Chua v. Gutierrez

G.R. No. 172316 (December 8, 2010)

Facts:

The case revolves around Townhouse Unit 320 located at Roxas Sea Front Garden, Pasay City, which was originally covered by Transfer Certificate of Title (TCT) No. 127330 in the name of Benito Chua. On July 20, 1994, petitioners Jose and Margarita Chua purchased the property from Benito for P2,800,000.00, but the sale was only registered on January 5, 1995.

Prior to the registration of the sale, on November 11, 1994, respondent Tan Tek Sing filed a suit for collection against Benito and others, which included a request for a writ of attachment. The Regional Trial Court (RTC) issued a writ of preliminary attachment on November 15, 1994, leading to the Sheriff levying on Townhouse Unit 320. A notice of levy was inscribed on TCT No. 127330 on November 18, 1994, while the title was still in Benito's name.

On December 5, 1994, the petitioners filed a motion to exclude the property from the attachment, asserting ownership due to the unregistered Deed of Absolute Sale. The RTC later ruled in favor of the petitioners, excluding the property from the attachment. However, the respondent appealed this decision to the Court of Appeals (CA), which ultimately reversed the RTC's ruling, declaring that the property was subject to the writ of attachment.

The petitioners' subsequent attempts to quash the writ of execution and notice of levy were denied by the RTC. They then filed a petition for certiorari with the CA, which was also dismissed. The CA ruled that the registered writ of attachment created a superior lien over the unregistered deed of sale, leading to the current petition for review on certiorari before the Supreme Court.

Legal Issues:

The primary legal issue in this case is whether a registered writ of attachment constitutes a superior lien over an unregistered deed of sale. The petitioners contended that since they were not the judgment debtors and had acquired the property prior to the attachment, the property should not be subject to execution.

Arguments:

• Petitioners' Arguments:

  1. The property was already owned by them at the time of the levy, and they were not the judgment debtors.
  2. They argued that the attachment should not affect their ownership since they had a valid and binding sale with Benito.
  3. They claimed that the mortgage lien in favor of Philippine American Life Insurance (PHILAM) was superior to the attachment lien.

• Respondent's Arguments:

  1. The respondent maintained that the registered writ of attachment created a superior lien over the property, which was still in Benito's name at the time of the attachment.
  2. The respondent argued that the petitioners' rights were subordinate to the duly recorded attachment, as registration serves as constructive notice to the world.
  3. The respondent contended that the petitioners' claim of good faith was irrelevant, as constructive notice through registration is binding.

Court's Decision and Legal Reasoning:

The Supreme Court affirmed the CA's decision, emphasizing that a duly registered writ of attachment has preference over an unregistered sale. The Court reiterated that registration is the operative act that binds or affects the land concerning third parties. The Court noted that when the petitioners registered their Deed of Absolute Sale on January 5, 1995, the writ of attachment had already been inscribed on the title.

The Court cited the principle that an attachment is a proceeding in rem, which means it is enforceable against the whole world. The lien created by the attachment remains until the debt is satisfied or the attachment is discharged. The Court also highlighted that the petitioners, by purchasing the property, took it subject to the existing attachment, regardless of their good faith or lack of knowledge about the prior attachment.

Furthermore, the Court dismissed the petitioners' argument regarding the mortgage with PHILAM, stating that the release of the mortgage occurred after the attachment was inscribed, and thus did not affect the priority of the attachment lien.

Significant Legal Principles Established:

1. A registered writ of attachment has a superior lien over an unregistered deed of sale.
2. Registration serves as constructive notice to the world, and parties are presumed to have knowledge of all instruments affecting the title.
3. The rights of a purchaser of registered land are subject to any existing liens or encumbrances at the time of purchase, regardless of good faith.