G.R. No. L-11323; April 21, 1958
BENJAMIN GEONANGA, petitioner-appellee, vs. C. N. HODGES, respondent-appellant.

FACTS

The spouses Raymundo Robles and Margarita Mondejar were the registered owners of Lots Nos. 430 and 855, covered by Transfer Certificate of Title (TCT) No. 3016. On August 8, 1949, they mortgaged these lots to the Agricultural and Industrial Bank (later the Rehabilitation Finance Corporation) to secure a loan. The Bank held the owner’s duplicate certificate of title. On August 11, 1954, respondent C.N. Hodges, as plaintiff in a civil case against Lourdes Robles et al., secured a writ of attachment from the Municipal Court of Iloilo, which was levied upon the lots. The Register of Deeds of Iloilo annotated this attachment as Entry No. 11336 on the original copy of TCT No. 3016, but it did not appear on the owner’s duplicate held by the Bank. On June 22, 1955, petitioners Benjamin Geonanga and Emilio Gotera, with the Bank’s consent, paid the Robles spouses’ obligation to the Bank and bought the lots. Consequently, TCT No. 3016 was cancelled, and a new TCT No. 8981 was issued in the names of Geonanga and Gotera, carrying a memorandum of the attachment in favor of Hodges. Petitioners filed a petition in the cadastral case for cancellation of the attachment annotation, arguing it was illegal and void under Section 26 of Commonwealth Act No. 459 , which exempts securities for loans granted by the Agricultural and Industrial Bank from attachment unless all debts to the Bank are first paid. The Court of First Instance of Iloilo granted the petition. Hodges appealed, contesting the court’s jurisdiction and arguing the exemption was solely for the Bank’s benefit and could not be invoked after the mortgage was cancelled.

ISSUE

1. Whether the Court of First Instance, sitting as a land registration court, had jurisdiction under Section 112 of Act No. 496 to order the cancellation of the attachment annotation.
2. Whether the attachment levy was valid given the exemption under Section 26 of Commonwealth Act No. 459 .
3. Whether petitioners, as successors-in-interest, could invoke the Bank’s exemption after the mortgage debt was paid and the mortgage cancelled.

RULING

The Supreme Court affirmed the lower court’s order, directing the cancellation of the attachment annotation.
1. Jurisdiction: The court held that under Section 112 of Act No. 496 , petitioners as registered owners could properly seek relief in the cadastral case to correct an “error or mistake” in the certificate of title, provided it did not reopen the original decree or impair the title of a purchaser in good faith for value. The issue here involved a clear legal error—the attachment was levied on properties expressly exempt by law—and thus did not involve a substantial controversy requiring an ordinary civil action. The objection was not legally serious enough to bar the court’s authority under Section 112.
2. Invalidity of Attachment: The Court ruled the attachment was void from the beginning. Section 26 of Commonwealth Act No. 459 explicitly states that securities on loans granted by the Agricultural and Industrial Bank “shall not be subject to attachment” unless all debts to the Bank are paid first. Since the debt to the Bank was unpaid at the time of the levy on August 11, 1954, the lots were exempt from attachment. The entry was made in violation of a prohibitory law and was therefore void under Article 5 of the Civil Code, not merely voidable.
3. Right of Petitioners to Invoke Exemption: The Court rejected appellant’s claim that the exemption was exclusively for the Bank’s benefit and ceased when the mortgage was cancelled. The payment of the debt to the Bank, made with its consent, legally subrogated the petitioners to the rights of the Bank under Articles 1237, 1302, and 1303 of the Civil Code. This subrogation extended to the Bank’s rights against third persons, including the invalidity of the attachment. Allowing the annotation to stand would give it retroactive effect to a date when the attachment was legally prohibited, contravening the purpose of the exemption law. The petition sought only the cancellation of the erroneous annotation on the title, not the dissolution of the writ of attachment itself from the municipal court.
Costs were awarded against appellant C.N. Hodges.