Ching Liu & Co. v. Mercado
REITERATIONFacts
The Antecedents: Fernando Go Chioco executed a first mortgage over a parcel of land in favor of Ching Yng Si, which was duly registered. Subsequently, Paula Mercado filed an action against Go Chioco and obtained an order of attachment over Go Chioco's interest in the property, which was also duly annotated on the title. A judgment was rendered in favor of Mercado, but the writ of execution was returned unsatisfied. Ching Yng Si initiated a foreclosure suit due to Go Chioco's failure to comply with the mortgage conditions. A judgment was rendered in favor of Ching Yng Si, and the property was sold at public auction to Ching Yng Si as the highest bidder. Ching Yng Si then sold the property to Ching Liu & Co., the appellee herein, and a new transfer certificate of title was issued in its favor, with the attachment annotation still present. Procedural History: Ching Liu & Co. filed a motion praying that the register of deeds be ordered to cancel the annotation of Paula Mercado's attachment on its title. The lower court granted the motion despite Mercado's opposition. The Petition: Paula Mercado appealed the order of the lower court, assigning errors related to the court's declaration that her attachment did not create any right and that she was not entitled to be notified of the foreclosure proceedings.
Issue(s)
Whether the attachment levied by appellant Paula Mercado created a right in her favor over the property. Whether appellant Paula Mercado was entitled to be notified of and included in the foreclosure proceedings instituted by Ching Yng Si, notwithstanding the prior valid levy of attachment.
Ruling
The judgment of the lower court is reversed. The register of deeds is ordered to maintain the annotation of the writ of attachment in favor of Paula Mercado.
Ratio Decidendi
On the issue of whether the attachment created a right in favor of Paula Mercado: The Court held that at the time of the attachment, Go Chioco was still the registered owner of the property, as a mortgage is merely an encumbrance and does not extinguish the debtor's title. The attachment was duly annotated in accordance with the Land Registration Act, producing all the effects of registration. The Court emphasized that attachment is a proceeding in rem, acquiring a specific lien upon the attached property which ripens into a judgment against the res. This lien stands upon as high equitable grounds as a mortgage lien. Therefore, the attachment did create a right in favor of the appellant. On the issue of whether Paula Mercado was entitled to be notified of the foreclosure proceedings: The Court ruled in the affirmative. It held that an attachment properly levied and annotated under the Land Registration Act constitutes a lien on the property from the moment of inscription. In accordance with section 225 of the Code of Civil Procedure, a party claiming an interest subordinate to the mortgage holder, such as an attaching creditor whose attachment is duly annotated prior to the foreclosure proceedings, should have been included as a party defendant. Failure to do so renders the foreclosure proceedings, as they affect the attaching creditor, invalid.
Main Doctrine
An attachment properly levied upon a property registered under the Land Registration Act, once annotated, recorded, or registered in the office of the register of deeds, affects the realty to which it refers, and from the moment it is inscribed, recorded, or noted, it constitutes a lien on the property. Consequently, a party with an interest subordinate to the mortgage holder, such as an attaching creditor whose attachment is duly annotated, should be included as a party defendant in a foreclosure proceeding.