G.R. No. 30882 - Tan Chun Tic vs. West Coast Life Insurance Co.

Parties and nature of the complaint
T an Chun Tic filed a complaint seeking the annulment and cancellation of the preliminary attachment levied by Jose C. Locsin, provincial sheriff of Occidental Negros, upon specified parcels of land.
West Coast Life Insurance Company and Jose C. Locsin were the defendants.
The attachment had been levied upon petition of West Coast Life Insurance Company against property described in transfer certificates of title Nos. 3220 and 1263, in the name of Go Chulian.

Early procedural developments in the trial court
The defendants demurred on the ground that the complaint did not state facts sufficient to constitute a cause of action.
The demurrer was overruled by M. L. de la Rosa, judge.
The defendants filed answers consisting of a general denial.
As none of the defendants appeared at the hearing, the trial court adjudged them in default.
After the plaintiff presented evidence, the trial court rendered judgment.

Trial court disposition on ownership and attachment
The trial court held that lots Nos. 64 and 662 of the cadastre of Murcia, Occidental Negros belonged in fee simple to Tan Chun Tic.
By virtue of that finding, the trial court:

Ordered the cancellation of transfer certificates of title Nos. 6328 and 6329 (formerly Nos. 3220 and 1263) in the office of the registrar of deeds of Occidental Negros; and
Ordered that the annotation of the preliminary attachment on the said lots be stricken.

Appeal and the principal assignment of error
West Coast Life Insurance Company appealed in due time and form.
The appellant assigned five errors, but the Court considered the fourth assignment of error because it raised the fundamental question.
The fourth assignment of error alleged that the trial court erred in not holding that the stipulation in the mortgage Exhibit A—where the mortgaged lands would become the property of the creditor-mortgagee upon nonpayment within the term—was a pactum commissorium and therefore null and void under articles 1859 and 1884 of the Civil Code.

Underlying debt, attachment, and mortgage transaction
On September 16, 1925, West Coast Life Insurance Company filed in the Court of First Instance of Manila a complaint against Go Chulian, Julio Gonzaga, and Francisco Sanchez for recovery of P24,000.
On the same date, West Coast Life Insurance Company obtained a writ of preliminary attachment.
On September 21, 1925, the provincial sheriff of Occidental Negros attached, among others, the parcels of land described in transfer certificates of title Nos. 3220 and 1263 in the name of Go Chulian.
The attachment was:

Recorded in the registry of deeds of Occidental Negros; and
Annotated on the back of the relevant certificates on September 21, 1925.

The mortgage and its stipulation
On September 15, 1925, Go Chulian executed a mortgage on the two parcels in favor of Genoveva Gamboa de Jayme to secure payment of a loan of P4,200.
The mortgage was identified as Exhibit A.
The mortgage fell due on March 30, 1926.
Exhibit A contained the following agreement:

If upon maturity the mortgagor could not satisfy the amount owed, the mortgagor would authorize the mortgagee to take over the parcels.
The mortgagee could dispose of them after the sugar-cane crop had been harvested for milling in the season of 1925–1926.
The ownership of the lots would be transferred to the mortgagee, who would then be owner in fee simple, dispensing with expensive lawsuits.

Assignment of mortgage rights to Tan Chun Tic and subsequent registrar action
On March 30, 1926, the mortgagee Genoveva de Jayme assigned and transferred her rights and actions in the mortgage contract to Tan Chun Tic for value received.
The deed of assignment (Exhibit B) was signed by:

On March 7, 1927, Tan Chun Tic presented to the registrar of deeds an affidavit (Exhibit C) stating that the period granted to the debtor in the mortgage had already elapsed without payment.
The registrar of deeds then:

The registrar preserved the annotation of the preliminary attachment in favor of West Coast Life Insurance Company.

(Subscriber-Only)

Validity of the mortgage stipulation as pactum commissorium
Whether the stipulation in Exhibit A—that the mortgaged property would become the property of the creditor-mortgagee upon nonpayment within the term—was a pactum commissorium.
Whether such a stipulation was therefore void under articles 1859 and 1884 of the Civil Code.

Effect of assignment and ownership claims on the attachment
Whether the assignment by Genoveva Gamboa de Jayme to Tan Chun Tic (Exhibit B) transferre...(Subscriber-Only)