound by the posterior claim
(Bank of the Philippine Island v. Noblejas, supra).  Aurora Francisco’s title, as a
purchaser at the auction sale of the property in question, cannot be bound by
the adverse claims of the plaintiffs in Civil Case No. Q-11895.  This is even more true
with petitioner St. Dominic Corporation which had acquired title from Aurora
Francisco without any notice or flaw.

Upon proper foreclosure
of a first mortgage, all liens subordinate to the mortgage are likewise foreclosed.  The foreclosure as well as the
sale of the property were annotated on the title to the property, then
still in the name of Adalia Francisco and Carlos Robes.  Such annotation serves as constructive notice
to the parties having any claim or interest in the property to exercise their right
of redemption or to participate in the foreclosure sale.  Certainly, there was an opportunity for the
claimants in Civil Case No. Q-11895 to acquire the property
at issue.  St. Dominic’s rights
can no longer be disturbed.

It should also be noted
that the intervenors in Civil Case Q-11895 possess no enforceable lien over the
property in question. 
They are merely prospective awardees of the realty.  The right they assert is purely
speculative.  No vested rights exist in
their favor.  The award of the disputed
lot to Cristobal Santiago, Jr. may have been declared improper.  As to who should get the
lot, according to law, still lies in the discretion of the PHHC.  No assurance is given that the lot would be
awarded to the claimants-intervenors. 
The decision in Civil Case Q-11895 may be deemed correct insofar as it
called for a processing of the Bustamante claim but erroneous when it assumed
that after processing, the award would be in the spouses’ favor.

However, the PHHC is now
estopped by circumstances from making any further award.  As earlier stated,
the lower court cannot order the execution of the decision as against the
petitioner and, thereby, cancel St. Dominic’s title in favor of a future
unknown person.  It cannot disregard the
rights already vested in petitioner St. Dominic.  To do so would impair confidence in
certificates of titles and orderly processes of law.  Among the guarantees of the Torrens system is that it renders title
indefeasible.  Section 31, Presidential
Decree 1529, The Land Registration Act, provides:  “The decree of registration shall bind
the land and quiet title thereto, subject only to the exceptions or liens as
may be provided by law.  It shall be
conclusive upon and against all persons, including the National Government and
all branches thereof whether mentioned by name in the application or notice,
the same being included in the general description ‘to all of whom it may
concern’.” This provision is applicable under the facts of this case.

In its petition in G. R.
No. 70623, petitioner St. Dominic “prays most earnestly for such and any
other relief as this Honorable Court, in its far greater wisdom, may deem just,
equitable and proper in the premises, such as the dismissal of the petition in
G.R. No. L-48630″.

Petitioners
Bustamante in G.R. No.
L-48630, assail the grant ex parte by the trial court of the writ of possession over the property, likewise
the subject of G.R. No. 70623, in favor of Aurora Francisco.  It is alleged that a court has no
jurisdiction, power, and authority to eject a third person who is not a party
to the foreclosure proceedings or mortgage by a mere writ of possession
summarily issued in a foreclosure suit.

Respondent St. Dominic
Corporation moved and was allowed to intervene as successor-in-interest by purchase to all the rights, title, and interest of respondent Francisco
over the lot in question.

Section 6 of Act No.
3135, as amended by Act 4118, the law that regulates the methods of affecting
extrajudicial foreclosure of mortgage makes applicable Sections 464 to 466 of
the Code of Civil Procedure, now sections 29 to 31 and 35 of Rule 39 of the
Revised Rules which provide:  “If no
redemption be made within twelve (12) months after the sale, the purchaser, or
his assignee, is entitled to a conveyance and possession of the property x x
x,” and “The possession of the property shall be given to the
purchaser or last redemptioner by the officer unless a third person is actually
holding the property adversely to the judgment debtor.”
Petitioners capitalize on this last proviso of the law.

On this point, the trial
court held, and We quote with approval that:

“The Court is aware of the limitation that writ of possession
may not issue when the property is in the possession of a third party who holds
the property adverse to the buyer in the foreclosure sale.  But, by their express admission in their
motion, movants are merely ‘occupants-applicants’ for the purchase of the land from the defunct
PHHC.  Under such claim which is, at best
inchoate, we cannot refuse to grant the writ of possession prayed for; to do
so, would be to becloud the integrity of the torrens
title, and it would be in derogation of its indefeasibility.

xxx                            xxx                               xxx

“In the instant case, the property involved is covered by a
certificate of title.  It has passed
through different owners until it was bought by petitioner, Aurora Francisco,
at a public auction sale by reason of
the foreclosure of the mortgage in the property and subsequently sold by said
Aurora Francisco to intervenor St. Dominic. 
And movants here, would like us to quash the writ of possession we
issued, on the ground that the same was issued upon an ex parte petition is
permitted and allowed by virtue of Act 3135, and on the allegation that movants
‘have been in possession of the subject property since 1962 as
occupants-applicants for the purchase thereof from the defendant PHHC x x x’
(p. 3, Motion to Quash) which, as we said above is a matter of expectancy
(inchoate) and should not be allowed to prevail over the clean title of the
petitioner and/or intervenor herein.” (pp. 73-74, Rollo
– G.R. No. 48630).

Indeed, the rules
contemplate a situation where a third party holds the property by adverse title
or right such as a co-owner, tenant or usufructuary.  In such cases, a grant of a writ of possession, would be denial of such third person’s rights
without giving them their day in court. 
Especially, where question of title is involved, the matter would well
be threshed out in a separate action and not in a motion for a writ of possession. 
But such is not the state of affairs in the case at bar.

The right of the
respondent to the possession of the property is clearly
unassailable.  It is founded on the right of ownership.  As the purchaser of the properties in the
foreclosure sale, and to which the respective titles thereto have already been
issued, the petitioner’s rights over the property has become absolute, vesting upon it the right of possession of the property which the court must aid in
affecting its delivery.  After such delivery,
the purchaser becomes the absolute owner of the property.  As we said in Tan Soo Huat v. Ongwico (63 Phil., 746), the deed of conveyance entitled the purchaser to have
and to hold the purchased property.  This
means, that the purchaser is entitled to go immediately upon the real property,
and that it is the sheriff’s inescapable duty to place him in such
possession.  (Philippine National Bank v.
Adil, 118 SCRA 110).  With
more reason that the said writ of possession
should be granted Aurora Francisco or, in her stead, St. Dominic Corporation in
the light of our pronouncements in G. R. No. 70623.  Ownership has been consolidated in St.
Dominic’s favor.  There being no clear
title or right enforceable by the Bustamante spouses, a writ of execution or a
writ of possession, may issue in favor of Aurora Francisco and/or St. Dominic
Corporation.

Be it noted that as the trial court had said “the writ of possession
issued by us has been complied with and satisfied”, meaning to say that
the movants vacated the property.  But in
the hearing held in this case, it has been admitted by the parties that the movants returned to the land in question and
constructed again thereon their respective houses.  This being so, the movants must vacate and
remove from the disputed premises whatever they have built or constructed
thereon.  The writ of possession issued
and enforced may no longer be quashed.

WHEREFORE, judgment is hereby rendered in G. R. No.
70623, GRANTING the petition of ST. DOMINIC CORPORATION.  The decision of the Intermediate Appellate
Court, now Court of Appeals, dated January 31, 1985 in AC-G. R. SP No. 00513 and its
resolution dated April 16, 1985,
are REVERSED and SET ASIDE.  The writ of execution
issued by the trial court in Civil Case No. Q-11895, with the
qualification excluding the petitioner, is in accord with the facts and the
applicable law and is accordingly sustained as correct.  However, the decision of the trial court directing the PHHC (now NHA) to process the application of
Francisca Banzon Bustamante to purchase the property in question and to execute
the requisite documents for the award of said lot to her having been rendered
ineffective by circumstances supervening in Civil Case No. Q-11895 the writ of execution
issued by the court a quo therefore is hereby declared without
force and effect.

G. R. No. L-48630 is DISMISSED for lack of merit.

SO ORDERED.

Fernan, (Chairman), Paras, Padilla, Bidin, and Cortes, JJ., concur.