GR 175303; (April, 2012) (Digest)
G.R. No. 175303 ; April 11, 2012
PACIFIC ACE FINANCE LTD. (PAFIN), Petitioner, vs. EIJI YANAGISAWA, Respondent.
FACTS
Respondent Eiji Yanagisawa, a Japanese national, filed a complaint for the nullity of his marriage to Evelyn Castañeda. During the pendency of this case before the Makati RTC, Evelyn, through counsel, voluntarily undertook in open court not to dispose of or encumber any properties registered in her name. This undertaking was embodied in a court order dated October 2, 1996, which was subsequently annotated on the title of a Parañaque townhouse unit registered in Evelyn’s name. Despite this annotation, Evelyn obtained a loan from petitioner Pacific Ace Finance Ltd. (PAFIN) and executed a Real Estate Mortgage (REM) over the said property on August 25, 1998. PAFIN admitted it did not verify the title with the Registry of Deeds, relying instead on Evelyn as a trusted neighbor.
Eiji filed a complaint for the annulment of the mortgage, arguing it violated the court order. The Parañaque RTC dismissed the complaint, ruling that Eiji, as a foreign national incapable of owning land in the Philippines, had no cause of action. The Court of Appeals reversed this decision, annulling the mortgage. PAFIN elevated the case to the Supreme Court, arguing that Eiji lacked the legal personality to seek annulment.
ISSUE
Whether respondent Eiji Yanagisawa has the legal personality or cause of action to seek the annulment of the real estate mortgage executed in violation of a court order annotated on the title.
RULING
Yes. The Supreme Court affirmed the Court of Appeals and annulled the mortgage. The legal logic centers on the nature of the right created by the annotated court order. The undertaking made by Evelyn in open court, and subsequently ordered by the Makati RTC and annotated on the title, created a legal obligation not to encumber the property. This annotation served as a notice to the whole world, including PAFIN. By failing to verify the title, PAFIN was not a mortgagee in good faith and was charged with constructive knowledge of the restriction.
Eiji’s cause of action springs not from an assertion of ownership, which is indeed prohibited by the Constitution, but from the violation of a court order made for his benefit during the matrimonial litigation. The order recognized his interest in the property’s preservation, as the underlying nullity case involved the liquidation of their assets. His legal standing is derived from being the intended beneficiary of the court’s directive, which gave him a right to enforce the undertaking against any party, including PAFIN, who transacted in violation of it. The mortgage, being executed in defiance of a court order, is therefore void.