THIRD DIVISION
[G.R. No. 138053. May 31, 2000]
CORNELIO M.
ISAGUIRRE, petitioner, vs. FELICITAS DE LARA, respondent.
D E C I S I O N
GONZAGA-REYES, J.:
In this petition for review on certiorari
under Rule 45 of the 1997 Revised Rules of Civil Procedure, petitioner Cornelio
M. Isaguirre assails the October 5, 1998 decision[1] of the Court of Appeals[2] and its Resolution promulgated on March 5, 1999.
The antecedent facts of the present case are
as follows:
Alejandro de Lara was the original
applicant-claimant for a Miscellaneous Sales Application over a parcel of land
identified as portion of Lot 502, Guianga Cadastre, filed with the Bureau of
Lands on January 17, 1942 and with an area of 2,342 square meters. Upon his
death, Alejandro de Lara was succeeded by his wife - respondent Felicitas de
Lara, as claimant. On November 19, 1954, the Undersecretary of Agriculture and
Natural Resources amended the sales application to cover only 1,600 square
meters. Then, on November 3, 1961, by virtue of a decision rendered by the
Secretary of Agriculture and Natural Resources dated November 19, 1954, a
subdivision survey was made and the area was further reduced to 1,000 square
meters. On this lot stands a two-story residential-commercial apartment
declared for taxation purposes under TD 43927 in the name of respondent’s sons
- Apolonio and Rodolfo, both surnamed de Lara.
Sometime in 1953, respondent obtained
several loans from the Philippine National Bank. When she encountered financial
difficulties, respondent approached petitioner Cornelio M. Isaguirre, who was
married to her niece, for assistance. On February 10, 1960, a document
denominated as "Deed of Sale and Special Cession of Rights and
Interests" was executed by respondent and petitioner, whereby the former
sold a 250 square meter portion of Lot No. 502, together with the two-story
commercial and residential structure standing thereon, in favor of petitioner,
for and in consideration of the sum of P5,000.
Sometime in May, 1968, Apolonio and Rodolfo
de Lara filed a complaint against petitioner for recovery of ownership and
possession of the two-story building.[3] However, the case was dismissed for lack of
jurisdiction.
On August 21, 1969, petitioner filed a sales
application over the subject property on the basis of the deed of sale. His
application was approved on January 17, 1984, resulting in the issuance of
Original Certificate of Title No. P-11566 on February 13, 1984, in the name of
petitioner. Meanwhile, the sales application of respondent over the entire
1,000 square meters of subject property (including the 250 square meter portion
claimed by petitioner) was also given due course, resulting in the issuance of
Original Certificate of Title No. P-13038 on June 19, 1989, in the name of
respondent.[4]
Due to the overlapping of titles, petitioner
filed an action for quieting of title and damages with the Regional Trial Court
of Davao City against respondent on May 17, 1990. The case was docketed as
Civil Case No. 20124-90. After trial on the merits, the trial court rendered
judgment on October 19, 1992, in favor of petitioner, declaring him to be the
lawful owner of the disputed property. However, the Court of Appeals reversed
the trial court’s decision, holding that the transaction entered into by the
parties, as evidenced by their contract, was an equitable mortgage, not a sale.[5] The appellate court’s decision was based on the
inadequacy of the consideration agreed upon by the parties, on its finding that
the payment of a large portion of the "purchase price" was made after
the execution of the deed of sale in several installments of minimal amounts;
and finally, on the fact that petitioner did not take steps to confirm his
rights or to obtain title over the property for several years after the
execution of the deed of sale. As a consequence of its decision, the appellate
court also declared Original Certificate of Title No.P-11566 issued in favor of
petitioner to be null and void. On July 8, 1996, in a case docketed as G. R.
No. 120832, this Court affirmed the decision of the Court of Appeals and on
September 11, 1996, we denied petitioner’s motion for reconsideration.
On May 5, 1997, respondent filed a motion
for execution with the trial court, praying for the immediate delivery of
possession of the subject property, which motion was granted on August 18,
1997. On February 3, 1998, respondent moved for a writ of possession, invoking
our ruling in G. R. No. 120832. Petitioner opposed the motion, asserting that
he had the right of retention over the property until payment of the loan and
the value of the improvements he had introduced on the property. On March 12,
1998, the trial court granted respondent’s motion for writ of possession.
Petitioner’s motion for reconsideration was denied by the trial court on May
21, 1998. Consequently, a writ of possession dated June 16, 1998, together with
the Sheriff’s Notice to Vacate dated July 7, 1998, were served upon petitioner.
Petitioner filed with the Court of Appeals a
special civil action for certiorari and prohibition with prayer for a
temporary restraining order or preliminary injunction to annul and set aside
the March 12, 1998 and May 21, 1998 orders of the trial court, including the
writ of possession dated June 16, 1998 and the sheriff’s notice to vacate dated
July 7, 1998.[6]
The appellate court summarized the issues
involved in the case as follows: (1) whether or not the mortgagee in an
equitable mortgage has the right to retain possession of the property pending
actual payment to him of the amount of indebtedness by the mortgagor; and (b)
whether or not petitioner can be considered a builder in good faith with
respect to the improvements he made on the property before the transaction was
declared to be an equitable mortgage.
The Court of Appeals held that petitioner
was not entitled to retain possession of the subject property. It said that -
… the mortgagee
merely has to annotate his claim at the back of the certificate of title in
order to protect his rights against third persons and thereby secure the debt.
There is therefore no necessity for him to actually possess the property.
Neither should a mortgagee in an equitable mortgage fear that the contract
relied upon is not registered and hence, may not operate as a mortgage to
justify its foreclosure. In Feliza Zubiri v. Lucio Quijano, 74 Phil 47,
it was ruled "that when a contract x x x is held as an equitable mortgage,
the same shall be given effect as if it had complied with the formal requisites
of mortgage. x x x by its very nature the lien thereby created ought not to be
defeated by requiring compliance with the formalities necessary to the validity
of a voluntary real estate mortgage, as long as the land remains in the hands
of the petitioner (mortgagor) and the rights of innocent parties are not
affected."
Proceeding from
the foregoing, petitioner’s imagined fears that his lien would be lost by
surrendering possession are unfounded.
In the same vein,
there is nothing to stop the mortgagor de Lara from acquiring possession of the
property pending actual payment of the indebtedness to petitioner. This does
not in anyway endanger the petitioner’s right to security since, as pointed out
by private respondents, the petitioner can always have the equitable mortgage
annotated in the Certificate of Title of private respondent and pursue the
legal remedies for the collection of the alleged debt secured by the mortgage.
In this case, the remedy would be to foreclose the mortgage upon failure to pay
the debt within the required period.
It is unfortunate
however, that the Court of Appeals, in declaring the transaction to be an
equitable mortgage failed to specify in its Decision the period of time within
which the private respondent could settle her account, since such period serves
as the reckoning point by which foreclosure could ensue. As it is, petitioner
is now in a dilemma as to how he could enforce his rights as a mortgagee. ...
Hence, this Court,
once and for all resolves the matter by requiring the trial court to determine
the amount of total indebtedness and the period within which payment shall be
made.
Petitioner’s claims that he was a builder in
good faith and entitled to reimbursement for the improvements he introduced
upon the property were rejected by the Court of Appeals. It held that petitioner
knew, or at least had an inkling, that there was a defect or flaw in his mode
of acquisition. Nevertheless, the appellate court declared petitioner to have
the following rights:
…He is entitled to
reimbursement for the necessary expenses which he may have incurred over the
property, in accordance with Art. 526 and Art. 452 of the Civil Code. Moreover,
considering that the transaction was merely an equitable mortgage, then he is
entitled to payment of the amount of indebtedness plus interest, and in the
event of non-payment to foreclose the mortgage. Meanwhile, pending receipt of
the total amount of debt, private respondent is entitled to possession over the
disputed property.
The case was finally disposed of by the
appellate court in the following manner:
WHERFORE, the
Petition is hereby DISMISSED, and this case is ordered remanded to the Regional
Trial Court of Davao City for further proceedings, as follows:
1) The trial court
shall determine –
a) The period
within which the mortgagor must pay his total amount of indebtedness.
b) The total
amount of indebtedness owing the petitioner-mortgagee plus interest computed
from the time when the judgment declaring the contract to be an equitable
mortgage became final.
c) The necessary
expenses incurred by petitioner over the property.[7]
On March 5, 1999, petitioner’s motion for
reconsideration was denied by the appellate court.[8] Hence, the present appeal wherein petitioner makes
the following assignment of errors:
A.......THE HONORABLE COURT OF APPEALS ERRED IN NOT
RULING THAT THE RTC ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
ISSUING A WRIT OF POSSESSION IN FAVOR OF RESPONDENT.
A.1......The RTC patently exceeded the scope of its
authority and acted with grave abuse of discretion in ordering the immediate
delivery of possession of the Property to respondent as said order exceeded the
parameters of the final and executory decision and constituted a variance
thereof.
B.......THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PETITIONER IS NOT ENTITLED TO THE POSSESSION OF THE PROPERTY PRIOR
TO THE PAYMENT OF RESPONDENT’S MORTGAGE LOAN.
C.......THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT PETITIONER WAS NOT A BUILDER IN GOOD FAITH.
D.......THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT PETITIONER IS ENTITLED TO INTEREST COMPUTED ONLY FROM THE TIME WHEN THE
JUDGMENT DECLARING THE CONTRACT TO BE AN EQUITABLE MORTGAGE BECAME FINAL.[9]
Basically, petitioner claims that he is
entitled to retain possession of the subject property until payment of the loan
and the value of the necessary and useful improvements he made upon such
property.[10] According to petitioner, neither the Court of Appeals’
decision in G.R. CV No. 42065 nor this Court’s decision in G.R. No. 120832
ordered immediate delivery of possession of the subject property to respondent.
The dispositive portion of the March 31,
1995 decision of the Court of Appeals in G.R. CV No. 42065, which was affirmed
by this Court, provides that –
IN VIEW OF ALL THE
FOREGOING, the judgment appealed from is REVERSED and SET ASIDE
and a new one entered: (1) dismissing the complaint; (2) declaring the
"Document of Sale and Special Cession of Rights and Interests"
(Exhibit B) dated February 10, 1960, to be an equitable mortgage not a sale;
(3) upholding the validity of OCT No. P-13038 in the name of Felicitas de Lara;
and (3) declaring null and void OCT No. P-11566 in the name of plaintiff
Cornelio Isaguirre. All other counterclaims for damages are likewise dismissed.
Costs against the appellee.[11]
Petitioner argues that the abovementioned
decision merely settled the following matters: (1) that the transaction between
petitioner and respondent was not a sale but an equitable mortgage; (2) that
OCT No. P-13038 in the name of respondent is valid; and (3) that OCT No.
P-11566 in the name of petitioner is null and void. Since the aforementioned
decision did not direct the immediate ouster of petitioner from the subject
property and the delivery thereof to respondent, the issuance of the writ of
possession by the trial court on June 16, 1998 constituted an unwarranted
modification or addition to the final and executory decision of this Court in
G.R. No. 120832.[12]
We do not agree with petitioner’s
contentions. On the contrary, the March 31, 1995 decision of the appellate
court, which was affirmed by this Court on July 8, 1996, served as more than
adequate basis for the issuance of the writ of possession in favor of
respondent since these decisions affirmed respondent’s title over the subject
property. As the sole owner, respondent has the right to enjoy her property,
without any other limitations than those established by law.[13] Corollary to such right, respondent also has the
right to exclude from the possession of her property any other person to whom
she has not transmitted such property.[14]
It is true that, in some instances, the
actual possessor has some valid rights over the property enforceable even
against the owner thereof, such as in the case of a tenant or lessee.[15] Petitioner anchors his own claim to possession upon
his declared status as a mortgagee. In his Memorandum, he argues that –
4.8 It was
respondent who asserted that her transfer of the Property to petitioner was by
way of an equitable mortgage and not by sale. After her assertion was sustained
by the Courts, respondent cannot now ignore or disregard the legal effects of
such judicial declaration regarding the nature of the transaction.
xxx......xxx......xxx
4.13 Having
delivered possession of the Property to petitioner as part of the constitution
of the equitable mortgage thereon, respondent is not entitled to the return of
the Property unless and until the mortgage loan is discharged by full payment thereof.
Petitioner’s right as mortgagee to retain possession of the Property so long as
the mortgage loan remains unpaid is further supported by the rule that a
mortgage may not be extinguished even though then mortgagor-debtor may have
made partial payments on the mortgage loan:
"Art. 2089. A
pledge or mortgage is indivisible, even though the debt may be divided among
the successors in interest of the debtor or the creditor.
"Therefore,
the debtor’s heir who has paid a part of the debt cannot ask for the proportionate
extinguishment of the pledge or mortgage as long as the debt is not completely
satisfied.
"Neither can
the creditor’s heir who has received his share of the debt return the pledge or
cancel the mortgage, to the prejudice of the other heirs who have not been
paid."
(Emphasis
supplied.)
xxx......xxx......xxx
4.14 ......To require petitioner to deliver possession of
the Property to respondent prior to the full payment of the latter’s mortgage
loan would be equivalent to the cancellation of the mortgage. Such effective
cancellation would render petitioner’s rights ineffectual and nugatory and
would constitute unwarranted judicial interference.
xxx......xxx......xxx
4.16 The fact of
the present case show that respondent delivered possession of the Property to
petitioner upon the execution of the Deed of Absolute Sale and Special Cession
of Rights and Interest dated 10 February 1960. Hence, transfer of possession of
the Property to petitioner was an essential part of whatever agreement the
parties entered into, which, in this case, the Supreme Court affirmed to be an
equitable mortgage.
xxx......xxx......xxx
4.19 Petitioner
does not have the mistaken notion that the mortgagee must be in actual
possession of the mortgaged property in order to secure the debt. However, in
this particular case, the delivery of possession of the Property was an
integral part of the contract between petitioner and respondent. After all, it
was supposed to be a contract of sale. If delivery was not part of the
agreement entered into by the parties in 1960, why did respondent surrender
possession thereof to petitioner in the first place?
4.20 Now that the
Courts have ruled that the transaction was not a sale but a mortgage,
petitioner’s entitlement to the possession of the Property should be deemed as
one of the provisions of the mortgage, considering that at the time the
contract was entered into, possession of the Property was likewise delivered to
petitioner. Thus, until respondent has fully paid her mortgage loan, petitioner
should be allowed to retain possession of the subject property.[16]
Petitioner’s position lacks sufficient legal
and factual moorings.
A mortgage is a contract entered into in
order to secure the fulfillment of a principal obligation.[17] It is constituted by recording the document in which
it appears with the proper Registry of Property, although, even if it is not
recorded, the mortgage is nevertheless binding between the parties.[18] Thus, the only right granted by law in favor of the
mortgagee is to demand the execution and the recording of the document in which
the mortgage is formalized.[19] As a general rule, the mortgagor retains possession
of the mortgaged property since a mortgage is merely a lien and title to the
property does not pass to the mortgagee.[20] However, even though a mortgagee does not have
possession of the property, there is no impairment of his security since the
mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted.[21] If the debtor is unable to pay his debt, the
mortgage creditor may institute an action to foreclose the mortgage, whether
judicially or extrajudicially, whereby the mortgaged property will then be sold
at a public auction and the proceeds therefrom given to the creditor to the
extent necessary to discharge the mortgage loan. Apparently, petitioner’s
contention that "[t]o require [him] … to deliver possession of the
Property to respondent prior to the full payment of the latter’s mortgage loan
would be equivalent to the cancellation of the mortgage" is without basis.
Regardless of its possessor, the mortgaged property may still be sold, with the
prescribed formalities, in the event of the debtor’s default in the payment of
his loan obligation.
Moreover, this Court cannot find any
justification in the records to uphold petitioner’s contention that respondent
delivered possession of the subject property upon the execution of the
"Deed of Sale and Special Cession of Rights and Interests" on
February 10, 1960 and that the transfer of possession to petitioner must
therefore be considered an essential part of the agreement between the parties.
This self-serving assertion of petitioner was directly contradicted by
respondent in her pleadings.[22] Furthermore, nowhere in the Court of Appeals’
decisions promulgated on March 31, 1995 (G.R. CV No. 42065) and on October 5,
1998 (G.R. SP No. 48310), or in our own decision promulgated on July 8, 1996
(G.R. No. 120832) was it ever established that the mortgaged properties were
delivered by respondent to petitioner.
In Alvano v. Batoon,[23] this Court held that "[a] simple mortgage does
not give the mortgagee a right to the possession of the property unless the
mortgage should contain some special provision to that effect."
Regrettably for petitioner, he has not presented any evidence, other than his
own gratuitous statements, to prove that the real intention of the parties was
to allow him to enjoy possession of the mortgaged property until full payment
of the loan.
Therefore, we hold that the trial court
correctly issued the writ of possession in favor of respondent. Such writ was
but a necessary consequence of this Court’s ruling in G.R. No. 120832 affirming
the validity of the original certificate of title (OCT No. P-13038) in the name
of respondent Felicitas de Lara, while at the same time nullifying the original
certificate of title (OCT No. P-11566) in the name of petitioner Cornelio
Isaguirre. Possession is an essential attribute of ownership; thus, it would be
redundant for respondent to go back to court simply to establish her right to
possess subject property. Contrary to petitioner’s claims, the issuance of the
writ of possession by the trial court did not constitute an unwarranted
modification of our decision in G.R. No. 120832, but rather, was a necessary
complement thereto.[24] It bears stressing that a judgment is not confined
to what appears upon the face of the decision, but also those necessarily included
therein or necessary thereto.[25]
With regard to the improvements made on the
mortgaged property, we confirm the Court of Appeals’ characterization of
petitioner as a possessor in bad faith. Based on the factual findings of the
appellate court, it is evident that petitioner knew from the very beginning
that there was really no sale and that he held respondent’s property as mere
security for the payment of the loan obligation. Therefore, petitioner may
claim reimbursement only for necessary expenses; however, he is not entitled to
reimbursement for any useful expenses[26] which he may have incurred.[27]
Finally, as correctly pointed out by the
Court of Appeals, this case should be remanded to the Regional Trial Court of
Davao City for a determination of the total amount of the loan, the necessary
expenses incurred by petitioner, and the period within which respondent must
pay such amount.[28] However, no interest is due on the loan since there
has been no express stipulation in writing.[29]
WHEREFORE, the assailed Decision of the Court of Appeals dated
October 5, 1998 and its Resolution dated March 5, 1999 are hereby AFFIRMED.
Respondent is entitled to delivery of possession of the subject property. This
case is hereby REMANDED to the trial court for determination of the amount of
the loan, the necessary expenses incurred by petitioner and the period within
which the respondent must pay the same.
SO ORDERED.
Melo, (Chairman), Vitug, and Purisima, JJ., concur.
Panganiban, J., on leave.
[1] Entitled "Cornelio M. Isaguirre v. Hon. Jesus A. Zozobrado, Jr., Hon. Wenceslao E. Ibabao, Annie May Braga-Leuterio, Alfonso P. Escovilla, Jr., and Felicitas de Lara" and docketed as CA-G.R. SP No. 48310.
[2] Eighth Division composed of J. Eloy R. Bello, Jr., ponente; and JJ. Salome A. Montoya and Ruben T. Reyes, concurring.
[3] Docketed as Civil Case No. 6021.
[4] Rollo, 69-71.
[5] Docketed as CA - G.R. No. CV No. 42065; decision was promulgated on March 31, 1995.
[6] Rollo, 6-17, 44.
[7] Ibid., 45-48.
[8] Ibid., 41-42.
[9] Ibid., 18.
[10] Ibid., 4.
[11] Ibid., 77.
[12] Ibid., 20-21.
[13] Civil Code, art. 428 –
The owner has the right to enjoy and dispose
of a thing, without other limitations than those established by law.
The owner has also a right of action against the holder and possessor of the thing in order to recover it.
[14] Id., art.
429 –
The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.
[15] Perez v. Evite, 1 SCRA 949 (1961)
[16] Rollo, 135-139.
[17] Civil Code, art. 2085 -
The following requisites are essential to the
contracts of pledge or mortgage:
(1)......That they be
constituted to secure the fulfillment of a principal obligation;
(2)......That the
pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3)......That the
persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the
purpose.
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
[18] Id., art. 2125, 1st par.
[19] Id., art. 2125, 2nd par.
[20] Oronce v. Court of Appeals, 298 SCRA 133 (1998); Adlawan v. Torres, 233 SCRA 645 (1994); Capulong v. CA, 130 SCRA 245 (1984); Peña, Peña Jr., Peña, Registration of Land Titles and Deeds, 257 (1994)
[21] Civil Code, art. 2126.
[22] Rollo, 108.
[23] 25 Phil 178 (1913)
[24] Gonzales v. Court of Appeals, 212 SCRA 595 (1992); Perez v. Evite, supra note 15. See also Phil Veterans Investment Development Corp. v. Velez, 199 SCRA 405 (1991); Cid v. Peralta, 24 Phil 142 (1913); Salacup v. Rambac, 17 Phil 21 (1910)
[25] Del Rosario v. Court of Agrarian Relations, 120 SCRA 422 (1984); Salomon v. Mendoza, 14 SCRA 867 (1965); Unson v. Lacson, 2 SCRA 861 (1961)
[26] Useful expenses are incurred to give greater utility or productivity to the thing. Tolentino, Civil Code of the Philippines II, 294 (1992)
[27] Civil Code, art. 546 –
Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the thing until he
has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.
[28] Rollo, 48.
[29] Civil Code, art. 1956; Velez v. Balzarza, 73 Phil 630 (1942)