Finals Reviewer in Land Titles and Deeds

CERTIFICATE OF TITLE

A Torrens title is the certificate of ownership issued under the Torrens system of registration by the government, thru the Register of Deeds naming and declaring the owner in fee simple of the real property described therein, free from all liens and encumbrances except such as may be expressly noted thereon or otherwise reserved by law.

Who has right to possess owner’s duplicate certificate.

Section 41 of Act No. 496, as amended by P.D. No. 1529, provides that the owner’s duplicate certificate shall be issued by the Register of Deeds in the name of the person in whose favor the land was decreed, and further disposes that said duplicate shall be delivered to the registered owner.

Protection of innocent third person.

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 and order the total cancellation of the certificate.

CASE

Evidence in the case at bar discloses that when petitioner purchased the subject property on June 10, 1970, the title thereto was in the name of her vendor Rafaela Donato alone. The rule that all persons dealing with property covered by Torrens certificate of title are not required to go beyond what appears on the face of the title is well-settled. The remedy of the defrauded party is to bring action for damages against those who caused the fraud or were instrumental in depriving him of the property. In the case at bar, because the action prescribes in 10 years from the issuance of the Torrens title over the property, the action is said to have already prescribed because it was fi led 15 years after the issuance to TCT No. T-32682.

An “innocent purchaser for value” or any equivalent phrase shall be deemed, under the Torrens system, to include an innocent lessee, mortgagee; or other encumbrancer for value.

Good faith, how determined.

Good faith, or the lack of it, is in its last analysis a question of intention; but, in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that “the honesty of intention,” “the honest lawful intent,” which constitutes good faith, implies freedom from knowledge and circumstances which ought to put a person on inquiry,” and so it is that proof of such knowledge that overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. “Good faith, or the want of it, is not visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs.’’

It has been held that a purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest on such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property.

When actual knowledge of purchaser does not constitute bad faith.

In a case where A sold the same property fi rst to B and then to C, C as a purchaser in good faith for value registered the deed and obtained a title in his name, free from all liens and encumbrances.

Thereafter, C sold the same property to D who relied on C’s good title. But before D finally acquired the property, he became aware of the fact that there was some trouble or pending litigation involving the same property between A and B, the information having been relayed to him by the tenant of the place. From these facts two questions have been raised, namely: (1) whether D is a purchaser in good faith, notwithstanding his knowledge of the pending litigation; and (2) whether D acquired valid title to the property free from lien or encumbrance.

With respect to the fi rst question, it was held that D is still a purchaser in good faith, notwithstanding his knowledge of the pending litigation, because of the fact that C from whom he bought the property was not a party to the litigation. D stepped only into the shoes of C, a previous purchaser in good faith, and thereby he became entitled to all the defenses available to C, including those arising from the acquisition of the property in good faith and for value. With respect to the second question, it was held that C acquired valid title to the property, in view of Article 1544 of the Civil Code providing that registration in the Registry of the real property the ownership of which is claimed by different persons shall have the effect of transferring ownership thereof to the party who, in good faith, fi rst recorded it in the Registry of Property. Furthermore, Article 526 of the Civil Code provides that “He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any fl aw which invalidates it.’’ Again, under Section 39 of Act No. 496, as amended by Act No. 2011, “every person receiving a certifi cate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certifi cate of title for value in good faith shall hold the same free of all encumbrances except those noted on said certifi cate.” When the pending litigation between A and B is fi nally decided, the decision of the court cannot operate to divest the right of D who is not and has never been a party to the litigation, either as plaintiff or as defendant.

Sale by co-owners

Under Article 493 of the Civil Code, the owner of an undivided interest in the property has the right to freely sell and dispose of only his rights, participation and interest in an undivided property held in common with others, but has no right to sell a specifi c part, by metes and bounds, of the property. The sale or other disposition can affect only his undivided share, and the transferee gets only what corresponds to his grantor in the property owned in common.

it was held that a co-heir who signs a deed of sale executed by the other co-heirs conveying the community property in favor of someone, not as vendor but only as an instrumental witness, without objecting to the sale of his alleged share in the property, is bound by the conveyance, and he cannot afterwards sue for partition after the vendee has already acquired ownership of the property by adverse possession.

Registration of sale with right of legal redemption

right of legal pre-emption or redemption that may be exercised within thirty days from the date of written notice by the vendor.

Torrens title not subject to prescription.

No title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession.

Right to recover possession equally imprescriptible.

To a registered owner under the Torrens system, the right to recover possession of the registered property is equally imprescriptible, since possession is a mere consequence of ownership.

Evidentiary value of certifi cate of title

A certifi cate of title is conclusive evidence with respect to the ownership of the land described therein, and other matters which can be litigated and decided in land registration proceedings.

Torrens title not subject to collateral attack.

Torrens title can be attacked only for fraud, within one year after the date of the issuance of the decree of registration. Such attack must be direct, and not by a collateral proceeding The title represented by the certificate cannot be changed, altered, modified, enlarged, or diminished in a collateral proceeding.

VOLUNTARY DEALINGS WITH REGISTERED LANDS

An innocent purchaser for value of registered land becomes the registered owner and in the contemplation of law the holder of a certificate thereof the moment he presents and files a duly notarized and lawful deed of sale and the same is entered on the day book and at the same time he surrenders or presents the owner’s duplicate certificate of title to the property sold and pays the full amount of registration fees, because what remains to be done lies not within his power to perform. The Register of Deeds is in duty bound to perform it. We believe that is a reasonable and practical interpretation of the law under consideration — a construction which would lead to no inconsistency and injustice.

FORMAL DETAILS REQUIRED OF VOLUNTARY INSTRUMENTS.

requires that every deed or other voluntary instrument presented for registration shall contain or have endorsed upon it the full name, nationality, place of residence, post office address of the grantee or other person acquiring or claiming an interest under such instrument, and every such instrument shall also state whether the grantee is married or unmarried, and, if married, the full name of the husband or wife. If the grantee is a corporation or association, the deed must show that such corporation or association has the requirements prescribed by existing law for acquiring public land, in case the land sold or conveyed was originally public land. This latter requirement may be expressed in the deed by means of a statement to the effect that such corporation or association has at least sixty (60) percent of its capital belonging to Filipinos.

Register of Deeds not authorized to determine whether or not fraud was committed in the deed sought to be registered. The duties enjoined upon the Register of Deeds by Section 57 of the Land Registration Act are clearly ministerial and mandatory in character, not only as indicated by the auxiliary “shall” but by the nature of such functions required to be performed by him.

nature of such functions required to be performed by him.

The requirements for deeds and other voluntary instruments of conveyance to be registrable there under are specified in the law, thus:

 (1) The presentation of the owner’s duplicate certificate whenever any duly executed voluntary instrument is filed for registration;

(2) the payment of the prescribed registration fees and the requisite documentary stamps;

(3) the evidence of full payment of real estate tax as may be due; and

(4) the inclusion of one extra copy of any document of transfer or alienation of real property, to be furnished the city or provincial assessor.

 Sales of Land to Aliens

Krivenko vs. Register of Deeds of Manila held that aliens are not allowed to acquire ownership of

urban or residential lands in the Philippines, and as a consequence, all acquisitions made in contravention of the prohibition since the fundamental law became effective are null and void per se and ab initio.

*** No entity, except the legislature itself, may add to or detract from or otherwise alter or amend the requirements it has so enumerated — and then only by the corresponding amendment of the existing statutes or the enactment of new ones. The local government cannot impose additional requirements; and for a chartered city to add new requirements for registration not otherwise provided by statutory law in the matter is tantamount to amending or modifying the law, a power which is not vested in such a chartered city.

REAL MORTGAGE

MORTGAGE, according to Sanchez Roman, is a real right constituted to secure an obligation upon real property or rights therein to satisfy with the proceeds of the sale thereof such obligation when the same becomes due and has not been paid or fulfilled.

Kinds of mortgages.

1.       conventional - or voluntary mortgage is one created by agreement of the parties.

2.       legal mortgage - is one created by operation of law, wherein the creditor is given a mortgage on the property of his debtor, without the necessity of the parties actually stipulating for it.

-  as one required by express provision of law to be executed in favor of certain persons to secure the performance of a principal obligation.

3. judicial mortgage is one resulting from a judgment.

4. equitable mortgage is one that is not a mortgage in form but in substance a mere security for a debt or obligation. This commonly occurs in the case of pacto de retro sales.

ESSENTIAL REQUISITES OF MORTGAGE.

POF

(a) That it be constituted to secure the fulfillment of a principal obligation;

(b) That the mortgagor be the absolute owner of the thing mortgaged;

(c) That the person constituting the mortgage has the free disposal of the property, and in the absence thereof, that he be legally authorized for the purpose.

DBP vs. CA Thus, a person who deliberately ignores a signifi cant fact that would create suspicion in an otherwise reasonable person is not an innocent purchaser for value

Who may constitute a mortgage.

It is only the absolute owner of the property who can constitute a valid mortgage on it.

Consent of both parties not necessary to registration of mortgage.

A mortgage may be registered at the instance of the mortgagee alone, even over the objection of the mortgagor.

Special characteristics of real mortgage.

The following are the special characteristics of a real mortgage:

(a) Realty as subject matter: Only real property or alienable rights and interests therein may be the subject matter of a mortgage. Thus, not only the land and improvements thereon may be mortgaged, but also the credits or rights of the mortgagee or other encumbrancers.

(b) Real right: A mortgage lien is a real right and as such it is good and binding against the whole world, and may be enforced by real action against all persons who may have existing rights or interests in the same property, not registered prior to the mortgage.

(c) Accessory obligation: As an obligation, a mortgage is only accessory and presupposes the existence of a principal obligation. In the absence therefore of a principal obligation, a mortgage cannot stand.

(d) Indivisibility: Even though the debt secured may be divided among the debtors or the creditors or their successors in interest, the mortgage shall remain as one and indivisible, unless there have been several things given in mortgage and each of them guarantees only a determinate portion of the obligation.

(e) Inseparability: The mortgage lien and the property affected are inseparable, so much so that whoever may subsequently acquire title to the mortgaged property is bound by the terms of the mortgage, whether the transfer be with or without the consent of the mortgagee. In other words, the mortgage, until discharged, follows the property to whomever it may be transferred no matter how many times over it changes hands as long as the annotation is carried over.

(f) Retention of possession. The mortgagor generallyretains possession of the mortgaged property inasmuch as a mortgage is a mere lien and title to the property does not pass to the mortgagee.

The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is usually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

Registration of mortgage; how effected.

The procedure in the registration of a mortgage is outlined in Section 61 of Act No. 496, as amended by P.D. No. 1529. The mortgage deed is fi led together with the owner’s duplicate certifi cate of title with the Register of Deeds of the city or province where the land lies. Thereupon, this offi cial enters upon the original certifi cate of title and the owner’s duplicate certifi cate a memorandum of the purport of the mortgage deed, the time of fi ling, and the fi le number of the deed, signing the memorandum after the entry. He also notes down upon the mortgage deed the time of fi ling and a reference to the volume and page of the registration book where it is registered.

*** that in a mortgage of real estate the improvements on the same are included; therefore, all objects permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage was constituted, are also included.

May mortgage be registered without the owner’s duplicate

title?

Where a mortgage deed has been fi led for registration and the owner’s duplicate certifi cate of title is being withheld by the owner or otherwise could not be presented at the time of registration, the Register of Deeds may be requested to proceed in accordance with Section 72 of Act No. 496 (now Section 71, P.D. No. 1529), in which case he shall send within twenty-four hours notice by mail to the registered owner, stating that such mortgage has been registered, and requesting that the owner’s duplicate certifi cate be produced in order that the corresponding memorandum of the mortgage could be made thereon. If the owner neglects or refuses to comply within a reasonable time the Registrar may suggest the fact to the court, and the court, after notice, may enter an order to the owner to produce his certifi cate at a time and place to be named therein, and may enforce the order by suitable process.

Stipulation against subsequent mortgage.

stipulation not to make a new mortgage not being contrary to law, morals, or public order, is valid and is, therefore, an obstacle to the registration of subsequent mortgages in the registry of property.

*** whether the agreement that the mortgagor cannot sell the mortgaged property without the consent of the mortgagee such that if it is sold

without his consent, valid or not?

Held:

It is not valid as it contravenes Article 2130, NCC which provides that a stipulation forbidding the owner from alienating the immovable mortgaged shall be void.

Pactum commissorium -  is a stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfi llment of the obligation in the event the obligor fails to live up to his undertakings, without further formality, such as foreclosure proceedings, and a public sale.

Extrajudicial foreclosure of mortgage.

A mortgage may be foreclosed extrajudicially only if there has been inserted in or attached to the real estate mortgage a special power of attorney conferring upon the mortgagee the power to sell the mortgaged property at public auction in the event of foreclosure, conformably to the procedure prescribed in Act No. 3135, as amended by Act No. 4118.

A power to sell extrajudicially conferred upon the mortgagee is a power that survives the death of the mortgagor because it is an agency coupled with interest. To constitute such power coupled with interest, the rule is that there should coexist in the agent, along with the power given him, an interest or estate in the thing to be disposed of. It is not meant an interest in the exercise of the power but an interest in the property on which the power is to operate.

As to the place of sale, it cannot be made legally outside of the province or city in which the property is situated; and in case the place within said province or city in which the sale is to be made is the subject of stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof lies.

Publication is also required by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, by publishing such notice once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. In order that a newspaper may be said to be of general circulation in a municipality, it must have regular subscribers, buyers and readers therein. The law does not require that notice of auction sale be given by the mortgagee to the mortgagor.

Right of redemption in foreclosure of mortgage.

may redeem the same within the term of one year from and after the sale.

Reckoning point – from the date of registration of the sale.

The pendency of an action questioning the validity of a mortgage cannot bar the issuance of the writ of possession after title to the property has been consolidated in the mortgagee.

 CASE

The period of redemption is not interrupted by the fi ling of an action assailing the validity of the mortgage, so that at the expiration thereof, the mortgagee who acquires the property at the foreclosure sale can proceed to have the title consolidated in his name and a writ of possession issued in his favor. To rule otherwise, and allow the institution of an action questioning the redemption would constitute a dangerous precedent. A likely offshoot of such a ruling is the institution of frivolous suits for annulment of mortgage intended merely to give the mortgagor more time to redeem the mortgaged property. (Union Bank of the Philippines vs. CA)

CHATTEL MORTGAGE - is a sale of personalty conveying the title to the mortgagee under the condition that, if the terms of redemption are not complied with, then the title becomes absolute in the mortgagee.

-           it is a transfer of personal property as security for a debt or obligation in such form that, upon failure of the mortgagor to comply with the terms of the contract, the title to the property will be in the mortgagee.

*** the true nature of a chattel mortgage as a sale only in form, while in substance essentially a contract of security.

Union Motors Corporation vs. CA, 361 SCRA 506, it was ruled that the accessory contract of chattel mortgage has no legal effect whatsoever inasmuch as the mortgagors are not the absolute owners thereof, ownership of the mortgagor being an essen tial requirement of a valid mortgage contract. The manifestations of ownership are control and enjoyment over the thing owned.

Subject matter of chattel mortgage -- Only personal property

House as object of chattel mortgage

If the owner of the building is distinct and different from the owner of the land, it may be considered a

personal property upon stipulation of the parties, for the purpose of constituting a chattel mortgage. So, also, where a building erected on land belonging to another is merely superimposed on the soil or is sold for immediate demolition, the same may be considered as movable or personal property.

Register of Deeds in respect to the registration of chattel mortgages are purely of a ministerial character, and he is clothed with no judicial or quasi-judicial power to determine the nature of the property, whether real or personal, which is the subject of the mortgage. Generally speaking, he should accept the qualifi cation of the property adopted by the person who presents the instrument for registration and should place the instrument on record, upon payment of the proper fees, leaving the effects of registration to be determined by the court if such question should arise for legal determination. Registration adds nothing to the instrument, considered as a source of title, and affects nobody’s rights except as a species of constructive notice.

it was held that the view as above enunciated that the parties to a deed of chattel mortgage may agree to consider a house as personal property, for purposes of such a contract, shall be deemed good only insofar as the contracting parties are concerned and is not applicable to strangers to the contract or to a case where there is no contract whatsoever with respect to the status of the house.

Machinery and fixture as subject matter.

Gen. Rule

Machinery and fi xture are personal property by their very nature

Exemption: 

if they are attached to real property or placed in a factory building or plant, with the character of permanence according to their purpose and in such manner that they cannot be detached therefrom without causing destruction of, or material injury to, the things real with which they are connected, they would be regarded as part of the real estate.

Exemption to the exemption:

if they are so placed by a tenant, or a usufructuary, or someone else having only a temporary right on the real property – movable

An interest in a business mortgageable if properly described. – personal property

Shares of stock as security of an obligation – personal property

Growing crops as personal property.

Growing crops, like ungathered sugar cane in the fi eld, are personal property and as such may be subject matter of chattel mortgage.

Vessels are considered personal property under the civil law.

Motor vehicle when object of chattel mortgage.

whenever any owner mortgages any motor vehicle as security for a debt or other obligation, the creditor or person in whose favor the mortgage is made is required, within seven days, to notify the Chief of the Motor Vehicles Offi ce in writing to that effect, stating the registration number of the motor vehicle, date of mortgage, names and addresses of both parties, and such other information as may be required by said offi ce.

Mortgage of after-acquired property valid.

The problem of whether after-acquired property may be object of a chattel mortgage has confronted stores open to the public for retail business, where the goods are constantly sold and substituted with new stock from time to time.

Large cattle as object of chattel mortgage; how described.

Large cattle includes the horse, mule, ass, carabao, or other domesticated member of the bovine family.

the description thereof shall include the brands, class, age, knots of radiated hair commonly known as

remolinos, or cowlicks, and other marks of ownership as described and set forth in the certifi cate of ownership of said animal or animals,together with the number and place of issue of such certifi cates ofownership.

Where to register chattel mortgage.

a chattel mortgage shall be recorded in the offi ce of the Register of Deeds of the province or city where the mortgagor resides as well as where the property is situated or ordinarily kept.

Government lien superior to mortgage lien.

Taxes due the government are preferred and superior to the mortgage lien.

Effect of registration.

While registration adds nothing to the instrument, considered as the source of title of the mortgagee, it operates as a constructive notice of the existence of the chattel mortgage. The transaction

thereby becomes binding against third persons. An otherwise invalid or legally defective document is not validated or cured of its legal defects by registration.

Mortgage binding on subsequent purchasers.

Instruments of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the mortgaged properties. The right of those who so acquire said properties should not and cannot be superior to that of the creditor who has in his favor an instrument of mortgage executed with the formalities of the law, in good faith, and without the least indication of fraud.

Sale of chattel without consent of mortgagee.

Art 319 par. 2 of RPC

incurs criminal responsibility. A mere stipulation in the deed of sale that it revokes the chattel mortgage and quashes, nullifi es and terminates all proceedings, judicial or extrajudicial, arising out of and incident to the transaction, does not and cannot have the effect of wiping out the criminal liability.

Effect of failure to register.

Where there exists a chattel mortgage contract in due form, but for some reason or another it was not, as it should be, registered in the offi ce of the Register of Deeds concerned, the effect would be that it still remains a valid chattel mortgage as against the mortgagor, his executors or administrators,54 but void as against third persons, such as intervening purchasers or creditors claiming liens by attachment, judgment or execution.

Affi davit of good faith; effect of omission.

The absence of such affi davit vitiates a mortgage as against creditors and subsequent encumbrancers

Foreclosure of chattel mortgage; condition precedent.

Before foreclosure may be resorted to, it is necessary as a condition precedent that there be a violation of the condition of the chattel mortgage and that at least thirty days shall have elapsed since then.

Procedure in foreclosure of chattel mortgage.

The procedure prescribed in Section 14 of the Chattel Mortgage Law for the foreclosure of chattel mortgage may be outlined as follows:

“1. Notices are posted for at least ten days in at least two public places in the municipality where the mortgaged property is to be sold, designating the time, place, and purpose of the sale.

“2. The mortgagee, his executor, administrator or assign, notifies in writing, at least ten days before the sale, the mortgagor or person holding under him and other persons holding subsequent mortgages of the time and place of the sale, said notice to be delivered personally to the party if

residing in the same municipality or sent by mail if residing outside.

“3. The mortgaged property is sold at public auction by a public officer at a public place in the municipality where the mortgagor resides or where the property is situated,

as designated in the notice.

“4. Within thirty days after the sale, the public official who conducted the sale makes a return of his doings, the same to be filed and recorded with the Office of the Register of Deeds where the mortgage has been recorded. The officer’s return describing the articles sold and stating the amount received for each article operates as a discharge of the lien created by the mortgage.

“5. The proceeds of the sale will be distributed and applied to the following payments:

(a) Cost and expenses of keeping and sale;

(b) Amount of demand or obligation secured by the chattel mortgage;

(c) Obligations due to persons holding subsequent mortgages, in their order, and

(d) Balance turned over to the mortgagor or person holding under him on demand.”

INVOLUNTARY DEALINGS WITH REGISTERED LAND — ATTACHMENT AND OTHER LIENS

ATTACHMENT is a writ issued at the institution or during the progress of an action, commanding the sheriff or other public offi cer to attach the property, rights, credits, or effects of the defendant to satisfy the demands of the plaintiff.

Attachment may be classifi ed into three kinds, namely:

(1) preliminary attachment;  is that issued at the institution or during the progress of an action.

(2) garnishment; plaintiff seeks to subject to his claim property of the defendant in the hands of a third person called the garnishee, as well as money owed by such third person to defendant. Garnishment proceedings are usually directed to personal property.

(3) levy on execution. is the attachment issued after the fi nal judgment in satisfaction thereof.