Title
The Manila Banking Corp. vs. Silverio
Case
G.R. No. 132887
Decision Date
Aug 11, 2005
Purificacion Ver sold properties to Ricardo Silverio Sr., unregistered. TMBC attached them for debt; Edmundo Silverio claimed purchase. SC ruled sale simulated, void; TMBC's levy valid, annotations upheld.
ownership dispute
parcels of land
void sale

Case Summary (G.R. No. 132887)

Factual Background

Purificacion Ver was the registered owner of two parcels of land in La Huerta, Paranaque City covered by TCT Nos. 31444 (452448) and 45926 (452452). On 16 April 1979 she executed an absolute deed of sale to Ricardo C. Silverio, Sr. (Ricardo, Sr.) for P1,036,475.00 but the deed was not registered; title thus remained in Purificacion Ver. On 22 February 1990, TMBC filed a collection action in the RTC of Makati City with application for preliminary attachment against Ricardo, Sr. and Delta Motors Corporation. By order of Branch 62, notices of levy on attachment and writs of attachment were inscribed on the two TCTs on 02 July 1990. On 29 March 1993 the trial court rendered judgment in favor of TMBC in the underlying collection case, and that decision was taken to the Court of Appeals for review.

Post-Judgment Developments and Petition for Cancellation

On 22 July 1993 Edmundo S. Silverio informed TMBC that the two parcels were no longer owned by Ricardo, Sr. and requested cancellation of the annotations. He alleged a sale from Ricardo, Sr. to him dated 11 September 1989. When TMBC did not act, Edmundo filed on 17 December 1993 in the RTC of Makati City a petition for "Cancellation of Notice of Levy on Attachment and Writ of Attachment" on the two TCTs, alleging that the properties had been sold to him before the levy and thus could not be levied to answer for Ricardo, Sr.'s debt.

Trial Court Proceedings and Findings

TMBC answered with a compulsory counterclaim and contended that the 1989 sale was void. After trial the RTC, Branch 145, dismissed Edmundo’s petition and also dismissed TMBC’s counterclaim for lack of merit. The trial court found the purported deed of sale to be fictitious and simulated. It emphasized that what appeared in the notarial registry was not the deed of sale but an affidavit of one Maria J. Segismundo, and that no effective, valid and legal sale had been executed between Ricardo, Sr. and Edmundo. The court concluded that because there was no valid sale, TMBC had the right to effect the levy and Edmundo could not obtain cancellation of the annotations.

Court of Appeals Decision

On appeal the Court of Appeals reversed and set aside the RTC decision and ordered the Register of Deeds of Paranaque City to cancel the notice of levy and writ of attachment on the two TCTs. The appellate court held that the sale between Ricardo, Sr. and Edmundo was not void and that, assuming it were void, only the parties to the sale and their assigns could attack it. The CA further ruled that the remedy of accion pauliana is subsidiary and can be invoked only after the creditor has exhausted all other remedies against the debtor’s other properties, and that TMBC had not shown it had exhausted such remedies.

Issues Presented on Certiorari

The principal issue before the Supreme Court was whether the properties were owned by Ricardo C. Silverio, Sr. or by Edmundo S. Silverio at the time of the levy on 02 July 1990. Resolution of ownership required deciding whether the alleged sale dated 11 September 1989 was valid or was an absolutely simulated transaction void ab initio. Secondary questions included whether TMBC, as a third party creditor, could challenge the validity of the sale and whether the Court of Appeals erred in applying the subsidiarity doctrine of accion pauliana to bar TMBC’s challenge.

Parties’ Contentions

TMBC contended that the 1989 sale was simulated and void and that it therefore had the right to levy the properties as belonging to its debtor, Ricardo, Sr. TMBC argued that badges of fraud indicated simulation and that it need not resort to accion pauliana where the contract is absolutely simulated and therefore inexistent. Edmundo maintained that the sale was valid and that TMBC, as a subsequent creditor, lacked standing to impugn the sale absent proof that it had exhausted other remedies against the debtor’s property.

Standard of Review and Exception to Factual Deference

The Court noted that the question of simulation is essentially factual and that in a Rule 45 petition the Supreme Court generally refrains from reweighing factual findings. The Court further recognized the established exception permitting review where the factual findings of the trial court and the appellate court are in conflict. Given the divergent findings below, the Court proceeded to examine the evidence de novo to determine whether the sale was simulated.

Supreme Court’s Evaluation of the Evidence and Findings on Simulation

The Supreme Court found the trial court’s factual findings more consistent with the evidence. The Court identified multiple indicia of simulation: first, absence of proof that the sale existed prior to the levy because the notarized deed did not appear in the records of the notary public or in the RMAO until 1993; the only notarized instrument on file for 11 September 1989 was an affidavit of Maria J. Segismundo and not the deed of sale allegedly acknowledged by Atty. Anacleto T. Lacanilao, Jr.; second, Edmundo’s evasive testimony concerning payment of the stated consideration of P3,109,425.00 and his inability to recall whether he personally handed the money to Ricardo, Sr.; third, Edmundo’s failure to assert acts of dominium over the properties until after TMBC’s lien and his lack of possession, absence of registration efforts until 1993, and failure to collect rentals or otherwise exercise ownership. The Court held that these circumstances constituted badges of fraud and simulation under Art. 1346, Art. 1345, and Art. 1409, and supported the conclusion that the transaction was absolutely simulated and therefore void ab initio.

Legal Analysis on Rights of Third Persons and the Role of Accion Pauliana

The Court distinguished absolutely simulated contracts from rescissible transfers undertaken in fraud of creditors. It observed that an absolutely simulated contract is inexistent and may be attacked by any creditor whose interests are directly affected, citing Art. 1421 and authoritative doctrine. The Court rejected the Court of Appeals’ application of Article 117 New Civil Code and the subsidiarity requirement of accion pauliana to bar TMBC’s challenge. The Court explained that whereas accion pauliana and rescission under Art. 1380–1383 apply to otherwise valid transfers rescindable for fraud, an absolutely simulated contract produces no le

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