G.R. No. 181232 ; October 23, 2009
JOSEPH TYPINGCO, Petitioner, vs. LINA WONG LIM, JERRY SYCHINGHO, JACKSON SYCHINGHO, JOHNSON SYCHINGHO, and FAR EAST BANK AND TRUST COMPANY, Respondents.

FACTS

Petitioner Joseph Typingco extended a loan to respondents-spouses Lina Wong Lim and Johnson Sychingho, secured by a promissory note co-signed by their children. Upon default, the respondents conveyed their Greenhills property to Typingco via dacion en pago on January 29, 1998, after first paying off a real estate mortgage in favor of respondent Far East Bank and Trust Company (FEBTC) to clear the title. Typingco then demanded the owner’s duplicate certificate of title, but FEBTC refused to surrender it.
FEBTC, later absorbed by Bank of the Philippine Islands (BPI), contended that the spouses had other unsettled obligations under Comprehensive Surety Agreements, authorizing the bank to retain properties as continuing security. The trial court and the Court of Appeals dismissed Typingco’s complaint for specific performance, ruling he was bound by the annotated mortgage and failed to verify the property’s status.

ISSUE

Whether the respondents had the right to convey the subject property via dacion en pago to Typingco, thereby obligating FEBTC/BPI to surrender the owner’s duplicate certificate of title.

RULING

The Supreme Court reversed the lower courts and ruled in favor of Typingco. The legal logic centers on the nature of dacion en pago and real estate mortgage. Dacion en pago is akin to a sale where the property is the object and the debt is the price. The respondents, as owners, retained the right to sell the property because the mortgage, merely a lien on the title, does not divest ownership absent foreclosure. Ownership remains with the mortgagor until a foreclosure sale is conducted and the redemption period lapses.
Consequently, the dacion en pago was a perfected and enforceable contract that extinguished the loan obligation. Typingco, as the transferee, is entitled to the property subject to the existing mortgage annotation, which subsists despite the change in ownership. FEBTC/BPI’s claim of other unpaid obligations by the respondents is a separate concern between them and does not affect the validity of the conveyance to Typingco, who is not a party to those agreements. The proper remedy for Typingco is a petition under Section 107 of Presidential Decree No. 1529 to compel the surrender of the title to the Register of Deeds. The Court ordered BPI to surrender the owner’s duplicate certificate to facilitate the issuance of a new title in Typingco’s name.