Facts:

The case involves Hilario T. de los Santos as the petitioner and Emilio Miller, Sr., Rosemarie Olazo, and Manuel Serrana, Jr. as the respondents. The events leading to the case began on September 30, 1982, when petitioner de los Santos and respondent Miller, Sr. secured a loan amounting to P 450,000.00 from Manphil Investment Corporation (Manphil). To secure this loan, de los Santos mortgaged his house and lot, which was covered by Transfer Certificate of Title (TCT) No. 337164. Subsequently, Miller, Sr. paid off the loan using funds that he advanced, which were not derived from the partnership MS Rice Mill Company, of which he was a partner with de los Santos. Despite the loan being fully paid, Miller, Sr. refused to return the title to de los Santos, claiming that he was entitled to retain it until de los Santos settled his obligations to him. De los Santos filed a complaint in the Regional Trial Court (RTC) of Makati for the removal of the cloud on his title and for the de...

Facts:

Background of the Case

Petitioner Hilario T. de los Santos filed a complaint in the Regional Trial Court (RTC) of Makati for "Removal of Cloud and Delivery of Title" against private respondents Emilio Miller, Sr., Rosemarie Olazo, and Manuel Serrana, Jr. Miller, Sr., was petitioner's business partner in the MS Rice Mill Company, while Olazo and Serrana, Jr. were officials at Manphil Investment Corporation (Manphil).

Loan and Mortgage Agreement

Petitioner alleged that he and Miller, Sr., obtained a P450,000.00 loan from Manphil on September 30, 1982. As security for the loan, petitioner mortgaged his house and lot covered by Transfer Certificate of Title (TCT) No. 337164.

Payment of the Loan

Petitioner claimed that out of the profits of MS Rice Mill Company, respondent Miller, Sr., surreptitiously paid the loan from Manphil in full. Despite the payment, which extinguished the real estate mortgage, private respondents refused to return petitioner's title. Petitioner sought the surrender of TCT No. 337164 and the execution of a Deed of Cancellation of Mortgage.

RTC and Court of Appeals Decisions

The RTC of Makati dismissed petitioner's complaint and ordered him to pay private respondents P15,000.00 as attorney's fees and costs. On appeal, the Court of Appeals affirmed the RTC's decision, ruling that the loan was not a partnership obligation but a personal one secured by their private properties. The Court of Appeals noted that the partnership's funds were insufficient to pay the loan, and the payment came from Miller, Sr.'s wife, Felisa.

Subrogation and Miller, Sr.'s Rights

The Court of Appeals held that Miller, Sr., having fully paid the loan, was subrogated to Manphil's rights as petitioner's creditor under Article 1303 of the Civil Code. Consequently, Miller, Sr., could not be compelled to return petitioner's title until petitioner settled his obligation.

Issue:

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Ruling:

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Ratio:

1. Subrogation under Article 1303: Subrogation transfers the creditor's rights to the person who pays the debt, including rights against the debtor or third parties. Miller, Sr., as the payor, succeeded to Manphil's rights as petitioner's creditor.
2. Cancellation of Mortgage: Since the mortgage had been cancelled, there was no legal basis for Miller, Sr., to retain petitioner's title. The property was no longer subject to any mortgage, and the title should be returned to petitioner.
3. Separate Action for Debt: Miller, Sr., could pursue a separate action to recover the amount he advanced on petitioner's behalf, but this did not justify withholding petitioner's title.

WHEREFORE, the decision of the Court of Appeals is REVERSED, and private respondent Emilio Miller, Sr., is ORDERED to return petitioner Hilario T. de los Santos' Transfer Certificate of Title No. 337164 without prejudice to his instituting a separate action to collect petitioner's debt.