G.R. No. L-29696 November 29, 1968
JESUS GIGANTE, plaintiff-appellant, vs. REPUBLIC SAVINGS BANK and ROLANDO MALLARI, defendants-appellants.

FACTS

1. In Civil Case No. 3412 of the Municipal Court of Caloocan, a judgment was rendered on May 6, 1958, ordering Dominador Mallari to pay Jesus Gigante P1,570 with interest and attorney’s fees.
2. To execute this judgment, the Sheriff levied on May 29, 1961, a house located at 551 Nadurata Street, Grace Park, Caloocan City, valued at P3,040, which was originally declared under Tax Declaration No. 34783 in the name of Dominador Mallari. The house was sold at public auction to Gigante on June 23, 1961.
3. However, the tax declaration for the house had been cancelled and replaced by Tax Declaration No. 52622 in the name of Rolando Mallari (son of Dominador) as of October 8, 1958.
4. On March 29, 1959, Rolando Mallari applied for a loan from Republic Savings Bank, offering as collateral the same house (under his tax declaration) and the land on which it stood, covered by Transfer Certificate of Title (TCT) No. 59922 in his name. The bank granted a loan of P18,000 secured by a real estate mortgage dated April 23, 1959, recorded on April 24, 1959, covering the land “together with all the buildings and improvements.”
5. Due to Rolando’s failure to pay the loan, the bank foreclosed the mortgage. At the foreclosure sale on June 28, 1960, the bank bought the land and improvements. Title was consolidated in the bank’s name, and TCT No. 88233 was issued to it on July 5, 1961.
6. When Gigante obtained a writ of possession for the house from the Municipal Court of Caloocan on September 1, 1962, the bank successfully blocked it, asserting ownership.
7. Gigante filed the present suit (Civil Case Q-7057) alleging that the transfer of the house from Dominador to Rolando was fictitious, fraudulent, and void. He sought possession and ownership of the house, plus damages. The trial court dismissed his complaint, declared the bank as the owner, and ordered Gigante to pay attorney’s fees to defendants.

ISSUE

1. Whether Gigante’s claim to the house, based on a judgment, levy, and sale against Dominador Mallari, is superior to the bank’s claim based on a registered mortgage and subsequent foreclosure.
2. Whether the action for rescission of the transfer from Dominador to Rolando Mallari and for damages against Rolando and the bank can prosper without Dominador Mallari as a party to the suit.

RULING

1. The bank’s registered mortgage is superior to Gigante’s unregistered claims. The bank’s real estate mortgage was duly recorded on April 24, 1959, on the Torrens title. In contrast, Gigante’s judgment against Dominador Mallari (May 6, 1958), the levy (May 29, 1961), and the sale (June 23, 1961) were not recorded on the title. Under the Torrens system, the bank’s registered interest prevails. The house, as an improvement on the mortgaged land, lawfully passed to the bank through foreclosure, and the bank was a purchaser in good faith.
2. The action for rescission and damages cannot proceed without Dominador Mallari as an indispensable party. Dominador Mallari, the alleged vendor in the fraudulent transfer, is not a party to the suit. Any decision on the validity of the transfer or award of damages would directly affect him, as he has the right to defend the transfer’s validity. A judgment without his participation would not be binding upon him. Citing precedents (e.g., Balanga vs. Manalang, Alberto vs. Mananghala), the Court emphasized that in actions to annul transfers, all parties involved in the transactions are indispensable.
The trial court’s judgment was affirmed. Costs were imposed on plaintiff Gigante.