Du v. Stronghold Insurance
REITERATIONFacts
The Antecedents: Aurora Olarte de Leon was the registered owner of Lot No. 10-A. In January 1989, she sold the property to Luz Du under a Conditional Deed of Sale, with a down payment and a balance. On April 28, 1989, De Leon sold the same property to spouses Enrique and Rosita Caliwag, leading to the cancellation of the original title and the issuance of a new one in the Caliwag spouses' name. Stronghold Insurance Co., Inc. (Stronghold) commenced Civil Case No. 90-1848 against the Caliwag spouses and others for fraud and misappropriation, seeking a writ of preliminary attachment. This attachment was annotated on the Caliwag spouses' Transfer Certificate of Title (TCT) No. 2200 on August 7, 1990. On December 21, 1990, Luz Du filed Civil Case No. 60319 against De Leon and the Caliwag spouses to annul the sale to the Caliwags, based on her earlier Conditional Deed of Sale. On January 3, 1991, Luz Du annotated a Notice of Lis Pendens on TCT No. 2200. On February 11, 1991, Stronghold obtained a favorable decision in Civil Case No. 90-1848. On March 12, 1991, a notice of levy on execution was annotated on TCT No. 2200, and the property was sold at public auction. On August 5, 1991, the certificate of sale and final deed of sale in favor of Stronghold were inscribed, leading to the cancellation of TCT No. 2200 and the issuance of TCT No. 6444 in Stronghold's name. Luz Du eventually secured a favorable judgment in Civil Case No. 60319 in August 1992, which became final in 1993. Procedural History: Luz Du commenced the present case (Civil Case No. 64645) to cancel TCT No. 6444 in Stronghold's name, claiming priority rights by virtue of her Notice of Lis Pendens (annotated January 3, 1991) and her favorable judgment. She argued that Stronghold proceeded with the execution sale despite her notice of lis pendens. The trial court ruled that Stronghold had superior rights due to the prior registration of its notice of levy on attachment. The Court of Appeals affirmed the trial court's decision, holding that Stronghold's notice of levy on attachment was registered almost five months before petitioner's notice of lis pendens, thus giving Stronghold priority. The CA also found that the execution sale retroacted to the date of the levy, when there were no apparent defects or adverse claims on the title. The Petition: Petitioner seeks to nullify the CA's decision and resolution, arguing that her unregistered right as a buyer under a conditional deed of sale predates Stronghold's lien, and questioning whether Stronghold acquired the property in bad faith.
Issue(s)
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. Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith.
Ruling
The Petition is denied, and the assailed Decision and Resolution of the Court of Appeals are affirmed. Costs are against the petitioner.
Ratio Decidendi
On Whether a Notice of Levy on Attachment is a superior lien over that of the unregistered right of a buyer: The Court held that the preference given to a duly registered levy on attachment or execution over a prior but unregistered sale is well-settled. The registration of Stronghold's attachment on August 7, 1990, predated Luz Du's notice of lis pendens, which was annotated on January 3, 1991. Under the Torrens system, the act of registration is the operative act that conveys or affects the land concerning third persons, and every registered conveyance, lien, or attachment constitutes constructive notice to all persons from the time of registration. The subsequent auction sale in favor of the attaching creditor retroacts to the date of the levy, ensuring that the preference created by the levy is not rendered meaningless or illusory. Therefore, Stronghold's registered attachment lien takes precedence over Luz Du's unregistered right as a buyer. The Court reiterated the principle that a levy on execution duly registered takes preference over a prior unregistered sale, and even if the prior sale is subsequently registered before the execution sale but after the levy, the validity of the execution sale is maintained because it retroacts to the date of the levy. On Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith: The Court ruled that Stronghold was a purchaser in good faith. When Stronghold registered its notice of attachment, it had no knowledge of the prior sale to petitioner because that sale had not yet been registered. Settled jurisprudence dictates that a party dealing with registered property may rely on the title and is only charged with notice of burdens and claims annotated thereon. There was no allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its attachment. Consequently, the annotation of respondent's notice of attachment was made in good faith, making its prior right enforceable. Furthermore, purchasers are bound by the judgment in a case only after the notice of lis pendens is inscribed. Since Stronghold is deemed to have acquired the property at the time of the attachment, not the actual purchase, it qualified as an innocent purchaser for value and in good faith.
Main Doctrine
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.