Spouses Rodriguez vs. Court of Appeals

Factual Background

The registered owners of the subject house and lot were Spouses Antonio and Maridel Calingo, the property being mortgaged to the Development Bank of the Philippines and later to HMDF/ Pag-ibig. On April 27, 1992, the Calingos executed a deed of sale with assumption of mortgage in favor of Spouses Christopher and Ma. Angelica Barrameda, who paid portions of the purchase price by checks and later completed payment on August 21, 1992. The Barramedas filed an affidavit of adverse claim with the Register of Deeds of Paranaque on May 29, 1992, which was inscribed on the certificate of title as Entry No. 3439, and they took possession on June 2, 1992. The Calingos informed HMDF of the sale by letter dated April 23, 1992, but that letter and an affidavit were served upon HMDF only on October 2, 1992.

Levy, Sheriff’s Sale and Third-Party Proceedings

A writ of execution issued in favor of the Rodriguezes in Civil Case No. 88-2159 was enforced by annotation of a notice of levy with attachment on the certificate of title on July 13, 1992. The Barramedas discovered a notice of sheriff’s sale posted on their property on November 9, 1992. Pursuant to Rule 39, Sec. 17, they served a Notice of Third Party Claim on the sheriff and filed with the Regional Trial Court of Makati a petition for quieting of title with a prayer for preliminary injunction on December 2, 1992, seeking cancellation of the levy and declaration of their ownership.

Trial Court Proceedings

The trial court ruled for Spouses Francisco and Bernardina Rodriguez and dismissed the Barramedas’ petition for quieting of title. The court held that the inscription of the Barramedas’ adverse claim on the certificate of title was insufficient to establish ownership against third parties because the deed of sale with assumption of mortgage was not registered. The court further found that the adverse claim lost its efficacy after the lapse of thirty days under the Land Registration Act and concluded that there was collusion between the Barramedas and the Calingos to defraud potential creditors.

Court of Appeals Ruling

The Court of Appeals reversed the trial court, relying on Sajonas v. Court of Appeals, and held that the inscription of the Barramedas’ adverse claim on the certificate of title was effective at the time the levy was made on July 13, 1992. The appellate court reasoned that the Rodriguezes were charged with notice of the Barramedas’ interest and that the notice of levy could not prevail over the existing adverse claim inscribed on the certificate of title.

Petitioners’ Contentions

The Rodriguezes argued to the Supreme Court that the Barramedas had no valid title and therefore could not invoke the remedy of quieting of title; that the affidavit of adverse claim inscribed on the certificate of title was insufficient to establish their claim against third parties; and that there was collusion between the Barramedas and the Calingos to defeat creditors.

Issue Presented

The dispositive issue was whether the Barramedas’ inscription of an adverse claim on the certificate of title could prevail over a levy on execution made to satisfy a judgment against the registered owners, the Calingos.

Supreme Court Ruling

The Court held that the Barramedas’ adverse claim could not prevail over the levy on execution. The petition was granted. The Supreme Court set aside the decision and resolution of the Court of Appeals and reinstated the decision of the Regional Trial Court, Makati, in Civil Case No. 92-3524. The Court imposed no costs.

Legal Basis and Reasoning

The Court grounded its ruling on Presidential Decree No. 1529. It emphasized Section 51’s rule that no voluntary instrument affecting registered land shall take effect as a conveyance or bind the land as to third persons until the act of registration in the Office of the Register of Deeds. The deed of sale with assumption of mortgage executed by the Calingos and the Barramedas was a registrable voluntary instrument and was not registered. The Court invoked the doctrine in L.P. Leviste and Company, Inc. v. Noblejas to explain when an adverse claim may affect third parties: an adverse claim may suffice where the registered owner refuses to surrender his duplicate certificate of title and the grantee files a statement of adverse claim under Section 110 of Act No. 496 (now PD 1529). The Court found no evidence that the Barramedas or the Calingos endeavored to obtain the owner’s duplicate certificate from HMDF so as to register the deed, nor that they sought HMDF’s consent despite a mortgage clause expressly prohibiting sale without the mortgagee’s written consent. Section 70 of PD 1529, the