Du vs Stronghold Insurance (Remedial Law)

DU V. STRONGHOLD INSURANCE

G.R. No. 156580 | JUNE 14, 2004

FACTS:

Sometime in January 1989, Aurora De Leon sold a parcel of land registered in her name to Luz Du under a ‘Conditional Deed of Sale’ for a down payment of P75,000.00 leaving a balance of P95,000.00.

On April 28, 1989, Aurora de Leon sold the same property to spouses Enrique and Rosita Caliwag without prior notice to Luz Du. As a result, Transfer Certificate of Title No. 2200 was issued in favor of the Caliwag spouses.

Meanwhile, Stronghold Insurance Corp., Inc. filed a civil case against the Caliwag spouses and other persons, for allegedly defrauding Stronghold and misappropriating the company’s fund by falsifying and simulating purchases of documentary stamps.  The action was accompanied by a prayer for a writ of preliminary attachment duly annotated at the back of Transfer Certificate of Title No. 2200 on August 7, 1990.

On her part, on December 21, 1990, Luz Du initiated an action against Aurora de Leon and the spouses Caliwag for the annulment of the sale by De Leon in favor of the Caliwags, anchored on the earlier mentioned Deed of Conditional Sale. On January 3, 1991, Luz Du caused the annotation of a Notice Of Lis Pendens at the back of TCT No. 2200.

On February 11, 1991, the court where the Stronghold case was filed ruled in favor of Stronghold, ordering the spouses Caliwag jointly and severally to pay the plaintiff P8,691,681.60, among others.  When the decision became final and executory, on March 12, 1991, a notice of levy on execution was annotated on TCT No. 2200 and the attached property was sold in a public auction.  On August 5, 1991, the certificate of sale and the final Deed of Sale in favor of Stronghold were inscribed and annotated leading to the TCT No. 6444 in the name of Stronghold.

It came to pass that on August 5, 1992, Luz Du too was able to secure a favorable judgment in Civil Case No. 60319 and which became final and executory sometime in 1993, as well. Thus, Luz Du commenced the present action to cancel the TCT No. 6444 with damages claiming priority rights over the property by virtue of her Notice Of Lis Pendens under Entry No. 13305 and inscribed on January 3, 1991, and the final and executory decision in he civil case she filed against spouses Caliwag.

According to Luz Du, despite her said notice of lis pendens annotated, Stronghold still proceeded with the execution of the decision in the other civil case against the subject lot and ultimately the issuance of Transfer Certificate of Title No. 6444 in its (Stronghold’s) name.

The trial court ruled that Stronghold had superior rights over the property because of the prior registration of the latter’s notice of levy on attachment on Transfer Certificate of Title (TCT) No. 2200.  For this reason, it found no basis to nullify TCT No. 6444, which was issued in the name of respondent after the latter had purchased the property in a public auction.

The CA affirmed the RTC Decision in toto and held that notice of levy on attachment had been registered almost 5 months before petitioner’s notice of lis pendens.

ISSUE:

Whether a Notice of Levy on Attachment on the property is a superior lien over that of the unregistered right of a buyer of a property in possession pursuant to a Deed of Conditional Sale

WON the acquisition of the subject property by Respondent Stronghold was tainted with bad faith

HELD:

1) Yes.

*Preference is given to a duly registered attachment over a subsequent notice of lis pendens, even if the beneficiary of the notice acquired the subject property before the registration of the attachment. Under the torrens system, the auction sale of an attached realty retroacts to the date the levy was registered. In this case of Tambao v. Suy, 52 Phil. 237, it has been held that “Where a preliminary attachment in favour of ‘A’ was recorded earlier, and the private sale of the attached property in favour of ‘B’ was executed a year later, the attachment lien has priority over the private sale, which means that the purchaser took the property subject to such attachment lien and to all of its consequences, one of which is the subsequent sale on execution.”

The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale. In Capistrano v. PNB, if the attachment or levy of execution, though posterior to the sale, is registered before the sale is registered, it takes a precedence over the latter. “The rule is not altered by the fact that at the time of the execution sale the Philippine National Bank had information that the land levied upon had already been deeded by the judgment debtor and his wife to Capistrano. The auction sale being necessary sequel to the levy, for this was effected precisely to carry out the sale, the purchase made by the bank at said auction should enjoy the same legal priority that the levy had over the sale in favour of plaintiff. In other words, the auction sale retroacts to the date of the levy. Were the rule otherwise, the preference enjoyed by the levy of execution in a case like the present would be meaningless and illusory.”

2) No

*Good faith: Defense in registration of attachment. It is settled that a person dealing with registered property may rely on the title and be charged with notice of only such burdens and claims as are annotated thereon. This principle applies with more force to this case, absent any allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its attachment. Thus, the annotation of respondent’s notice of attachment was a registration in good faith, the kind that made its prior right enforceable.

*taken from www.scribd.com/doc/110773918/BSL-CASE-DOCTRINES-IN-CIVIL-PROCEDURE-BRONDIAL