Rodriguez v. Calingo
REITERATIONFacts
The Antecedents: Spouses Antonio and Maridel Calingo (respondents Calingo) were the registered owners of a house and lot mortgaged to Home Mutual Development Fund (HMDF). On April 27, 1992, respondents Calingo sold the property to Spouses Christopher and Ma. Angelica Barrameda (respondents Barrameda) through a contract of sale with assumption of mortgage. Respondents Barrameda issued checks for the down payment, and respondents Calingo issued a receipt. Respondents Calingo informed HMDF of the sale on October 2, 1992, after the sale date. On May 29, 1992, respondents Barrameda filed an affidavit of adverse claim, which was inscribed on the certificate of title. Respondents Barrameda occupied the property on June 2, 1992. On July 13, 1992, a notice of levy with attachment on the property was annotated on the title, pursuant to a writ of execution issued in Civil Case No. 88-2159 in favor of herein petitioners, Spouses Francisco and Bernardina Rodriguez (petitioners), against respondents Calingo. Respondents Barrameda paid the full purchase price on August 21, 1992, and respondents Calingo waived their rights to the property, guaranteeing it was free from encumbrances except the assumed mortgage. On October 7, 1992, respondents Barrameda executed an affidavit asserting ownership and claiming the levy was illegal. Petitioners' counsel, Atty. Nelson A. Loyola, replied on October 15, 1992, noting the unregistered deed and HMDF records showing Calingo ownership, and suggesting settlement. Respondents Barrameda discovered a notice of sheriff's sale on November 9, 1992. They filed a Notice of Third Party Claim on November 20, 1992, and a petition for quieting of title with preliminary injunction on December 2, 1992. Procedural History: The Regional Trial Court (RTC) of Makati ruled in favor of petitioners, dismissing respondents Barrameda's petition for quieting of title. The RTC found the adverse claim annotation insufficient, noted the failure to register the title in respondents Barrameda's names, deemed the adverse claim to have lost efficacy after 30 days, and suspected collusion between respondents Barrameda and Calingo to defraud third parties. The Court of Appeals (CA) reversed the RTC decision, holding that the adverse claim was effective at the time of the levy and thus charged petitioners with knowledge, making the levy subordinate to the adverse claim. Petitioners' motion for reconsideration was denied. The Petition: Petitioners argue that respondents Barrameda lacked a valid title for a quieting of title petition, that the adverse claim was insufficient, and that collusion existed. The principal issue is whether respondents Barrameda's adverse claim prevails over the levy on execution.
Issue(s)
Whether respondents Barrameda's adverse claim on the property should prevail over the levy on execution issued by another court in satisfaction of a judgment against respondents Calingo. Whether the annotation of an adverse claim is sufficient to bind third parties when the underlying instrument (deed of sale with assumption of mortgage) is registrable but was not registered.
Ruling
The petition is GRANTED. The assailed decision and resolution of the Court of Appeals are SET ASIDE, and the decision of the Regional Trial Court, Makati in Civil Case No. 92-3524 is REINSTATED.
Ratio Decidendi
On whether respondents Barrameda's adverse claim prevails over the levy on execution: The Supreme Court held that the adverse claim cannot prevail over the levy on execution. The Court emphasized that the Property Registration Decree requires registrable instruments, such as the deed of sale with assumption of mortgage, to be registered with the Register of Deeds to be binding on third persons. The act of registration is the operative act to convey or affect the land concerning third parties. In this case, the deed of sale was not registered; instead, an affidavit of adverse claim was filed. The Court clarified that while an adverse claim serves as a notice to third parties, it cannot substitute for the registration of a registrable instrument. The Court found no justifiable reason why the deed of sale could not be registered, noting that the owner's duplicate certificate of title was with HMDF, but no effort was shown to retrieve it for registration purposes. Furthermore, the parties did not obtain the written consent of HMDF, the mortgagee, which was a prohibition in the mortgage contract. The Court found it suspicious that the judgment against respondents Calingo was rendered before the sale and that respondents Barrameda remitted the full payment despite knowledge of the levy on execution, indicating a lack of prudence expected of a buyer. On the sufficiency of an adverse claim to bind third parties: The Supreme Court reiterated that an annotation of an adverse claim is a measure designed to protect an interest where registration is not otherwise provided for by law. However, when the instrument is registrable, like a deed of sale, the proper remedy to bind third parties is registration. The Court cited L.P. Leviste and Company, Inc. v. Noblejas to explain that an adverse claim is sufficient to affect third parties when the owner refuses to surrender the duplicate certificate for annotation of a voluntary instrument. In such a scenario, the annotation of the adverse claim is sufficient notice. However, in the present case, the failure to register the deed of sale was not due to the owner's refusal to surrender the duplicate title but rather a failure to exert effort to retrieve it and to obtain the mortgagee's consent. The Court concluded that the adverse claim could not substitute for the registration of the deed of sale, which was the operative act to convey or affect the land concerning third persons.
Main Doctrine
An annotation of an adverse claim is not sufficient to bind third parties if the instrument it represents (a deed of sale with assumption of mortgage) is registrable and was not registered, especially when there was no justifiable reason for its non-registration and the parties failed to obtain the consent of the mortgagee.