Spouses Suntay v. Keyser Mercantile, Inc., G.R. No. 208462, December 10, 2014

Summary: BAYFORT sold to KEYSER Condominium Unit G on installment basis. The Contract to Sell was not registered with the Register of Deeds (RD) Manila. 

Meanwhile, Sps Suntay won their case  against BAYFORT before the HLURB. HLURB rescinded the Contract to Sell between the two and ordered Bayfront to pay Sps Suntay P2,752,068.60 as purchase price with interest.  

On Nov. 16, 1994, the HLURB issued a writ of execution.

Sheriff of the RTC Manila levied Bayfront’s titled properties, including Unit G. The levy was duly recorded in the RD Manila on Jan 18, 1995.

The auction sale was then conducted on Feb 23, 1995, and Sps Suntay were the highest bidder. Consequently, the Certificate of Sale in favor of Sps was issued. This was duly annotated at the back of CCT No. 15802 on April 7, 1995.

Meanwhile, the Deed of Absolute Sale between Bayfront and Keyser involving Unit G was finally executed on Nov 9, 1995. But when Keyser was about to register the said deed, it discovered the Notice of Levy and the Certificate of Sale annotated at the back of CCT. Nevertheless, on Mar 12, 1996, the RoD cancelled the title of Bayfront and issued CCT No. 264748 in the name of Keyser but carried over the annotation of the Suntays.

Subsequently, the sheriff’s Final Deed of Sale was executed on April 16, 1996 in favor of the Suntays upon the expiration of the 1 year period of redemption from the earlier auction sale. CCT No. 26474 of Keyser was cancelled and, thereafter, CCT No. 34250-A11 was issued in the name of Sps Suntay.

Keyser then filed a complaint for annulment of auction sale and cancellation of notice of levy before the HLURB. 

HLURB ruled in favor of Keyser. Office of the President and CA affirmed. But SC reversed -  HLURB had no jurisdiction over controversies.

Undaunted, Keyser filed before the RTC Manila a complaint for annulment of auction sale, writ of execution, declaration of nullity of title, and reconveyance of property with damages against Sps Suntay.

RTC Manila ruled in favor of Keyser - declared the auction sale as null and void, and ordered RoD to reinstate the title of Keyser.

CA affirmed the decision.

- Sps Suntay did not acquire the subject property because at the time it was levied, Bayfront had already sold the condominium unit to Keyser. Considering that Bayfort had no interest in the property, Sps Suntay, as purchasers at the auction sale, also acquired no interest.

Sps, hence, filed a petiton for review on certiorari before the SC.

- Their right as purchasers in a public action should have been preferred because their right acquired thereunder retroacts to the date of registration of the Notice of Levy on Jan 18, 1995 and the subsequent auction sale on Feb 23, 1995.

-  Their right over the subject property is superior over that of Keyser because they purchased the subject property in a legitimate auction sale prior to Keyser’s registration of the deed of absolute sale.

SC reversed the CA decision, and declared the auction sale as valid and binding.

- The doctrine is well-settled that 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, the validity of the execution sale should be maintained because it retroacts to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory.

In this case, the contract to sell between Keyser and Bayfront was executed on Oct 20, 1989, but the deed of absolute sale was only made on Nov 9, 1995 and registered on Mar 12, 1996. The Notice of Levy in favor of Sps Suntay was registered on Jan 18, 1995, while the Certificate of Sale on April 7, 1995, both dates clearly ahead of Keyser’s registration of its Deed of Absolute Sale. Evidently, applying the doctrine of primus tempore, potior jure(first in time, stronger in right), Sps Suntay have a better right than Keyser.

Ponente: MENDOZA, J.

A petition for review on certiorari

Facts:

Oct 20, 1989, Eugenia Gocolay, President of KEYSER entered into a contract to sell with Bayfront Development Corporation for the purchase on installment basis of Condominium Unit G in Bayfront Tower located at Manila. 

- Unit G was covered by Condominium Cert Title (CCT) 15802.

- The Contract to Sell was not registered with the Register of Deeds (RoD) Manila. Thus, the subject unit remained in the name of Bayfront.

July 7, 1990, Sps Suntay also purchased several condominium units on the 4th floor of Bayfront Tower through. Despite payment of the full purchase price, Bayfront failed to deliver the condominium units. 

Sps Suntay filed an action before the HLURB. HLURB rescinded the Contract to Sell between Bayfront and Sps Suntay and ordered Bayfront to pay Sps Suntay P2,752,068.60 as purchase price with interest. 

On Nov 16, 1994, the HLURB issued a writ of execution.

Sheriff of the RTC Manila levied Bayfront’s titled properties, including Unit G. The levy was duly recorded in the RoD Manila on Jan 18, 1995

The auction sale was conducted on Feb 23, 1995, and Sps Suntay were the highest bidder. Consequently, the Certificate of Sale in favor of Sps was issued. This was duly annotated at the back of CCT No. 15802 on April 7, 1995.

Meanwhile, the Deed of Absolute Sale between Bayfront and Keyser involving Unit G was finally executed on Nov 9, 1995. But when Keyser was about to register the said deed, it discovered the Notice of Levy and the Certificate of Sale annotated at the back of CCT. Nevertheless, on Mar 12, 1996, the RoD cancelled the title of Bayfront and issued CCT No. 264748 in the name of Keyser but carried over the annotation of the Suntays.

Subsequently, the sheriff’s Final Deed of Sale was executed on April 16, 1996 in favor of the Suntays upon the expiration of the 1 year period of redemption from the earlier auction sale. CCT No. 26474 of Keyser was cancelled and, thereafter, CCT No. 34250-A11 was issued in the name of Sps Suntay.

Keyser then filed a complaint for annulment of auction sale and cancellation of notice of levy before the HLURB. 

HLURB ruled in favor of Keyser. 

Sps Suntay appealed the decision to the Office of the President and later to the CA but both affirmed the HLURB judgment.

On appeal before the SC, however, the HLURB decision was set aside. SC ruled that the HLURB had no jurisdiction over controversies between condominium unit owners and the issue of ownership, possession or interest in the disputed condominium units could not be adjudicated by the HLURB due to its limited jurisdiction under PD957 and PD1344.

Undaunted, Keyser filed before the RTC Manila a new complaint for annulment of auction sale, writ of execution, declaration of nullity of title, and reconveyance of property with damages against Sps Suntay. 

In their answer, Sps Suntay denied the material allegations of the complaint and interposed special and affirmative defenses of res judicata, forum shopping, prescription, and lack of cause of action.

RTC Manila ruled in favor of Keyser, and declared the auction sale as null and void, and ordered RoD to reinstate the title of Keyser.

- when Sps Suntay registered the Certificate of Sale, the condominium unit was already registered in the name of Keyser. 

- also the auction sale was irregular due to lack of posting and publication of notices. 

Sps Suntay elevated the decision to the CA. 

CA denied the appeal.

- Sps Suntay did not acquire the subject property because at the time it was levied, Bayfront had already sold the condominium unit to Keyser. Considering that the judgment debtor had no interest in the property, Sps Suntay, as purchasers at the auction sale, also acquired no interest.

Sps Suntay filed a MR, but it was denied.

Hence, this petition.

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Sps Suntay Contention:

- CA erred in not applying S52 of PD1529 and A1544 of the NCC. Their right as purchasers in a public action should have been preferred because their right acquired thereunder retroacts to the date of registration of the Notice of Levy on January 18, 1995 and the subsequent auction sale on February 23, 1995.

-  Their right over the subject property is superior over that of Keyser because they purchased the subject property in a legitimate auction sale prior to Keyser’s registration of the deed of absolute sale.

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Who has the superior right over Unit G.

Held: Sps Suntay

(1) Sps Suntay properly relied on the Certificate of Title of Bayfront

The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative thereto by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry. 

In the case, the subject property was registered land under the Torrens System covered by CCT No. 15802 with Bayfront as the registered owner. At the time that the Notice of Levy was annotated on January 18, 1995, the title had no previous encumbrances and liens. Evidently, it was a clean title. The Certificate of Sale, pursuant to an auction sale, was also annotated on April 7,1995, with Bayfront still as the registered owner.

It was only on Mar 12, 1996, almost a year later, that Keyser was able to register its Deed of Absolute Sale with Bayfront. Prior to such date, Spouses Suntay appropriately relied on the Torrens title of Bayfront to enforce the latter’s judgment debt.

Because "the act of registration is the operative act to convey or affect the land insofar as third persons are concerned," it follows that where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore farther than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto.

(2) Levy on execution is superior to the subsequent registration of the deed of absolute sale.

The doctrine is well-settled that 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, the validity of the execution sale should be maintained because it retroacts to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory.

In this case, the contract to sell between Keyser and Bayfront was executed on Oct 20, 1989, but the deed of absolute sale was only made on Nov 9, 1995 and registered on March 12, 1996. The Notice of Levy in favor of Sps Suntay was registered on Jan 18, 1995, while the Certificate of Sale on April 7, 1995, both dates clearly ahead of Keyser’s registration of its Deed of Absolute Sale. Evidently, applying the doctrine of primus tempore, potior jure(first in time, stronger in right), Spouses Suntay have a better right than Keyser.

In the case of [Uy v. Spouses Medina], the Court wrote:

The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that the property involved was duly covered by the Torrens system which works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land. The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale. This is so because an attachment is a proceeding in rem. It is against the particular property, enforceable against the whole world. The attaching creditor acquires a specific lien on the attached property which nothing can subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means that the property attached is an indebted thing and a virtual condemnation of it to pay the owner’s debt. The lien continues until the debt is paid, or sale is had under execution issued on the judgment, or until the judgment is satisfied, or the attachment discharged or vacated in some manner provided by law.

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the CA are REVERSED and SET ASIDE. Accordingly, the Court hereby declares the auction sale as valid and binding on KEYSER.