PRUDENCIO S. PENTICOSTES, SR. AND PRUDENCIO S. PENTICOSTES, JR., PETITIONERS, VS. DEVELOPMENT BANK OF THE PHILIPPINES, SPOUSES ALEXANDER DE GUZMAN AND NATIVIDAD MABALOT AND REGI…

In this case the singular issue is whether or not a bank
mortgagor may be compelled to surrender the duplicate title of the property
mortgaged for registration pursuant to the Comprehensive Agrarian Reform
Program (CARP) of the government when the mortgage obligation has not been paid
for.

The facts are undisputed.  Respondents spouses
Alexander de Guzman and Natividad Mabalot
obtained a mortgage loan from the Development Bank of the Philippines
(DBP for short), whereby Transfer Certificates of Title Nos. 77533 and 76343
were offered as collateral.

Thereafter, the land
described under Transfer Certificate of Title No. 76343 was leased by said
respondents-spouses to petitioner Prudencio S. Penticostes on February 4, 1982. 
The other lot covered by Transfer Certificate of Title No. 77533 was
sold to the other petitioner Prudencio Penticostes, Jr. on February
26, 1987.

Meanwhile, R.A. No. 6657, otherwise known as the CARP Law was
passed.  Considering Section 6 thereof relative
to the registration of deeds or any transactions involving agricultural lands,
petitioners, in compliance therewith, went to the Register of Deeds of Tarlac to register their deeds of sale and lease
contract.  The Register of Deeds,
however, refused to annotate the two (2) deeds in the original file kept
in his Office without the owner’s
duplicate copies of said titles. 
With this requirement, petitioners
went to the DBP to borrow the titles but the latter contended that the
registered owners-spouses thereof still have an unpaid balance on their
mortgage contract.  Petitioners expressed
their willingness to assume the same but
did not actually assume nor pay the unpaid obligation so the DBP stood
firm in its refusal.

Thus, petitioners filed a complaint in the Regional Trial Court
of Tarlac seeking to compel the surrender of the said
titles for purposes of registration, its registration and damages.  A motion to dismiss the complaint dated September 16, 1988 was filed by the
respondent Register of Deeds for lack of cause of action and for failure to
exhaust administrative remedies.  The De
Guzman spouses filed a motion for issuance of a complete set of a copy of the
complaint with motion for extension of time to file the answer on September 19,
1988, having been served on September 9, 1989 a copy of the complaint attached
to the summons which is supposed to consist of six pages, but it actually
consisted of five pages only with page 4 missing so that said respondents
cannot possibly file their answer until after a complete set of the complaint
is served to them.  The DBP, which was
served a copy of the summons on September
9, 1988, filed a motion to dismiss on September 22, 1988 on
the ground that the claim is unenforceable under the statute of frauds
and that the complaint states no cause of action.

On October
4, 1988 Prudencio Penticostes filed a
motion to declare respondents in default for failure to file the responsive
pleadings under the rules.

On October 6, 1988
the De Guzman spouses filed their answer with compulsory counter-claim.

On October 11, 1988,
the trial court directed the petitioners to comment on the preliminary issues
raised by the respondents in their special affirmative defenses within five (5) days from notice.

On October 11, 1988
petitioners filed their memorandum with a prayer that the presiding judge inhibit himself inasmuch as the counsel of petitioners
filed an administrative case against him. 
An opposition to the motion to dismiss filed by the DBP was filed by
petitioners on October 26, 1988.

On November 8, 1988
the trial court denied the motion for inhibition for lack of legal ground and
considering that there are issues of facts rendering the ground for dismissal not indubitable, action on the motion to dismiss was deferred until
after the evidence warrants the same.

On November 16, 1988, plaintiffs filed a motion to declare
respondents–spouses in default.

On November 24, 1988, the trial court issued an order denying
plaintiffs’ motion to declare
respondents-spouses in default,
considering the provision of Section 4, Rule 18 of the Rules of Court and
considering further that respondents-spouses’
counterclaim is compulsory in nature.  A
motion for reconsideration thereof was filed by the petitioners and the De Guzman spouses were given five (5) days
to file their comment.

In the meanwhile, on December
8, 1988, petitioners also filed a motion to declare the DBP in default.  The respondents-spouses filed their comment
on December 14, 1988 stating that they filed a motion to require the petitioner
to furnish a complete copy of the complaint to be able to file an answer and
that they filed the same before their motion
was resolved by the trial court and even as petitioner failed to furnish them a complete copy of the
complaint.  On December
14, 1988, the DBP
filed an answer with compulsory
counterclaim and alternative compulsory counterclaim.  On December 22, 1988, the DBP also filed an opposition to declare
the adverse parties in default.

In its order dated February
14, 1989, the trial court denied petitioners’ motion to declare the
DBP in default inasmuch as the latter filed a motion to dismiss on September 22, 1988 before the expiry
date to file the answer so that the
motion to dismiss is considered an answer.^[1] It ruled that as the case states a common
allegation against the respondents, the court shall try the case against all
upon the considered answer thus seasonably filed.  It also held that the filing of the DBP’s answer after the deferment of the motion
to dismiss did not prejudice the petitioners as the answer is a reiteration of
the issues raised in the motion to dismiss which was
treated as an answer.  The pre-trial was
thus set on March 14, 1989.

On said date, a pre-trial conference was held after which the trial court rendered a
pre-trial order as follows:

“During the pre-trial conference of this case, parties
stipulated and agreed on the following facts:

1.     
The existence of the deed of sale and lease of
the property;

2.     
That at the time of the execution of the deed of
sale, this land was mortgaged to the Development Bank of the Philippines, Tarlac Branch, Tarlac, Tarlac; and

3.     
That at the time the plaintiffs demanded from
the Development Bank of the Philippines the surrender of the title, they were
duly informed that the loan of defendants-spouses Alexander de Guzman and Natividad Mabalot was still
outstanding and only partially paid, to which Atty. Prudencio
Penticostes expressed his willingness to assume the
same.

The only factual matters to be resolved pertain to damages, the
admission of its proof being dependent on the resolution of the legal issues
raised in the pleadings of the parties.

Parties, through counsel, are hereby directed to submit their
respective memoranda to resolve the legal issues in their pleadings not later
than April 14, 1989.

Without prejudice to the resolution of the legal issues, set the
hearing on May 10, 11 and 12,
1989, at 8:30 in the morning
(sic).”^[2]

The parties filed their memoranda.

On April 28, 1989,
a decision was rendered by the trial court dismissing the complaint for lack of
merit.

Hence, this petition.

Petitioners assailed the trial court for rendering a decision when there was allegedly no answer filed by the respondents and that they
should have been declared in default.

This allegation is without cogent basis.  The court has taken pains to relate the
antecedent incidents in the court in
order to determine the merit of this representation.  In the
case of respondent Register of Deeds, he filed a timely motion to dismiss
within the reglementary period to answer.  Similarly, the respondent DBP filed a timely
motion to dismiss.  And before its motion
to dismiss was resolved by the court the DBP filed its answer and compulsory
counterclaim on December 14, 1988.  Upon the filing of the motion to dismiss by
the DBP the period to file an answer is deemed
interrupted until said motion to dismiss is resolved.

By the same token, the De Guzman spouses filed, within the reglementary period to answer, a motion to require the
petitioners to furnish them a complete set of the complaint and for an
extension of time to file the answer. 
Nevertheless, even before the resolution of their motion, they filed on October 6, 1988 their answer with
counter-claim.  No doubt their motion for
the issuance of the complete set of a copy of the complaint with motion for
extension of time to file answer interrupted the running of the period within
which to file the answer.

None of the respondents, therefore, was in default as their
answers were timely filed.

Moreover, assuming that any of the respondents failed to file the
answer on time, under Section 4, Rule 18 of the Rules of Court, “when a
complaint states a common cause of action against several defendants, some of
whom answer, and the others fail to do so, the court shall try the case against
all upon the answers thus filed and render judgment upon the evidence
presented.”

As to the merit of the case, it appears that at the pre-trial,
the parties agreed and entered into a stipulation of facts on the basis of
which the trial court required the parties to file their memoranda.  Because of the stipulation of facts of the
parties at the pre-trial, as indeed the facts appear to be undisputed, the
Court can very well resolve the case without need of a trial on the merits.

In resolving the issue as to whether or not the respondents may
be compelled to surrender the title of the properties in the possession of the
DBP for registration by the petitioners pursuant to the CARP Law, the trial
court made the following disquisition:

“Considering the
admission of the parties that the loan of
defendants-spouses de Guzman is still outstanding and only partially paid,
defendants-spouses’ obligation therefore to deliver said titles is thus
unavailing as the titles were in the possession of the DBP as security of the
loan obtained by said spouses.

The provision of the mortgage contract executed by the
mortgagor-spouses states that they could not convey or in any manner encumber
the mortgage property without the written consent of the mortgagor-bank (p. 11,
Answer).  It is therefore legally and
physically impossible for defendants-spouses to surrender something which is
not in their possession.

With respect to defendant DBP, plaintiffs failed to show any legal
basis upon which this Court will use its coercive power.  On the other hand, defendant DBP stands firm
on its contractual right pursuant to the mortgage contract with the other
defendants-spouses.  Plaintiffs, not
being privies to the aforementioned contract, can not invoke their obligation
under the CARP Law to obtain the copies of Transfer Certificates of Title Nos. 77533 and 76343 for the registration
of their right without disturbing defendant DBP’s
secured rights.

Plaintiffs’ right cannot rise higher than
its source, i.e., defendant de Guzman spouses. 
Nowhere in plaintiffs’ complaint and other pleadings could be found a
legal basis for the surrender of the aforementioned copies of Transfer
Certificates of Title Nos.  77533 and
76343 which it holds as collateral for the mortgage loan to defendants-spouses
de Guzman.

Even the compulsory
registration of rights under par. 4, Sec. 6, of the CARP Law will not justify
disturbance of DBP’s prior and superior right.  What plaintiffs cannot do by way of voluntary
registration could be obtained by some other means, as what plaintiff Prudencio S. Penticostes did when
he served a notice of lis pendens
to the office of defendant Register of Deeds (p. 10, Record).  The
CARP Law or any other law, does not require
from any party compliance under impossible conditions.

There being no legal ground for the plaintiffs to compel the defendants-spouses de Guzman and
the DBP to surrender the titles, refusal of the Register of Deeds to annotate
plaintiffs’ Deed of Sale and Lease Contract without presentation of the owners’
duplicate copies of said titles is in order (Sec. 53, P.D. 1529).”^[3]

We agree.

Under Section 6 of R.A.
No. 6657 popularly known as the CARP Law it is provided as follows:

“x x x.

“Upon the effectivity of this Act, any sale, disposition, lease,
management contract or transfer of possession of private lands executed by the
original landowner in violation of this Act shall be null and void:  Provided, however, That those executed prior
to this Act shall be valid only
when registered with the Register
of Deeds within a period of three (3) months after the effectivity
of this Act.  Thereafter, all Registers
of Deeds shall inform the Department of Agrarian Reform (DAR) within thirty
(30) days of any transaction involving agricultural
lands in excess of five (5) hectares.”

The foregoing provision simply means that any
sale, disposition, lease management contract or transfer of possession of
private lands executed by the original land owners in violation of the act
shall be null and void unless it is registered with the Register of Deeds
within a period of three (3) months after the effectivity
of said act.

The documents of sale and
lease in favor of petitioners may be registered only by the Register of Deeds
upon their compliance with the requirement of the law with respect to the
submission of the duplicate copy of the owners
certificate of title.^[4]

Since in this case the
said duplicate titles are in the possession of the DBP as mortgagor thereof and
since it appears that the mortgage loan covering the properties have not been
fully paid for, the DBP had the right to refuse to release the duplicate titles
to the petitioners for purposes of registration.  The petitioners, therefore, may not compel
the DBP through court action to surrender the owners duplicate title of the property
in question for purposes of registration of the documents of petitioners under
the CARP Law.

WHEREFORE, the petition is DISMISSED for lack of
merit, with costs against petitioners.

SO ORDERED.

Narvasa, (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
Citing Epang vs.
Ortin De Leyco, 97 Phil. 24
(1955).

^[2]
Page 147, Original Record.

^[3]
Pages 164-165, Rollo.

^[4]
Section 53, P.D. No.
1529.