Consolidated Bank and Trust Corporation v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Petitioner SOLIDBANK loaned NICOS Industrial Corporation (NICOS) a substantial amount. NICOS defaulted, prompting SOLIDBANK to file a collection case and secure a writ of attachment on NICOS's properties covered by TCT Nos. T-210581 and T-210580. The Sheriff of Manila levied and attached these properties, and the notices of levy were annotated on the titles at the Register of Deeds of Malolos, Bulacan. Subsequently, the attached properties, mortgaged by NICOS to United Coconut Planters Bank (UCPB), were extrajudicially foreclosed by UCPB. UCPB then sold its rights to Manuel Go, who in turn sold them to respondent GOLDEN STAR INDUSTRIAL CORPORATION (GOLDEN STAR). NICOS later executed a Waiver of Right of Redemption in favor of GOLDEN STAR. GOLDEN STAR filed a petition for a writ of possession, which was granted by the Regional Trial Court of Malolos, Bulacan. GOLDEN STAR forcibly took possession of the properties. Procedural History: SOLIDBANK filed an omnibus motion to annul the writ of possession and cite for contempt, arguing the properties were under custodia legis. The Malolos RTC denied the motion. SOLIDBANK appealed to the Intermediate Appellate Court (IAC), which affirmed the RTC's denial, ruling the properties were not in custodia legis at the time of foreclosure. SOLIDBANK moved for reconsideration, which was denied. Hence, this petition for review. The Petition: SOLIDBANK seeks to have the properties declared under custodia legis at the time of foreclosure, arguing that its prior attachment created a lien and that it acquired the right of redemption. It also seeks to nullify the writ of possession and the waiver of redemption.
Issue(s)
Whether the subject properties were under custodia legis by virtue of the prior annotation of a writ of attachment in petitioner's favor at the time the properties were extrajudicially foreclosed. Whether the writ of possession issued in favor of respondent GOLDEN STAR is valid. Whether petitioner SOLIDBANK acquired the right of redemption over the foreclosed properties, and the effect of the registration of the certificate of sale and the pendency of the action on the redemption period.
Ruling
The petition is granted. The Supreme Court reversed the decision of the Intermediate Appellate Court. It declared the levy and attachment by the Manila Sheriff valid and binding, that petitioner SOLIDBANK acquired the right of redemption over the properties, and that the order granting the writ of possession to GOLDEN STAR, the order denying SOLIDBANK's omnibus motion, and the Waiver of Right of Redemption executed by NICOS in favor of GOLDEN STAR are null and void.
Ratio Decidendi
On whether the subject properties were under custodia legis: The Supreme Court ruled in the affirmative. The records clearly showed that notices of levy upon realty were sent to the Registrar of Deeds of Malolos, Bulacan, and were inscribed and annotated at the back of the Transfer Certificates of Title on September 7, 1982. This annotation established a lien on the properties, placing them under custodia legis. The Court reiterated the well-settled rule that a levy effected by a writ of attachment creates a lien that cannot be destroyed except by its dissolution. Therefore, the properties were under the court's custody when they were subsequently extrajudicially foreclosed. On the validity of the writ of possession: The Supreme Court declared the writ of possession issued by the Malolos court in favor of respondent GOLDEN STAR null and void ab initio. This is because the writ interfered with the jurisdiction of a co-ordinate and co-equal court, as the properties were already under custodia legis due to the prior attachment. The Court emphasized that when property is in custodia legis, the officer holding it is the mere hand of the court, and interfering with it invades the court's jurisdiction. Furthermore, the transactions leading to GOLDEN STAR's claim were deemed irregular and questionable, suggesting a conspiracy to defeat SOLIDBANK's lien. On whether petitioner SOLIDBANK acquired the right of redemption and the effect of registration and pendency of action: The Supreme Court held that petitioner SOLIDBANK acquired the right of redemption by operation of law pursuant to Section 6 of Act No. 3135. This section allows any person with a lien subsequent to the mortgage to redeem the property within one year from the date of sale. The Court cited foreign jurisprudence holding that an attaching creditor may succeed to the incidental rights of the debtor, including the right to redeem from a prior mortgage. The waiver of the right of redemption by NICOS in favor of GOLDEN STAR was deemed of no moment, as NICOS no longer had a right to waive by that time. The Court dismissed GOLDEN STAR's argument that the redemption period had lapsed. It reiterated the rule that the pendency of an action tolls the term of the right of redemption, citing Ong Chua v. Carr and Fernandez v. Suplido. The Court noted that SOLIDBANK commenced its action by filing an omnibus motion well within the one-year redemption period after the certificate of sale was registered. Therefore, the right of redemption continued until the decision of the appeal.
Main Doctrine
A writ of attachment duly annotated on the title of real property places the property under custodia legis, rendering subsequent extrajudicial foreclosure and issuance of a writ of possession null and void. An attaching creditor acquires the right of redemption over foreclosed properties.