Ruiz v. Court of Appeals
REITERATIONFacts
The Antecedents: Genaro Ruiz, Sr., elderly and sickly, sold Lot No. 8485-B to Honorato Hong for P350,000.00 on April 23, 1986, evidenced by a notarized deed of sale. Genaro Ruiz, Sr. received P100,000.00 as partial payment. Genaro Ruiz, Sr. retained possession of the deed and title for transfer. Amor Ruiz, estranged wife of Genaro Ruiz, Sr., had also borrowed money from Hong and had previously entrusted the title to Hong for safekeeping. In July 1986, Amor Ruiz obtained the title from Hong, promising to effect the transfer, but failed to do so. To appease Hong, Genaro Ruiz, Sr. executed a second deed of sale on July 22, 1986, with identical terms. Procedural History: On August 18, 1986, Amor Ruiz and her children filed a complaint for Support against Genaro Ruiz, Sr. (Civil Case No. CEB-5268), attaching Lot No. 8485-B. Hong filed a third-party claim. A compromise agreement was reached, and a writ of execution was issued when Genaro Ruiz, Sr. failed to comply. Meanwhile, Hong filed a Specific Performance case (Civil Case No. CEB-7555) for the delivery of the title. The trial court in the Support case proceeded with an auction sale where Amor Ruiz was the lone bidder. Hong amended his complaint in the Specific Performance case, seeking to nullify the auction sale and obtain the title. Genaro Ruiz, Sr. was declared in default. The trial court in CEB-7555 issued a writ of preliminary injunction enjoining the sheriff from issuing the Certificate of Sale in CEB-5268. This injunction order was assailed by petitioners. Subsequently, the trial court in CEB-7555 rendered a decision declaring Hong the owner of the lot, nullifying the attachment and execution sale, and making the injunction permanent. Petitioners appealed this decision (CA-G.R. CV No. 35673), and the Court of Appeals affirmed the trial court's decision. Separately, the Court of Appeals in CA-G.R. SP No. 23032 annulled the writ of preliminary injunction, leading to the issuance of a Certificate of Sale and a definite Deed of Sale in favor of Amor Ruiz. Hong filed a motion for reconsideration, and petitioners' subsequent motion for implementation of a writ of possession was denied. The Court of Appeals, in denying the writ of possession, reasoned that the Specific Performance case directly raised the issue of ownership, and if Hong were adjudged the owner, the court issuing the writ of execution would have no power over the property. The Petition: Petitioners (heirs of Genaro Ruiz, Sr.) assail the Court of Appeals' rulings, arguing that their right acquired through a registered attachment and execution sale in the Support case is superior to Hong's unregistered deed of sale. They contend that the Court of Appeals gravely abused its discretion in upholding the trial court's nullification of the attachment and auction sale and ordering the delivery of the title to Hong.
Issue(s)
Whether the registered attachment and execution sale in the Support case is superior to the prior unregistered deed of sale in favor of Honorato Hong. Whether the knowledge of the prior unregistered sale by the attaching creditor is equivalent to registration. Whether the execution of two deeds of sale for the same property is indicative of fraud or a valid reiteration of intent. Whether the Court of Appeals erred in annulling the writ of preliminary injunction and allowing the issuance of a Certificate of Sale in favor of Amor Ruiz, considering the pending appeal on the ownership of the property.
Ruling
The petitions are denied. The decision of the Court of Appeals affirming the trial court's ruling in the Specific Performance case is affirmed. The registered attachment and execution sale in favor of the petitioners is declared null and void, and Honorato Hong is declared the lawful owner of Lot No. 8485-B.
Ratio Decidendi
On the superiority of the registered attachment over the prior unregistered sale: The Court held that while registration is the operative act that binds the land concerning third persons, knowledge of a prior unregistered interest by the attaching creditor is equivalent to registration. In this case, Genaro Ruiz, Sr.'s own pleadings in the Support case explicitly stated that he had sold the land to Honorato Hong on April 23, 1986, and therefore no longer owned it at the time of the levy. This declaration against interest, coupled with other evidence, established that the petitioners, through Amor Ruiz, had knowledge of the prior sale to Hong. Consequently, their registered attachment could not prevail over Hong's prior, albeit unregistered, sale. Furthermore, Section 35, Rule 39 of the Rules of Court states that a purchaser at an execution sale acquires the rights of the judgment debtor as of the time of the levy. Since Genaro Ruiz, Sr. had already sold the property to Hong before the levy, he had no more right or interest to convey to his wife, Amor Ruiz, as the purchaser at the execution sale. Therefore, Amor Ruiz acquired nothing from the execution sale, and petitioners, as her successors, were not entitled to possession. On knowledge of prior unregistered interest being equivalent to registration: The Court reiterated the principle that the Torrens system cannot be used as a shield for the commission of fraud. Citing Fernandez v. Court of Appeals, the Court emphasized that knowledge of a prior existing unregistered interest has the effect of registration as to the party with such knowledge. The overt acts of ownership and possession exercised by Hong over the land, and Genaro Ruiz, Sr.'s own admission in his pleadings, demonstrated that the petitioners were aware of Hong's prior unregistered sale. This knowledge precluded them from claiming superiority based on their subsequent registered attachment. On the execution of two deeds of sale: The Court found no merit in the petitioners' contention that the execution of a second deed of sale on July 22, 1986, after the initial sale on April 23, 1986, was illogical or indicative of fraud. The Court noted that Genaro Ruiz, Sr. executed the second deed to reiterate his intention to sell the land to Hong, especially after Amor Ruiz had obtained the title from Hong under false pretenses and failed to effect the transfer. The existence of two duly notarized deeds of sale, supported by the testimony of Hong and the admission of Genaro Ruiz, Sr., sufficiently proved the conveyance of the property to Hong. The Court found the petitioners' arguments to be mere surmises and conjectures without sufficient proof to rebut the notarized documents. On the validity of the injunction and Certificate of Sale: The Court clarified that the Court of Appeals decision in CA-G.R. SP No. 23032, which annulled the writ of preliminary injunction, did not definitively settle the ownership of the property. Instead, it merely declared the injunction void and stated that the issuance of the Certificate of Sale was ministerial, but it explicitly mentioned that the award of the property to the highest bidder would be subject to the outcome of Hong's claims. Therefore, the subsequent issuance of a Certificate of Sale in favor of Amor Ruiz did not divest Hong of his ownership rights, especially since the trial court and the Court of Appeals in the Specific Performance case ultimately ruled in favor of Hong, declaring the execution sale void.
Main Doctrine
A prior unregistered sale, when known to an attaching creditor, is superior to the attachment. The registration of an attachment is the operative act that binds the land concerning third persons, but knowledge of a prior unregistered interest is equivalent to registration.