G.R. No. L-3597 - Landig vs. U.S. Commercial Co.

Marcelo Diaz and Castor Larin owned seven (7) parcels of land in San Luis, Pampanga, in equal, pro-indiviso shares.
Their title to the land was evidenced by Certificates of Title Nos. 21655 and 21659.

On December 18, 1944, Teodoro Landig purchased all of Marcelo Diaz’s rights and interests in the seven parcels via a deed of sale executed before Notary Public A. M. Zarate.
The deed of sale was subsequently registered on December 1, 1948, leading to the cancellation of the original Certificates of Title and the issuance of Certificates Nos. 2634 and 2635.

On February 20, 1941, Marcelo Diaz and Castor Larin secured a P3,000 loan from the Agricultural and Industrial Bank by mortgaging two of the parcels.
Due to non-payment, on December 2, 1948, the Provincial Sheriff of Pampanga executed an extra judicial sale of the mortgaged properties at the instance of the Rehabilitation Finance Corporation (successor to the Agricultural and Industrial Bank).
Prior to the sale, Teodoro Landig, already having acquired Marcelo Diaz’s interest, paid the outstanding loan amount of P4,800.95, including interest.
Consequently, the Rehabilitation Finance Corporation assigned its mortgage interest to Landig by way of a deed of assignment, registered on December 1, 1948.

On June 29, 1948, the U. S. Commercial Company obtained a judgment against Marcelo Diaz amounting to P14,465.61 in civil cases filed in the Court of First Instance of Manila.
With the judgment unpaid, the court issued a writ of execution on September 28, 1948, which was forwarded to the Provincial Sheriff of Pampanga.
The sheriff levied execution on Marcelo Diaz’s one-half interest in the land, and the notice of attachment was registered and annotated on the original Certificates of Title Nos. 21655 and 21659 on September 30, 1948.

On October 23, 1948, Teodoro Landig filed a third party claim with the Provincial Sheriff, asserting his ownership of Marcelo Diaz’s interest in the seven parcels.
Due to this claim, the sheriff required the U. S. Commercial Company to post an indemnity bond of P12,000 to continue with the sale; the bond was duly posted on February 5, 1949.
To prevent the sale from proceeding under the existing circumstances, Teodoro Landig initiated the present legal action, challenging the priority of right over the land.

Whether the right of Teodoro Landig, acquired through the deed of sale executed on December 18, 1944, but registered on December 1, 1948, prevails over the right of the U. S. Commercial Company, which obtained a notice of attachment recorded on September 30, 1948.
Whether the mere execution and possession of a deed of sale constitute a superior title against a prior registered notice of attachment under the Torrens System.

How the provisions of the Land Registration Act (Act No. 496), which governs registered lands under the Torrens System, affect the validity and effectivity of voluntary instruments (such as deeds of sale) versus actions involving attachments executed by court order.
Whether the operative act under the Torrens System is the registration itself, which would determine the priority of rights in conflict situations.