Suntay v. Keyser Mercantile
REITERATIONFacts
The Antecedents: Respondent Keyser Mercantile, Inc. (Keyser) entered into a Contract to Sell with Bayfront Development Corporation (Bayfront) for Unit G of Bayfront Tower Condominium on October 20, 1989. This contract was not registered. Petitioners Spouses Carlos and Rosario Suntay (Spouses Suntay) filed an action against Bayfront for violation of P.D. Nos. 957 and 1344, rescission of contract, sum of money, and damages due to Bayfront's failure to deliver condominium units they purchased. The Housing and Land Use Regulatory Board (HLURB) rescinded the contract and ordered Bayfront to pay Spouses Suntay P2,752,068.60 with interest. A writ of execution was issued, and Spouses Suntay, through the RTC sheriffs, levied Bayfront's titled properties, including Unit G, as CCT No. 15802 was still in Bayfront's name with a clean title. The levy was recorded on January 18, 1995. An auction sale was conducted on February 23, 1995, where Spouses Suntay were the highest bidders, and a Certificate of Sale was issued on March 1, 1995, annotated on April 7, 1995. The Deed of Absolute Sale between Bayfront and Keyser was executed on November 9, 1995, with Keyser allegedly paying the full price in 1991. Upon attempting to register the deed in February 1996, Keyser discovered the annotations of the levy and certificate of sale. The Register of Deeds cancelled Bayfront's title and issued CCT No. 26474 in Keyser's name on March 12, 1996, but carried over the Suntays' annotation. A Final Deed of Sale was executed in favor of Spouses Suntay on April 16, 1996, leading to the cancellation of Keyser's title and the issuance of CCT No. 34250-A in the Spouses Suntay's name. Procedural History: Keyser filed a complaint for annulment of auction sale and cancellation of notice of levy before the HLURB, which ruled in its favor. This decision was affirmed by the Office of the President and the CA. However, the Supreme Court set aside the HLURB decision, ruling that the HLURB lacked jurisdiction over ownership disputes. Keyser then filed a new complaint before the RTC for annulment of auction sale, writ of execution, declaration of nullity of title, and reconveyance. The RTC ruled in favor of Keyser, declaring the auction sale null and void due to the property being registered in Keyser's name at the time of levy and irregularities in the auction sale (lack of posting and publication). Spouses Suntay appealed to the CA, which affirmed the RTC decision, holding that Spouses Suntay acquired no interest because Bayfront had already sold the unit to Keyser prior to the levy. Spouses Suntay's motion for reconsideration was denied. The Petition: Spouses Suntay filed a petition for review on certiorari before the Supreme Court, raising issues of prescription, estoppel by laches, application of P.D. 1529 and Article 1544 of the Civil Code, lack of cause of action, forum shopping, res judicata, and claims for damages and attorney's fees.
Issue(s)
Whether the CA erred in not dismissing respondent's complaint on grounds of prescription of actions under Article 1146 of the Civil Code and estoppel by laches. Whether the CA erred in not applying Section 52 of P.D. 1529 and Article 1544 of the Civil Code by finding that petitioners have better rights of ownership over the subject property. Whether the CA erred in not dismissing the complaint for lack of valid and legitimate cause of action. Whether the CA erred in not dismissing the complaint on the ground of forum shopping. Whether the CA erred in not dismissing the complaint on the ground of res judicata. Whether the CA erred in not awarding damages and attorney's fees in favor of petitioners.
Ruling
The petition is GRANTED. The September 7, 2012 Decision and the August 8, 2013 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 94677 are REVERSED and SET ASIDE. Accordingly, the Court hereby declares the auction sale as valid and binding on Keyser Mercantile, Inc. and all other subsequent registrants.
Ratio Decidendi
On Whether the CA erred in not dismissing respondent's complaint on grounds of prescription of actions under Article 1146 of the Civil Code and estoppel by laches: The defense of prescription is unavailing because the filing of the first action (HLURB Case No. REM-032196-9152) on March 21, 1996, interrupted the prescriptive period. This interruption lasted until the judgment of dismissal due to lack of jurisdiction became final on September 23, 2005. Consequently, the filing of the second action (Civil Case No. 06-114716) on March 24, 2006, was within the four-year prescriptive period. The Court also found no estoppel by laches, as Keyser actively pursued its claim through various legal avenues. The procedural defenses of res judicata and forum shopping were also dismissed because the prior HLURB case was dismissed on jurisdictional grounds, meaning it was not decided on the merits, thus failing a key requisite for res judicata. Since there was no res judicata, there could be no forum shopping. On Whether the CA erred in not applying Section 52 of P.D. 1529 and Article 1544 of the Civil Code by finding that petitioners have better rights of ownership over the subject property: The Court found that Spouses Suntay properly relied on the Torrens System and the clean title of Bayfront. The Notice of Levy was registered on January 18, 1995, and the Certificate of Sale was annotated on April 7, 1995, both dates preceding Keyser's registration of its Deed of Absolute Sale on March 12, 1996. Under the Torrens System, registration is the operative act that conveys or affects the land concerning third persons. Since Spouses Suntay's levy and sale were registered while Bayfront was still the registered owner and the title was clean, their rights acquired through the execution sale retroacted to the date of the levy, giving them preference over Keyser's subsequently registered deed. The Court disagreed with the lower courts' findings that the property was already registered in Keyser's name at the time of levy or that the auction sale was irregular, noting that the levy on execution duly registered takes precedence over a prior unregistered sale. On Whether the CA erred in not dismissing the complaint for lack of valid and legitimate cause of action: This issue is rendered moot by the Court's finding that Spouses Suntay have superior rights over the property due to the timely registration of their levy and certificate of sale. The lower courts' premise that Keyser had superior rights was found to be erroneous. On Whether the CA erred in not dismissing the complaint on the ground of forum shopping: As previously discussed, the Court found no forum shopping because the prior HLURB case was dismissed on jurisdictional grounds and thus did not result in res judicata. The elements of litis pendentia or res judicata, which are the basis for determining forum shopping, were not met. On Whether the CA erred in not dismissing the complaint on the ground of res judicata: The defense of res judicata requires identity of parties, subject matter, and cause of action, and that the former judgment was rendered on the merits by a court with jurisdiction. The previous HLURB case was dismissed due to lack of jurisdiction, meaning it was not adjudicated on the merits. Therefore, the requisite of a judgment on the merits was absent, and res judicata did not apply. On Whether the CA erred in not awarding damages and attorney's fees in favor of petitioners: The Court denied the claim for damages and attorney's fees. The filing of a civil action, even if unsuccessful, is not a ground for moral damages unless there is proof of bad faith or malice. Spouses Suntay failed to present compelling evidence to warrant moral damages. Similarly, exemplary damages require a prior award of compensatory or moral damages, which were not granted. Attorney's fees are not automatically awarded to the winning party and require a specific showing of entitlement, which was not met here.
Main Doctrine
A levy on execution duly registered takes preference over a prior unregistered sale, even if the prior sale was subsequently registered before the sale in execution but after the levy was duly made, because the preference created by the levy retroacts to the date of the levy.