Durawood v. Bona
REITERATIONFacts
The Antecedents: Petitioner Durawood Construction and Lumber Supply, Inc. (Durawood) filed a collection suit against LBB Construction and Development Corporation (LBB Construction) and its president, Leticia Barber, for unpaid construction materials amounting to ₱665,385.50. The Regional Trial Court (RTC) issued a writ of preliminary attachment, leading to the levy on a parcel of land owned by LBB Construction. Respondent Candice S. Bona intervened, claiming co-ownership of the attached property, asserting that LBB Construction had sold it to her and her siblings via a Deed of Absolute Sale dated June 2, 2004. Bona contended that this sale was registered on June 16, 2004, prior to the annotation of Durawood's levy on attachment on June 17, 2004. Procedural History: The RTC initially ruled in favor of Durawood, ordering LBB Construction to pay the sum owed. Following the finality of this judgment, Durawood sought execution. During this process, it was discovered that the original title (TCT No. R-17571) had been cancelled and a new title (TCT No. R-22522) issued in the name of Bona and her siblings. Durawood moved to reinstate the notice of levy on attachment on the new title and to cite the Register of Deeds for contempt, arguing irregularities in the cancellation and issuance of the new title, particularly the alleged antedating of the sale registration. The RTC granted Durawood's motion to reinstate the levy, finding the sale registration fraudulent. However, the Court of Appeals reversed the RTC's decision, holding that the registration date in the Primary Entry Book, not the annotation on the title, determines priority, and that the issuance of the new title substantially complied with regulations. Durawood then filed the present petition for review on certiorari. The Petition: Durawood seeks review of the Court of Appeals' decision, arguing that the appellate court erred in disregarding the non-payment of registration fees for the Deed of Absolute Sale, which should have invalidated its registration on June 16, 2004. Durawood also contends that the Court of Appeals failed to properly consider the non-compliance with NALTDRA Circular No. 94 regarding the issuance of the new title and overlooked the significance of the entries on the predecessor title as evidence. The core of Durawood's argument is that the Court of Appeals erred in finding that the RTC committed grave abuse of discretion in reinstating the notice of levy on attachment, asserting that the levy should take precedence due to the failure to complete the registration of the sale.
Issue(s)
Whether the Court of Appeals committed grave abuse of discretion in reversing the RTC's orders regarding the reinstatement of the notice of levy on attachment, considering the allegations of fraud and rescission of contracts. Whether the registration of the Deed of Absolute Sale on June 16, 2004, should take precedence over the levy on attachment registered on June 17, 2004, considering the non-payment of registration fees for the Deed of Sale. Whether the issuance of TCT No. R-22522 by Atty. Randy A. Rutaquio on June 16, 2004, despite not being the Register of Deeds at that time, renders the registration invalid, and the effect of NALTDRA Circular No. 94. Whether the RTC erred in reinstating the notice of levy on attachment, considering the subsequent sale of the property at public auction.
Ruling
The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the Decision of the Court of Appeals, and reinstated the RTC's orders. The Court held that the registration of the levy on attachment on June 17, 2004, takes precedence over the Deed of Sale registered on June 16, 2004, due to the non-payment of registration fees for the Deed of Sale as of June 25, 2004. The Court found that the RTC did not commit grave abuse of discretion.
Ratio Decidendi
On the issue of the alleged fraud and rescission of contracts and the Court of Appeals' discretion: The Court noted the RTC's finding that the alienation of property by LBB Construction in favor of the Bonas without sufficient property to pay its obligations was considered in fraud of creditors under Articles 1381 and 1387 of the Civil Code. The Court found that the RTC did not commit grave abuse of discretion in ordering the reinstatement of the levy on attachment, as the subsequent sale of the property at public auction to Durawood was based on a validly reinstated levy. On the issue of registration precedence and payment of fees: The Court reiterated the principle that for an entry in the Primary Entry Book to be considered registration, all requirements, including the payment of prescribed fees, must be met. Citing Levin v. Bass and Development Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija, the Court emphasized that the entry alone does not produce the effect of registration if there are outstanding requirements. In this case, as of June 25, 2004, the required registration fees for the Deed of Sale had not been paid, as evidenced by the letter of Atty. Santos to the LRA Administrator. Therefore, the registration of the Deed of Sale was not complete on June 16, 2004. Consequently, the levy on attachment, registered on June 17, 2004, should take precedence. The Court found that the RTC was correct in reinstating the notice of levy on attachment because the Deed of Sale was not validly registered ahead of the levy. On the issue of the issuance of TCT No. R-22522 and NALTDRA Circular No. 94: While the Court acknowledged the CA's reliance on substantial compliance with NALTDRA Circular No. 94 regarding the issuance of titles by a subsequent Register of Deeds, it found this secondary to the primary issue of the validity of the registration of the Deed of Sale. The Court noted that the RTC's finding that Atty. Rutaquio was not the authorized Register of Deeds on June 16, 2004, was supported by a certification from the LRA. However, the critical factor remained the non-payment of registration fees for the Deed of Sale, which invalidated its claim of prior registration. The Court found that the CA erred in prioritizing the date of entry in the Primary Entry Book over the completion of the registration process, which includes payment of fees. On the issue of the RTC's reinstatement of the levy on attachment: The Court's primary focus was on the registration issue. The Court found that the RTC was correct in reinstating the notice of levy on attachment because the Deed of Sale was not validly registered ahead of the levy, and the subsequent sale of the property at public auction to Durawood was based on a validly reinstated levy.
Main Doctrine
The entry of an instrument in the Primary Entry Book of the Registry of Deeds, when accompanied by the payment of the required registration fees, is considered registration and takes precedence over subsequent entries, even if the annotation on the certificate of title is made later or if the instrument was not immediately acted upon due to non-payment of fees.