Guillermo v. Orix Metro Leasing
REITERATIONFacts
The Antecedents: Orix Metro Leasing and Finance Corporation (Orix) extended loans to EMC Northstar Transport, Inc. (EMC Northstar), with spouses Edwin and Margarita Cando acting as sureties and securing the loans with chattel mortgages on buses. EMC Northstar defaulted on its loan obligations. Consequently, Orix filed a complaint for replevin, sum of money, and damages against EMC Northstar and the Sps. Cando. The parties later entered into a compromise agreement, which was approved by the Regional Trial Court (RTC). Under this agreement, EMC Northstar and the Sps. Cando admitted an outstanding obligation and agreed to pay it through post-dated checks. However, they again defaulted on their payments, prompting Orix to move for the issuance of a Writ of Execution. Procedural History: The RTC granted Orix's motion for execution, directing the issuance of a writ to enforce the compromise judgment. A Deputy Sheriff levied upon a parcel of land owned by the Sps. Cando. Christian and Victorino Guillermo (petitioners) filed a Third-Party Claim, asserting ownership over the levied property. They claimed to have purchased the property from the Sps. Cando after paying off a prior mortgage to BPI Family Savings Bank. The RTC initially ruled in favor of the petitioners, ordering the cancellation of the levy. However, the Court of Appeals (CA) reversed the RTC's decision, holding that the registered levy on execution in favor of Orix took precedence over the prior unregistered sale to the petitioners. The CA's decision was based on the principle that registration is the operative act to convey or affect land concerning third persons. The petitioners then filed the present petition for review on certiorari before the Supreme Court. The Petition: The petitioners seek a review on certiorari of the CA's decision, arguing that the CA erred in prioritizing Orix's registered levy over their prior sale. They contend that their application for registration of the sale and cancellation of the mortgage was perfected on July 26, 2012, prior to Orix's levy annotation on August 17, 2012, and that they should not be penalized for the Register of Deeds' delay in issuing the new title. They also argue that ownership had already transferred to them through constructive and actual delivery before the levy. Furthermore, they assert that the levy was improper as Orix failed to exhaust EMC Northstar's personal properties first. The petitioners pray for the reinstatement of the RTC's decision and the cancellation of the levy on their property.
Issue(s)
Whether the entry of the Deed of Sale in the Primary Entry Book constituted valid registration, establishing its priority over the levy on execution despite the delay in the issuance of the Transfer Certificate of Title. Whether the levy on execution was valid against property where ownership had already been transferred, and if the levy was subject to superior existing liens, thus affecting its precedence over the prior sale. Whether the order of execution was proper, considering the requirement to first levy on personal properties.
Ruling
The Petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE. The Order of the RTC is REINSTATED. The Deputy Sheriff is DIRECTED to release and cancel the notice of levy on execution upon Transfer Certificate of Title No. 004-2012009967.
Ratio Decidendi
On the Priority of Registration (Primary Entry Book): The Court ruled that the Cancellation of the Real Estate Mortgage and the Deed of Absolute Sale are deemed registered as of July 26, 2012. Applying Saberon v. Ventanilla, Jr., the Court held that in voluntary registration, an innocent purchaser becomes the registered owner the moment they present a valid deed, surrender the owner's duplicate certificate, and pay the fees. The entry in the Primary Entry Book is the operative act. Since Petitioners fulfilled all requirements on July 26, 2012, the delay by the Register of Deeds in issuing the new title until September 3, 2012, cannot prejudice them. Therefore, the registration of the sale predated the annotation of Orix's levy on August 17, 2012. On the Validity of the Levy against Transferred Property and Superiority of Prior Liens: Citing Miranda v. Spouses Mallari, the Court emphasized that a judgment debtor can only transfer property in which they have an interest. A levy on execution only creates a lien over the right, title, and interest of the judgment obligor at the time of the levy. Here, ownership had already been transferred to Petitioners via constructive delivery (execution of the Deed of Sale on June 5, 2012) and actual delivery (possession under the Lease Contract since February 2012). Since Spouses Cando no longer owned the property on August 17, 2012, the levy was invalid as there was no interest to attach. The Court also noted that when Petitioners paid the Spouses Cando's loan to BPI, they stepped into the shoes of BPI, a prior mortgagee. The BPI mortgage was annotated in 2009, making it a senior encumbrance superior to Orix's 2012 levy. Under Rule 39, Section 12, a levy is subject to existing liens. On the Order of Execution: The Court observed a procedural irregularity. Under Rule 39, Section 9, the sheriff must first levy on personal properties. There was no evidence that the sheriff attempted to levy on the buses owned by the judgment debtor before levying on the real property. This failure rendered the levy on the subject real property improper.
Main Doctrine
Under Section 56 of P.D. 1529, instruments relating to registered land are regarded as registered from the time they are noted in the Primary Entry Book. Once a registrant has fulfilled all requirements—presenting the deed, surrendering the owner's duplicate title, and paying fees—what remains to be done lies with the Register of Deeds. Consequently, a levy on execution annotated after such entry, but before the issuance of the new title, is inferior to the prior sale. Furthermore, a judgment debtor can only transfer property in which they have an interest; thus, a levy cannot attach to property already transferred to a buyer via actual or constructive delivery.