G.R. No. L-2020. December 29, 1949.

LA ORDEN DE PADRES BENEDICTINOS DE FILIPINAS, petitioner-appellee, vs. THE PHILIPPINE TRUST COMPANY, oppositor-appellant.

FACTS

Petitioner La Orden de Padres Benedictinos de Filipinas filed a petition in the Court of First Instance of Manila seeking an order to direct the Register of Deeds to register a deed of cancellation of a second mortgage. The petitioner alleged it had executed a second mortgage in favor of oppositor Philippine Trust Company on September 24, 1934, over parcels covered by Certificates of Title Nos. 22560 and 22539. Full payment of the loan was made on June 19, 1944, and a deed of cancellation was issued, but it contained errors: it incorrectly stated the mortgage date and omitted reference to Title No. 22560. The Register of Deeds refused registration without a court order. The oppositor admitted the mortgage but denied valid payment, claiming the payment made in June 1944 with Japanese war notes was under duress and null. It also argued the court lacked jurisdiction.

ISSUE

1. Whether the lower court had jurisdiction to order the registration of the deed of cancellation and the cancellation of the mortgage annotations.
2. Whether the payment of a pre-war obligation with Japanese war notes during the occupation was valid.
3. Whether the lower court correctly ordered the annotation of a Department of Justice circular on the certificate of title.

RULING

1. Yes, the lower court had jurisdiction. Following Haw Pia vs. China Banking Corporation, payments made with Japanese war notes during the occupation for pre-war obligations, if accepted by the creditor, are valid and release the obligation. Since the fact of payment and execution of the deed of cancellation was not denied, there was no substantial controversy over the cancellation, placing the matter within the court’s jurisdiction under the Land Registration Act to direct the Register of Deeds.
2. The payment was valid. The Court, adhering to Haw Pia, ruled that such payments, when accepted, are valid. The oppositor’s claim of duress was a matter to be resolved in a separate ordinary civil action, not a bar to the cancellation of the mortgage annotation.
3. No, the order to annotate the Department of Justice circular was erroneous. In line with Lim vs. Register of Deeds of Rizal, the Department of Justice had no authority to issue Circular No. 14, series of 1945, which sought to annotate titles with a clause subjecting wartime transactions to future government disposition. Therefore, that portion of the lower court’s order was unwarranted and illegal.

The appealed order was affirmed with modification, eliminating the directive to annotate the Department of Justice circular.

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