Case Digest: PNB v. CA, G.R. No. 105760, July 7, 1997

Ownership

CASE TITLE: PNB v. CA
GR No/ Date: G.R. No. 105760, July 7, 1997
PONENTE: FRANCISCO, J.:
CASE WITH THE SC: Petition for Certiorari under Rule 45
PROCEDURAL ANTECEDENTS: RTC - Petition for the Issuance of a Writ of Possession CA - Appeal
FACTS: In 1978, spouses Crisanto de la Cruz and Pepita Montano mortgaged two parcels of land to petitioner PNB for a loan of P24,000.00. On October 12, 1984, PNB extrajudicially foreclosed the mortgage and was the sole bidder at the public auction sale.  A Certificate of Sale was issued in favor of PNB, and the sale was annotated on the title. On September 24, 1986, PNB filed a Petition for the Issuance of a Writ of Possession, which was granted on November 20, 1986. On December 9, 1986, Private respondent Nildelfonso Montano filed a Motion for the Dissolution of the Writ of Possession which was granted by the RTC on August 28, 1990.
ISSUES: Whether the consolidation of title in PNB’s favor entitles it to a writ of possession. NO Whether the decision in an agrarian suit implicating Montano but not impleading PNB affects the bank’s rights to the property. YES Whether PNB’s absolute ownership rights override Montano’s tenancy rights. NO
ARGUMENTS/LEGAL BASES
PETITIONER (PNB)	RESPONDENT (Nildelfonso Montano)
PNB argued that it has the right to possession as the absolute owner, following the foreclosure and lack of redemption by the mortgagors. Since nearly eight years have passed without the mortgagors redeeming the property, PNB believes consolidation is unnecessary. PNB contended that the agrarian case filed by Montano against the mortgagors should not affect its rights as it was not a party to that suit and had relied on the title in good faith.	Montano was instituted as a tenant on the property before 1972 by the former owners. Montano asserted his rights as a tenant under agrarian reform laws, emphasizing his long-term possession and tenancy. Montano claimed that the agrarian court’s decision confirming his tenancy is binding and conclusive against PNB, despite not being a party to the original agrarian case.
PREVAILING PARTY: CA/Nildelfonso Montano
Decision/ Doctrine: We find the petition devoid of merit. Granting that petitioner PNB's title over the subject property has been consolidated or confirmed in its favor, it is still not entitled to a writ of possession, as the same may be issued in extrajudicial foreclosure of real estate mortgage only if the debtor is in possession and no third person had intervened. Such requisite is evidently lacking in the case at bar, as it has been established that private respondent Montano has been in possession and finally adjudged as the tenant on the landholding in question. It is also the erroneous belief of petitioner PNB that the decision in the agrarian case is being enforced against it, and so contends that as it was not impleaded as party in the agrarian suit, the judgment therein cannot affect petitioner PNB. The CA merely stated that "the rendition of the decision in the CAR case is a supervening event which proves that Nildefonso Montano is indeed a tenant of the landholding." No pronouncement was made whatsoever as to whether CAR decision is binding on petitioner PNB, but merely considered said CAR decision as evidence in support of private respondent Montano's allegation that he is a tenant on the landholding in question. Moreover, even if petitioner PNB had not been impleaded as party defendant in the agrarian suit, Sec. 49 (b), Rule 39 of the Rules of Court provides that the judgment, with respect to the matter directly adjudged therein, is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action. The mortgage was extrajudicially foreclosed only on October 12, 1984, the Certificate of Sale in favor of petitioner issued on the same day, and registered on November 28, 1984, while the agrarian case was instituted on January 18, 1983, prior to the levy; hence, petitioner took title to the subject property subsequent to the commencement of the action. The judgment in the agrarian suit, therefore, is conclusive upon petitioner PNB. Petitioner PNB further insists that as absolute owner of the properties, under Art. 428 and 429 of the New Civil Code, it has the right to possess and dispose of the same. These very provisions cited, however, show that the exercise of the rights of ownership are subject to limitations that may be imposed by law. In the instant case, the Tenancy Act and P.D. 27 have imposed limitations on petitioner PNB's exercise of the rights of ownership. This has been discussed at length in this Court's Decision in the case of "Tanpingco vs. IAC," where we held that: Under Art. 428 of the Civil Code, the owner has the right to dispose of a thing without other limitations than those established by law. As an incident of ownership, therefore, there is nothing to prevent a landowner from donating his naked title to the land. However, the new owner must respect the rights of the tenant. Sec. 7 of R.A. No. 3844, as amended (Code of Agrarian Reforms of the Philippines) gives the agricultural lessee the right to work on the landholding once the leasehold relationship is established. xxx xxx xxx [S]ecurity of tenure is a legal concession to agricultural lessees which they value as life itself and deprivation of their landholdings is tantamount to deprivation of their only means of livelihood. Also, under Sec. 10 of the same Act, the law explicitly provides that the leasehold relation is not extinguished by the alienation or transfer of legal possession of the landholding.  This doctrine has been reiterated in "Endaya vs. Court of Appeals", where this Court further held that the agricultural lessee's rights are enforceable against the transferee or the landowner's successor-in-interest. Therefore, as the adjudged legitimate tenant on the land in question, private respondent Montano may enforce his right of possession against petitioner PNB, whose contention that private respondent Montano is illegally occupying the property lacks basis in fact and in law. Petitioner PNB may not, by way of defense, argue that its right over the land is superior to private respondent Montano's claim on the subject properties since the agricultural lease was not annotated on the Transfer Certificate of Title and, therefore, it dealt with the properties in good faith. Even if the fact of tenancy had not been reflected on the title, petitioner PNB admitted that before they consented to the mortgage, an ocular inspection was conducted on the landholding on the occasion of which, petitioner PNB's Credit Investigator already found private respondent Montano staying on the land and even interviewed the latter. In answer to the questions propounded by said Investigator, private respondent Montano allegedly said that he had been allowed to stay on the property in question because he was ejected from the adjacent parcel of land which he used to till. The land being an agricultural one, and considering the ocular inspection conducted sometime in 1978 when P.D. 27 had been in effect for some time, petitioner PNB's suspicion that the land was tenanted should have been aroused by the existence of a farmer on the land other than the mortgagors themselves. It cannot be denied, therefore, that petitioner PNB had been put on notice by its actual knowledge of another person possessing the land, no matter what the given reason may have been for private respondent Montano's occupancy of the properties in question. Furthermore, as purchaser at a public auction, petitioner PNB was only substituted to and acquired the right, title, interest and claim of the judgment debtor or mortgagor to the property as of the time of the levy. In this case, the only remaining right of the mortgagors (spouses Crisanto de la Cruz and Pepita Montano) at the time of levy is the right to be paid a reasonable price for the land they owned as mandated by P.D. 27. That is the only right which petitioner PNB acquired as the new absolute owner of the land. From the foregoing, it is evident that petitioner PNB is not entitled to a Writ of Possession, as possession of the land in question has been granted by law to private respondent Montano as tenant of subject landholding. WHEREFORE, premises considered, judgment is hereby rendered DENYING the petition. Costs against petitioner.