G.R. No. L-23498 October 7, 1925 EDUARDO DE RODA, vs. W. A. LALK and E. MICHAEL & CO., INC.

Facts: Plaintiff alleges that on March 6, 1920, he commenced an action in the CFI-Cebu, in which he prayed that a certain document executed by him and his wife, as well as a document executed by his wife, and which refers to the sales of four parcels of land, known as lots Nos. 46, 47, 48 and 584 of the Banilad Friar Land Estate, be annulled and set aside, the transfer certificates of title of which are Nos. 471, 472, 481 and 654. That the final decision in that case declared the deed executed by his wife on September 20, 1916, to Mariano M. Gallegos to be null and void, and in the same decision the court also declared void subsequent and successive transfers made by Mariano M. Gallegos, Joaquin Felix Roca and other persons deriving title to said lots as void "for a defect in the source." That the defendant W. A. Lalk is in possession and claims to be the owner of lots Nos. 46 and 48, transfer certificates of title of which are Nos. 471 and 472. That the court having declared null and void the transfer certificates of title Nos. 591 and 592 in favor of Mariano M. Gallegos, and the transfer certificates of title Nos. 593 and 594 in the name of Joaquin Felix Roca "for a defect in the source," the transfer certificates of title above-mentioned from which the defendants deraign title, must also be void. That the defendants E. Michael & Co., Inc., and W. A. Lalk obtained their respective titles through transactions and purchases from persons whose titles have been declared null and void by the court, and by reason of the final judgment in that case recognizing plaintiff as the owner of said lots Nos. 46 and 48, it follows that the respective titles of the defendants are null and void. Plaintiff prays that he be recognized as the absolute owner of lots Nos. 46 and 48, and that the register of deeds be ordered to issue a new title in his name, and that pending this action, the register of deeds be enjoined from making any new transfer of title of said lots. For answer the defendants admit the allegations of the complaint, and make a general denial of all other allegations, and as a special defense allege that "they were purchasers in good faith." The lower court rendered judgment for the defendants, from which the plaintiff appeals, claiming that "the trial court erred in declaring that the defendantsappellees as purchasers in good faith have a better right than the plaintiff, the proved owner, as demonstrated by civil case No. 2460." Issue: Whether or not defendants-appellees as purschasers in good faith have a better right than the plaintiff. Ruling: It is admitted that civil case No. 2460 was filed in the CFI of Cebu on March 6, 1920, and the no lis pendens was filed prior to April 9, 1924. It is also admitted that the conveyances to the defendants were made on November 26, 1920, and that all of the conveyances from which the defendants deraign title duly noted on and appear in the registry of deeds. The defendants were not made parties to civil case No. 2460, and there is no allegation or proof of any fraud on their part in the making of their purchases, or that they had any knowledge of any defect in the title. In so far as the record shows, they purchased and acquired their title in good faith, and for a valuable consideration.

The rule is elementary that fraud is not presumed. Ruling Case Law, volume 12, page 426, says: For aught that appears in the record, the defendants acquired their title in an honest and lawful manner, and without any knowledge of the decision which was rendered in civil case No. 2460, and under such a state of facts and in the absence of a lis pendens, that decision was not binding upon them. G.R. No. 47051 June 28, 1940 THE MUNICIPAL COUNCIL OF PARAAQUE, RIZAL, vs. CFI-RIZAL and MONTE DE PIEDAD Y CAJA DE AHORROS DE MANILA Facts: On May 4, 1934, the municipal council of Paraaque, Rizal, petitioner, filed a petition seeking a declaration of escheat in its favor of the "Hacienda de Baclaran." This property was registered in favor of the Roman Catholic Archbishop of Manila, who obtained, in 1912, an original certificate of title thereon which later was substituted with a transfer certificate of title in favor of the "Monte de Piedad y Caja de Ahorros de Manila" and the Asiatic Petroleum Co. (P. I.), Ltd. By virtue of said petition a notice of lis pendens was filed in the office of the register of deeds of Rizal. On May 31, 1939, respondent, "Monte de Piedad y Caja de Ahorros de Manila," moved for the cancellation of the notice of lis pendens and the dismissal of the petition. Respondent Court of First Instance denied the motion for dismissal, postponed the consideration of the motion for cancellation until after the hearing of the petition for escheat, and set the case for hearing on August 16, 1939. On this date, however, the attorney for the petitioner asked for the postponement of the hearing, which was granted despite respondent's objection. The case was reset for hearing on September 20, 1939, and for lack of time was transferred to September 28, 1939. On this date, petitioner started to introduce its evidence, but as it encountered with some difficulties in making an orderly offer of its proof, the court postponed the hearing until further orders. In view of these delays, respondent, "Monte de Piedad y Caja de Ahorros de Manila," renewed its petition for cancellation of the notice of lis pendens, alleging great prejudice to its interest, it being precluded from transacting business the property. The court, on October 23, 1939, granted the motion and ordered the cancellation of said notice. It is the review of this order that the petitioner seeks in the present petition for certiorari. Issue: Whether or not it was proper for the respondent Court to order the cancellation of the notice of lis pendens. Ruling: Petition is dismissed, with costs against petitioner. RD: The SC has once held that while ordinarily a notice of pendency which has been filed in a proper case, cannot be cancelled while the action is pending and undetermined, the proper court has the discretionary power to cancel it under peculiar circumstances, as for instance, where the evidence so far presented by the plaintiff does not bear out the main allegations of his complaint, and where the continuances of the trial, for which the plaintiff is responsible, are unnecessarily delaying the determination of the case to the prejudice of the defendant. These peculiar circumstances are present in the instant case, and SC held that the respondent court acted without abuse of discretion in ordering the cancellation of the notice of lis pendens.

G.R. No. L-42091 November 2, 1935 GONZALO CHUA GUAN, vs. SAMAHANG MAGSASAKA, INC., and SIMPLICIO OCAMPO, ADRIANO G. SOTTO, and EMILIO VERGARA Facts: The complaint alleges that the defendant Samahang Magsasaka, Inc., is a corporation duly organized under the laws of the Philippine Islands with principal office in Cabanatuan, Nueva Ecija, and that the individual defendants are the president, secretary and treasurer respectively of the same; that on June 18, 1931, Gonzalo H. Co Toco was the owner of 5,894 shares of the capital stock of the said corporation represented by nine certificates having a par value of P5 per share; that on said date Gonzalo H. Co Toco, a resident of Manila, mortgaged said 5,894 shares to Chua Chiu to guarantee the payment of a debt of P20,000 due on or before June 19, 1932. The said certificates of stock were delivered with the mortgage to the mortgagee, Chua Chiu. The said mortgage was duly registered in the office of the register of deeds of Manila on June 23, 1931, and in the office of the said corporation on September 30, 1931. On November 28, 1931, Chua Chiu assigned all his right and interest in the said mortgage to the plaintiff and the assignment was registered in the office of the register of deeds in the City of Manila on December 28, 1931, and in the office of the said corporation on January 4, 1932. The debtor, Gonzalo H. Co Toco, having defaulted in the payment of said debt at maturity, the plaintiff foreclosed said mortgage and delivered the certificates of stock and copies of the mortgage and assignment to the sheriff of the City of Manila in order to sell the said shares at public auction. The sheriff auctioned said 5,894 shares of stock on December 22, 1932, and the plaintiff having been the highest bidder for the sum of P14,390, the sheriff executed in his favor a certificate of sale of said shares. The plaintiff tendered the certificates of stock standing in the name of Gonzalo H. Co Toco to the proper officers of the corporation for cancellation and demanded that they issue new certificates in the name of the plaintiff. The said officers (the individual defendants) refused and still refuse to issue said new shares in the name of the plaintiff. The prayer is that a writ of mandamus be issued requiring the defendants to transfer the said 5,894 shares of stock to the plaintiff by canceling the old certificates and issuing new ones in their stead. The special defenses set up in the answer are as follows: that the defendants refuse to cancel the said certificates standing in the name of Gonzalo H. Co Toco on the books of the corporation and to issue new ones in the name of the plaintiff because prior to the date when the plaintiff made his demand, to wit, February 4, 1933, nine attachments had been issued and served and noted on the books of the

corporation against the shares of Gonzalo H. Co Toco and the plaintiff objected to having these attachments noted on the new certificates which he demanded. Issues: Whether the said mortgage takes priority over the said writs of attachment. Did the registration of said chattel mortgage in the registry of chattel mortgages in the office of the register of deeds of Manila, under date of July 23, 1931, give constructive notice to the said attaching creditors? Ruling: In view of the premises, the attaching creditors are entitled to priority over the defectively registered mortgage of the appellant and the judgment appealed from must be affirmed without special pronouncement as to costs in this instance. RD: The practical application of the Chattel Mortgage Law to shares of stock of a corporation presents considerable difficulty and the court have obtained little aid from the decisions of other jurisdictions because that form of mortgage is ill suited to the hypothecation of shares of stock and has been rarely used elsewhere. In fact, it has been doubted whether shares of stock in a corporation are chattels in the sense in which that word is used chattel mortgage statutes. If with respect to a chattel mortgage of shares of stock of a corporation, registration in the province of the owner's domicile should be sufficient, those who lend on such security would be confronted with the practical difficulty of being compelled not only to search the records of every province in which the mortgagor might have been domiciled but also every province in which a chattel mortgage by any former owner of such shares might be registered. We cannot think that it was the intention of the legislature to put this almost prohibitive impediment upon the hypothecation of shares of stock in view of the great volume of business that is done on the faith of the pledge of shares of stock as collateral. It is a common but not accurate generalization that the situs of shares of stock is at the domicile of the owner. The term situs is not one of fixed of invariable meaning or usage. Nor should we lose sight of the difference between the situs of the shares and the situs of the certificates of shares. The situs of shares of stock for some purposes may be at the domicile of the owner and for others at the domicile of the corporation; and even elsewhere. It is a general rule that for purposes of execution, attachment and garnishment, it is not the domicile of the owner of a certificate but the domicile of the corporation which is decisive. By analogy with the foregoing and considering the ownership of shares in a corporation as property distinct from the certificates which are merely the evidence of such ownership, it seems to us a reasonable construction of section 4 of Act No. 1508 to hold that the property in the shares may be deemed to be situated in the province in which the corporation has its principal office or place of business. If this province is also the province of the owner's domicile, a single registration sufficient. If not, the chattel mortgage should be registered both at the owner's domicile and in the province where the corporation has its principal office or place of business. In this sense the property mortgaged is not the certificate but the participation and share of the owner in the assets of the corporation. Apart from the cumbersome and unusual method of hypothecating shares of stock by chattel mortgage, it appears that in the present state of our law, the only safe

way to accomplish the hypothecation of share of stock of a Philippine corporation is for the creditor to insist on the assignment and delivery of the certificate and to obtain the transfer of the legal title to him on the books of the corporation by the cancellation of the certificate and the issuance of a new one to him. From the standpoint of the debtor this may be unsatisfactory because it leaves the creditor as the ostensible owner of the shares and the debtor is forced to rely upon the honesty and solvency of the creditor. Of course, the mere possession and retention of the debtor's certificate by the creditor gives some security to the creditor against an attempted voluntary transfer by the debtor, provided the by-laws of the corporation expressly enact that transfers may be made only upon the surrender of the certificate. It is to be noted, however, that section 35 of the Corporation Law (Act No. 1459) enacts that shares of stock "may be transferred by delivery of the certificate endorsed by the owner or his attorney in fact or other person legally authorized to make the transfer." The use of the verb "may" does not exclude the possibility that a transfer may be made in a different manner, thus leaving the creditor in an insecure position even though he has the certificate in his possession. Moreover, the shares still standing in the name of the debtor on the books of the corporation will be liable to seizure by attachment or levy on execution at the instance of other creditors. This unsatisfactory state of our law is well known to the bench and bar. Loans upon stock securities should be facilitated in order to foster economic development. The transfer by endorsement and delivery of a certificate with intention to pledge the shares covered thereby should be sufficient to give legal effect to that intention and to consummate the juristic act without necessity for registration.

G.R. No. L-13029 June 30, 1959 MARIA A. GARCIA vs. JESUS OCAMPO, ROSARIO OCAMPO, LAO KING HING, and THE HEIRS OF RAMON RIVERA Facts: The facts involved in the case are not dispute. Only questions of law are in issue; hence, the appeal was made direct to this Tribunal. The appealed Order states that Maria A. Garcia obtained a judgment for P1,630.80 against Jacinta Rivera, alleged owner of one-half of the land in question with an area of about 47.10 square meters, more or less, covered by TCT No. 28709. By virtue of the judgment, a writ of execution was issued and the City of Manila Sheriff levied on the rights, title and participation of Jacinta Rivera in the land. Said levy of execution was duly registered in the Office of the Register of Deeds of Manila. Pursuant to the levy, the sheriff advertized the one-half portion of the land for sale, and eventually sold it to Maria A. Garcia in 1932. One year thereafter, the sheriff issued to her a final deed of sale; and since then, Maria A. Garcia had been in possession of and administrating the property sold to her and receiving the rents from the occupants thereof, so that by the year 1956, she had received in the way of rentals, more than P5,000.00. On March 20, 1956, Garcia commenced the present action against defendants Jesus Ocampo, Rosario Ocampo, Lao King Hing, and the heirs of Ramon Rivera, alleging that the defendants, particularly Jesus Ocampo, shortly before she filed her complaint, illegally entered the land in question and without her permission, executed a contract of

lease over the same property in favor of Lao King Hing, representing to the latter that they were the owners of the land, and that Lao king Hing was about to construct a building thereon, and she asked the court that the sale to her by the sheriff in 1932 and 1933 of the rights of Jacinta Rivera over the land be ordered duly noted on the certificate of title; that the Register of Deeds be ordered to cancel TCT No. 28709, and to issue a new one in her favor on the one-half portion of the property, the other half corresponding to the heirs of Ramon Rivera; that the lease contract over one-half of the property, executed by the defendants in favor of Lao king Hing be declared null and void; and that the defendants be ordered to pay to her P10,000.00 as moral damages and P3,000.00 as attorney's fees. Defendants filed a motion for dismissal on the ground that the plaintiff's cause of action had already prescribed; that the complaint states no cause of action; and that there was another case pending between the same parties and for the same cause. Pending resolution of the petition to dismiss, the parties filed pleadings and memoranda, after which, the trial court, as already stated, dismissed the complaint. Incidentally, it may be stated, that the third ground, as stated in the petition to dismiss, namely, that there was another case pending between the same parties, referred to a suit filed by Concepcion Ocampo et al., defendants herein, against Maria A. Garcia, plaintiff in the present case. Issues: Whether or not: 1. That the plaintiff's cause of action has already prescribed and is barred now by the statute of limitations; 2. That the complaint states no cause of action; 3. That there is another case pending by the same parties for the same cause. Ruling: The Order of dismissal appealed from is hereby affirmed. RD: SC agrees with the trial court in its reasoning, particularly on that portion of the Order, to the effect that inasmuch as the sale of the property made to Maria A. Garcia by the sheriff in 1932 as well as the final deed of sale issued in 1933 were never recorded in the Office of the Register of Deeds of Manila, it was all contrary to the provisions of law about judicial sales. Furthermore, in auction sales, the law provides a period of 12 months within which to redeem the property sold, and that this period begins to run not from the date of sale but from the time of registration of the sale in Office of the Register of Deeds. In the present case, the period of redemption has not yet commenced to run only in favor of other redemptioners contemplated by law, so that Maria A. Garcia has not yet become the absolute owner of the property she had bought. And one may take the view that the rentals Maria A. Garcia had received since she took possession of the property after the sale, and for which she was under obligation to render account, may be considered as money received by her on account of the redemption price. With the cancellation of said encumbrance, there remains nothing in the way of cause of action to support the complaint of Maria A. Garcia in the present case. In other words, as far as it concerns her, there no longer is any annotation of the levy of execution on the transfer certificate of title, covering the land in the present case; the sale to her was never registered in the office of the Register of Deeds, naturally, said sale was never annotated in the transfer certificate of title. And even assuming that the sale had force, though made without complying with the provisions of law applicable, there is the fact

that the amount of judgment obtained by her against Jacinta Rivera for P1,630.80 was more than satisfied and the land sold to her may be considered as redeemed with the rentals she had been receiving since 1933 amounting to P5,200.00.

G.R. No. L-15590 August 31, 1960 ASTURIAS SUGAR CENTRAL, INC vs. CORAZON SEGOVIA, ET AL., F.Z. LEDDA and CO. Facts: The property, the subject matter of this action, was previously covered by TCT No. T-2319 in the name of Ponciano Ambrosio. This property was purchased by Corazon Segovia de Zayco on July 18, 1952, hence TCT No. T-2319 was cancelled and, in its stead, TCT No. T-6825 was issued in the buyer's name. At the time of the sale, there were various annotations appearing at the back of the old certificate which were carried over and annotated in the new transfer certificate of title. Among them were the two notices of attachment in favor of the defendant- appellant F.Z. Ledda and Co., Inc. and the plaintiff-appellee Asturias Sugar Central, Inc. Subsequently, F.Z. Ledda and Co., Inc. appears to have purchased at public auction the interest of Ponciano Ambrosio as a consequence of its judgment and execution sale, and a certificate of sale was issued in its name on March 3, 1952. However, the sale was neither registered in the Office of the Register of Deeds nor annotated at the back of either transfer certificates of title Nos. T-2319 or T-6825. Nonetheless, the annotation regarding the said buyer's notice of attachment still appears registered and noted at the back of said certificates of title. On the other hand, the second annotation in favor of the plaintiff Asturias Sugar Central, Inc. was by virtue of a writ of preliminary attachment issued by the court, in Civil Case No. 7 3 2151, on June 11, 1951 and registered on June 16, 1953 in favor of Asturias Sugar Central, Inc., became final and executory, a writ of execution of the judgment was, upon motion of the plaintiff, issued by the court. Following a levy on execution on the parcel of land in dispute and the required publication and posting of the notice of sale, the property was sold at public auction on October 24, 1953 to the plaintiff Central.

The corresponding certificate of sale was then registered in the Office of the Register of Deeds of Iloilo. Thereafter, plaintiff-appellee Asturias Sugar Central, Inc. instituted this action to quiet the title over the property described under Transfer Certificate of Title No. T-6825 of the land records of Iloilo City in the name of one defendants, Mrs. Corazon Segovia de Zayco. The complaint prayed, among other things, that judgment be rendered: (a) declaring of no effect whatsoever the annotations and/or encumbrances appearing on the back of TCT No. T-6825 in favor Squires Bingham Co., Inc. and F.Z. Ledda and Co., Inc. and ordering the Register of Deeds of Iloilo to cancel the same; (b) declaring the plaintiff Asturias Sugar Central, Inc. as the lawful owner of the property covered under the said certificate of title and ordering the defendant Corazon Segovia de Zayco to convey and deliver the possession thereof to it; and (c) ordering the Register of Deeds of Iloilo to cancel Transfer Certificate of Title No. T6825 and, in lieu thereof, to issue a new certificate in the plaintiff's name. F.Z. Ledda and Co., Inc. appealed contended that since the prior sale was unregistered and "was not preceded by a valid levy on execution", it cannot be given such preference as the appellant maintains. Appellee puts much emphasis on appellant's failure to register its certificate of sale. The property being registered under the Torrens System, the priority of rights thereon is generally determined by the priority of registration, not of the execution sales, as incorrectly assumed by the appellee, but of the attachments. The auction sales being merely the completion of the attachment liens, should relate back to the latter and enjoy the same priority Appellant's lien (levy on execution) was registered on June 7, 1951; on the other hand, the appellee registered its notice of preliminary attachment six (6) days later or on June 13, 1951, and their levy on execution on October 15, 1953. Appellee contends that the preferential lien in favor of Ledda and Co. was discharged and extinguished as soon as it had acquired the property at the execution sale, even before the registration of the latter. Such a theory would render priority in recording levies and attachments entirely nugatory, since the liens would be always discharged before the sheriff's sale can be recorded. Issue: Whether or not the preferential lien in favor of Ledda and Co. was discharged and extinguished as soon as appelee had acquired the property at the execution sale, even before the registration of the latter. Ruling: The judgment of the court a quo appealed from is hereby reversed in so far as the appellant F.Z. Ledda and Co., Inc. is concerned, and another one shall be entered declaring the auction sale in favor of the appellant Ledda and Co. as preferred over that of the appellee. However, since the auction sale to the appellant is as yet unregistered and it does not appear that the appellee Asturias Sugar Central had actual notice thereof, we think that in the interest of justice, the latter should be allowed to exercise the right of redemption under Rule 39, Section 25 of the Rules of Court within a period of twelve (12) months counted from the finality of this judgment.

RD: Ledda's failure to register and annotate the execution sale in its favor on the corresponding certificate of title does not worsen the position of the Central to its prejudice. The Central, which recorded its attachment lien before the Sheriff's sale in favor of Ledda was made, had notice that the property was subject to the preferential rights of Ledda and Co. because of its prior recorded levy. Thereafter, the Central was duty bound to know and was warned that the property had been virtually condemned to pay the owner's debt to Ledda, and it was incumbent the Central, as junior lien holder, to watch out for subsequent developments arising under the preferential levy. It was bound to know that the property could be sold at execution and that the sale would relate back to the date that Ledda's levy was recorded. If the Central took no measures to forestall that possibility, or protect its junior lien, it only had itself to blame. In its memorandum in lieu of oral argument, the appellant urges that the present suit was improperly instituted as an ordinary civil action, as according to it, it should have instead been brought in the original registration proceedings pursuant to Sections 78 and 112 of the Land Registration Act. This argument is incorrect. Proceedings under Section 112 of the statute referred to would be proper only if there were a unanimity among the parties, or there would be no adverse claim or serious objection by any party in, which is not the case here.