Case Digest (G.R. No. 165881)
Facts:
Philippine Charity Sweepstakes Office (PCSO) held a first real estate mortgage over a Dagupan City parcel covered by TCT No. 52135 executed under a Deed of Undertaking with First Real Estate Mortgage dated March 8, 1989, in favor of PCSO to secure sweepstakes ticket obligations of Patricia P. Galang, with Purita E. Peralta as mortgagor. Despite Peralta’s later conditional sale to New Dagupan Metro Gas Corporation (New Dagupan) on July 31, 1990, PCSO registered its mortgage only on May 20, 1992, then sought extrajudicial foreclosure on February 10, 1993, and bought the property at public auction on June 15, 1993; meanwhile, New Dagupan’s adverse claim was annotated on October 1, 1991.New Dagupan later obtained a final and executory RTC compromise in a related case ordering delivery of the title’s owners duplicate (RTC Branch 43, January 21, 1994) and then filed, on June 1, 1994, a petition against PCSO to annul TCT No. 52135 or compel surrender of the owners duplicate. The RTC
Case Digest (G.R. No. 165881)
Facts:
- Parties and the property involved
- Respondent Purita E. Peralta (Peralta) held registered ownership over a parcel of land in Bonuan Blue Beach Subdivision, Dagupan City under Transfer Certificate of Title (TCT) No. 52135.
- Respondent New Dagupan Metro Gas Corporation (New Dagupan) acquired the subject property from Peralta under a conditional sale.
- Petitioner Philippine Charity Sweepstakes Office (PCSO) became mortgagee by virtue of a real estate mortgage executed on Peralta’s property.
- The Deed of Undertaking with First Real Estate Mortgage and the mortgage purpose
- On March 8, 1989, Peralta constituted a real estate mortgage over the subject property in favor of PCSO.
- The mortgage was to secure payment of sweepstakes tickets purchased by provincial distributor Patricia P. Galang (Galang).
- The salient provisions of the Deed of Undertaking with First Real Estate Mortgage provided that:
- Galang, as principal, acknowledged an outstanding and unpaid account of P450,000.00 representing the balance of her ticket accountabilities for “all draws.”
- The principal agreed to liquidate or pay the account ten (10) days after each draw at 14% per annum interest.
- During the lifetime of the mortgage, the mortgagor (Peralta) shall not alienate, sell, dispose of, or encumber the property without the mortgagee’s prior written consent.
- Upon payment of the principal amount, interest, and legally incurred expenses by the mortgagee, the undertaking would be terminated.
- The conditional sale by Peralta to New Dagupan and annotation of adverse claim
- On July 31, 1990, Peralta sold the subject property to New Dagupan under a conditional sale.
- The sale became absolute upon New Dagupan’s full payment of the price of P800,000.00.
- New Dagupan paid P200,000.00 upon execution of the corresponding deed and agreed to pay the remaining P600,000.00 in monthly installments of P70,000.00, with the first installment due on August 31, 1990.
- Peralta allegedly showed New Dagupan a photocopy of TCT No. 52135 bearing no liens and encumbrances, and undertook to deliver the owners duplicate within three (3) months.
- New Dagupan withheld payment of the last installment intended for capital gains tax due to Peralta’s alleged failure to:
- deliver the owners duplicate of TCT No. 52135; and
- execute a deed of absolute sale in favor of New Dagupan.
- New Dagupan’s President, Julian Ong Cuna (Cuna), executed an affidavit of adverse claim annotated on TCT No. 52135 on October 1, 1991 as Entry No. 14826.
- New Dagupan’s action against Peralta and PCSO’s belated mortgage registration
- Because of Peralta’s continued failure to deliver the deed of absolute sale and the owners duplicate, New Dagupan filed a complaint for specific performance against Peralta with the RTC on February 28, 1992.
- The case was docketed as Civil Case No. D-10160 and raffled to Branch 43.
- During the pendency of Civil Case No. D-10160, on May 20, 1992, PCSO caused the registration of its mortgage lien.
- PCSO’s foreclosure and the auction sale
- On February 10, 1993, PCSO applied for extrajudicial foreclosure due to Galang’s alleged failure to fully pay sweepstakes she purchased in 1992.
- A public auction occurred on June 15, 1993, where PCSO was the highest bidder.
- A certificate of sale was issued to PCSO.
- The certified true copy of TCT No. 52135 that New Dagupan obtained from the Register of Deeds for Civil Case No. D-10160 reflected PCSO’s mortgage lien.
- New Dagupan asserted that it learned of the mortgage only after obtaining that copy, then wrote PCSO on October 28, 1993, notifying PCSO of its complaint and suggesting intervention.
- The compromise judgment between Peralta and New Dagupan
- On January 21, 1994, RTC Branch 43 rendered a decision approving the compromise agreement between Peralta and New Dagupan.
- Under the compromise:
- Peralta waived and quitclaimed the remaining purchase price balance of P60,000.00 as a penalty for failure to execute and deliver a deed of absolute sale transferring TCT No. 52135 to New Dagupan.
- Upon signing, possession and ownership of the property were vested absolutely in New Dagupan, acknowledged as the absolute owner.
- The compromise was without prejudice to whatever rights and remedies PCSO had against Peralta and Galang under the Deed of Undertaking.
- The decision became final and executory.
- New Dagupan’s subsequent demand and its petition against PCSO
- After finality, New Dagupan demanded Peralta’s delivery of the owners duplicate of TCT No. 52135.
- In a letter dated March 29, 1994, PCSO replied that it had already foreclosed the mortgage and held a certificate of sale from the June 15, 1993 auction.
- On June 1, 1994, New Dagupan filed with the RTC a petition for:
- annulment of TCT No. 52135, or
- surrender of the owners duplicate thereof,
- The case was docketed as Civil Case No. 94-00200-D and raffled to Branch 43.
- On March 6, 1996, the case was transferred to RTC Branch 42 after the presiding judge of Branch 43 inhibited himself.
- PCSO’s defenses and its third-party complaint; responses of Peralta and Galang
- In its Answer dated March 7, 1995, PCSO alleged that:
- New Dagupan was a buyer in bad faith;
- New Dagupan and Peralta colluded to deprive PCSO of its mortgage rights;
- New Dagupan was estopped from questioning PCSO’s superior right after entering the compromise agreement;
- New Dagupan was bound by the foreclosure proceedings since PCSO obtained title via auction.
- PCSO moved on April 17, 1995 for leave to file a third-party complaint, alleging that Peralta and Galang were indispensable parties.
- In the Third-Party Complaint, PCSO reiterated its allegations and further claimed that the sale to New Dagupan was void because it violated the prohibition in the Deed of Undertaking.
- In their Answer to Third-Party Complaint with Counterclaims dated January 2, 1996, Peralta and Galang asserted that:
- the clause prohibiting sale was void under Article 2130 of the Civil Code;
- PCSO’s failure to intervene in Civil Case No. D-10160 barred it from questioning the sale and compromise;
- PCSO’s neglect in registering its mortgage entitled New Dagupan to preference;
- PCSO had no cause of action after foreclosure because of the circumstances.
- RTC Branch 42 decision and orders
- On January 28, 1998, RTC Branch 42 ruled for New Dagupan.
- The dispositive portion ordered PCSO to...(Subscriber-Only)
Issues:
- Ownership and priority issue between PCSO and New Dagupan
- Which party had a better right over the subject property: PCSO, as mortgagee/foreclosure purchaser, or New Dagupan, as purchaser under conditional sale and subsequent final compromise.
- Whether the mortgage secured future obligations or operated as a continuing guaranty
- Whether the Deed of Undertaking with First Real Estate Mortgage functioned as a continuing guaranty that extended beyond Galang’s settled P450,000.00 account to cover ticket purchases in 1992.
- Validity and effect of the mortgage vis-à-vis Peralta’s sale and foreclosure
- Whether the mortgage was extinguished upon Galang’s full payment of P450,000.00, such that PCSO had nothing to register and nothing to foreclose.
- Whether PCSO’s belated registration affected its rights against third parties under the Torrens system.
- Good faith and effect of notice under the Torrens system
- Whether New Dagupan was a buyer in good faith and for value despite learning of the mortgage later.
- Whether PCSO could claim New Dagupan’s bad faith ...(Subscriber-Only)