G.R. No. L-18178; January 31, 1963
The Register of Deeds of Iloilo, petitioner-appellee, vs. C. N. Hodges, oppositor-appellant, Fermin Jalover, intervenor-appellee.

FACTS

Fermin Jalover owned Lot No. 986, covered by Transfer Certificate of Title No. T-2125. On March 25, 1953, he mortgaged the lot to the Rehabilitation Finance Corporation (RFC) to secure a loan. Later, on May 31, 1957, the lot was sold at a public auction by virtue of writs of execution in two civil cases, with C.N. Hodges as the highest bidder. The sheriff issued two certificates of sale to Hodges, which were registered and annotated on the back of Jalover’s title as Entries Nos. 15102 and 15104.
Subsequently, on March 14, 1960, Jalover requested the Register of Deeds to cancel these annotations, arguing they were null and void for being contrary to Section 26 of Commonwealth Act No. 459, which provides an exemption from attachment for properties mortgaged to the Agricultural and Industrial Bank. The Register of Deeds denied the request, prompting Jalover to elevate the matter en consulta to the Land Registration Commissioner. The Commissioner directed the Register of Deeds to file a petition in court under Section 112 of Act No. 496 (the Land Registration Act) to secure the cancellation. Accordingly, the Register of Deeds filed the petition in the Court of First Instance of Iloilo.

ISSUE

The primary issue is whether the Court of First Instance, acting as a land registration court under Section 112 of Act No. 496, has jurisdiction to order the cancellation of the annotations on the certificate of title, given the adverse claim and the substantive legal question raised by Hodges regarding the applicability of the exemption under Commonwealth Act No. 459 to a mortgage in favor of the RFC.

RULING

The Supreme Court reversed the lower court’s order. It held that the land registration court lacked jurisdiction to entertain the petition. While Section 112 of Act No. 496 allows a person in interest to seek the amendment or cancellation of an entry upon the ground that a registered interest has ceased, this summary proceeding is only permissible when there is unanimity among the parties or no adverse claim. If a serious objection is raised, the matter becomes controversial and must be threshed out in an ordinary action. Here, Hodges, the purchaser at the auction sale, seriously opposed the petition, raising a substantial legal issue on the merits. This controversy placed the petition beyond the limited jurisdiction of the land registration court.
On the substantive legal issue, the Court further clarified that even assuming jurisdiction, the lower court’s order was erroneous. Section 26 of Commonwealth Act No. 459, which exempts securities for loans from the Agricultural and Industrial Bank from attachment, does not apply to loans obtained from the Rehabilitation Finance Corporation. Republic Act No. 85, which created the RFC as the successor to the Agricultural and Industrial Bank, does not contain a similar exemption provision for its own loans. The transitory provisions merely made the RFC a trustee for the liquidation of the former bank’s transactions. Since Jalover’s loan was from the RFC, not the defunct Agricultural and Industrial Bank, the property did not enjoy the claimed exemption from attachment and levy. The appealed order was reversed.