Lavides v. Pre
REITERATIONFacts
The Antecedents: Petitioner Manolet Lavides purchased six (6) properties from spouses Policarpio and Natalia Castro through two (2) unregistered deeds of pacto de retro sale dated March 8, 1975, and April 1, 1975. Subsequently, Vimarco, Inc. filed a collection case against the Castro spouses, and a writ of preliminary attachment was issued and registered on the titles of the subject properties in May 1976. After the judgment in favor of Vimarco, Inc. became final and executory, an order of execution was issued. On January 10, 1984, during the scheduled auction sale, petitioner filed a third-party claim over the properties. The auction sale was postponed, and petitioner filed a separate action to assert his claim, leading to a restraining order and later a writ of preliminary injunction. Procedural History: The Regional Trial Court (RTC) of Gumaca, Quezon, Branch 61, dissolved the writ of preliminary injunction, dismissed the complaint, and dismissed the counterclaim, ruling that the levy on execution had precedence over the unregistered pacto de retro sale. The Court of Appeals affirmed the RTC decision, and a subsequent motion for reconsideration was denied. The Petition: Petitioner filed a petition for review, assigning errors related to the superiority of Vimarco, Inc.'s claim, the alleged bad faith of Vimarco, Inc. due to actual knowledge, the finality of the attachment order, and the denial of damages.
Issue(s)
Whether the Court of Appeals erred in holding that Vimarco, Inc. has a superior right of claim to the subject properties. Whether the Court of Appeals erred in not finding that Vimarco, Inc.'s actual knowledge of petitioner's claim is equivalent to registration and therefore Vimarco, Inc. was in bad faith. Whether the Court of Appeals erred in finding that the previous order of preliminary attachment in Civil Case No. 5122-P had been decided with finality. Whether the Court of Appeals erred in not awarding petitioner's claim for damages and attorney's fees.
Ruling
The petition is DENIED, and the assailed decision of the Court of Appeals in CA-G.R. CV No. 47710 is AFFIRMED. Costs against petitioner.
Ratio Decidendi
On the superiority of Vimarco, Inc.'s claim: The Court held that the levy on execution, pursuant to a final and executory judgment, is superior to the prior unregistered pacto de retro sale. Under Section 50 of Act No. 496 (now Section 51 of PD 1529), registration is the operative act that conveys and affects registered land under the Torrens System. Unregistered deeds, including pacto de retro sales, only operate as a contract between the parties and do not bind third persons. The attachment and levy were duly recorded and annotated, giving Vimarco, Inc. a preferred right that retroacts to the date of levy. To rule otherwise would render the preference of liens nugatory. On actual knowledge and bad faith: The Court found no evidentiary support for petitioner's assertion that Vimarco, Inc. had actual knowledge of his claim prior to the registration of the attachment. The records indicate that Vimarco, Inc. only became aware of petitioner's claim when the third-party claim was filed on January 10, 1984, which was after the attachment was registered in 1976. The Torrens System cannot be used to shield fraud, but in this case, there was no showing of actual knowledge equivalent to registration before the levy. On the finality of the attachment order: The Court dismissed the contention that the order of preliminary attachment did not become final, stating that where a decision has been rendered, the court has effectively denied all pending motions. The attachment remained effective until the final resolution of the case, and ruling otherwise would cause undue delay in satisfying legitimate creditors. On damages and attorney's fees: While not explicitly detailed in the ratio, the dismissal of the petition and affirmation of the lower courts' decisions implicitly means that the claim for damages and attorney's fees was also denied, as the petitioner failed to establish his superior right to the properties.
Main Doctrine
A duly registered levy on execution, pursuant to a final and executory judgment, takes precedence over a prior unregistered pacto de retro sale of the same properties, as registration is the operative act that conveys and affects registered land under the Torrens System, and unregistered deeds only operate as a contract between the parties.