Dilag v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Private respondent Marciano Arellano, as parent of the late Herminio Arellano, obtained a judgment for quasi-delict against spouses Pablo and Socorro Dilag for P14,500.00 plus moral damages and attorney's fees. The decision became final, and a writ of execution was issued. Procedural History: The Dilag spouses filed a petition for relief from judgment, which was dismissed. A Notice of Levy on Execution was annotated on TCT No. 30137, covering Lot 288, registered in the Dilag spouses' name. An Adverse Claim dated March 11, 1974, by the Dilag children (petitioners herein) and a Lease Contract dated February 9, 1979, in favor of David and Erlinda Diancin were inscribed on the title. Lot 288 and Lot 1927 were sold at public auction to Marciano Arellano on August 26, 1981. A Certificate of Sale was inscribed on TCT No. 30137 on August 27, 1981. On the same date, a Deed of Absolute Sale dated August 26, 1981, was inscribed, conveying Lot 288 to the Dilag children, leading to the cancellation of TCT No. 30137 and the issuance of TCT No. 104986 in their names. A Definite Deed of Sale was executed in favor of Arellano on August 30, 1982, after the redemption period expired. A writ of possession was issued, and possession of Lot 288 was delivered to Arellano on December 22, 1982. Arellano subsequently sold Lot 288 to Marcelino Florete Jr. and Leon Coo. David Diancin, the lessee, waived his claim as lessee in favor of Arellano. The Dilag children filed Civil Case No. 15085 for annulment of the decision in Civil Case No. 8714 and subsequent proceedings, alleging illegal levy on execution as they were not parties to the original case. The Petition: The Dilag children sought to reinstate the RTC Order dated August 26, 1983, granting a writ of preliminary prohibitory injunction, which was set aside by the Intermediate Appellate Court (IAC) through a writ of certiorari. The IAC ruled that the deed of sale in favor of the Dilag children was simulated and executed in fraud of creditors.
Issue(s)
Whether the petitioners (Dilag children) were the owners of Lots 288 and 1927 at the time of the levy on execution in Civil Case No. 8714, considering the alleged simulated sale and continued acts of ownership by the Dilag spouses. Whether the decision and writ of execution in Civil Case No. 8714 are operative against the petitioners, and whether the Dilag children's claim for annulment and injunctive relief can stand given the circumstances of the alleged sale, their possession, and the validity of the underlying obligation.
Ruling
The petition is denied for lack of merit, and the assailed decision of the appellate court is affirmed.
Ratio Decidendi
On the issue of ownership at the time of levy: The Supreme Court affirmed the IAC's ruling that the Dilag children were not the owners of Lot 288 at the time of the levy on execution. The Dilag spouses were the registered and declared owners at the time of the levy. The title in the names of the Dilag children was issued before the deed of sale on which it was based. This temporal inconsistency, along with the Dilag spouses' continued exercise of ownership (e.g., leasing the property), indicated that the deed of sale was simulated and fictitious, executed to defraud the judgment creditor. A simulated sale is inexistent and cannot give rise to any right, thus the adverse claim based on it was a nullity. On the issue of the operability of the judgment and the Dilag children's claims: Even if the Dilag children had become valid owners in 1981, they failed to exercise their right of redemption within the legal period. The Dilag children filed their action for annulment on July 5, 1983, and at that time, they were not in possession of the property, undermining their claim for injunctive relief. They relied on a 1981 deed of sale instead of a 1974 deed, suggesting they did not consider the earlier deed valid. The obligation of the Dilag spouses was not extinguished, as admitted partial payment did not cover the entire judgment, and the compromise agreement was disapproved and became final. Therefore, the decision and writ of execution are operative.
Main Doctrine
A deed of sale executed in fraud of creditors, especially when it is simulated and fictitious, is inexistent and cannot give rise to any legal right or obligation, rendering subsequent claims based on such a deed void. Furthermore, parties claiming ownership through a deed of sale must demonstrate possession and exercise of ownership rights; failure to do so, coupled with continued acts of ownership by the supposed sellers, indicates simulation. A third party claiming ownership over property levied upon in execution must establish a clear legal right to the property prior to the levy.