Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 130223 August 19, 2009
RURAL BANK OF STA. BARBARA [PANGASINAN], INC., Petitioner,
vs.
THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, INC., Respondent.
D E C I S I O N
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision1 dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders dated 9 October 1995 and 27 February 1996 of the Regional Trial Court (RTC), Branch 43, of Dagupan City, in Civil Case No. D-10583.
Spouses Tomas and Maria Soliven (spouses Soliven) were the registered owners, under Transfer Certificate of Title (TCT) No. T-125213, of a parcel of land located in Barangay Maninding, Sta. Barbara, Pangasinan (subject property). On 18 May 1992, the spouses Soliven sold the subject property to respondent Manila Mission of the Church of Jesus Christ of Latter Day Saints, Inc. (Manila Mission). However, it was only on 28 April 1994 when TCT No. T-125213 in the name of the spouses Soliven was cancelled, and TCT No. 195616 was issued in the name of respondent.
In the meantime, on 15 April 1993, petitioner Rural Bank of Sta. Barbara (Pangasinan), Inc. filed with the RTC a Complaint against the spouses Soliven for a sum of money, docketed as Civil Case No. D-10583. The Complaint of petitioner included a prayer for the issuance of a Writ of Preliminary Attachment.
In an Order dated 7 May 1993, the RTC ordered the issuance of the Writ of Attachment petitioner prayed for, to wit:
WHEREFORE, let a Writ of Attachment be issued against all the properties of [Spouses Soliven] not exempt from execution or so much thereof as may be sufficient to satisfy the [herein petitioner’s] principal claim of ₱338,000.00 upon filing of [petitioner’s] bond in the amount of ₱100,000.00.2
Upon the filing by petitioner of the required bond, the RTC issued the Writ of Attachment on 21 May 1993. Acting on the authority of said Writ, Sheriff Reynaldo C. Daray attached the subject property, which was then still covered by TCT No. T-125213 in the name of the spouses Soliven. The Writ of Attachment was annotated on TCT No. T-125213 on 24 May 1993. Thus, when TCT No. T-125213 of the spouses Soliven was cancelled and TCT No. 195616 of petitioner was issued on 28 April 1994, the annotation on the Writ of Attachment was carried from the former to the latter.
While Civil Case No. D-10583 was still pending before the RTC, respondent executed an Affidavit claiming title and ownership over the subject property, and requested the Ex-Officio Provincial and City Sheriff to release the said property from attachment. The Sheriff, however, advised respondent to file a motion directly with the RTC.
On 16 March 1995, respondent filed with the RTC, in Civil Case No. D-10583, a Motion to Release Property from Attachment, to which petitioner, in turn, filed an Opposition. After hearing, the RTC issued an Order on 9 October 1995 discharging the subject property from attachment. The RTC decreed in said Order:
WHEREFORE, the Court hereby directs the Ex-Officio Provincial Sheriff of Pangasinan and City Sheriff of Dagupan to discharge and release the subject land from attachment and orders the notice of attachment on T.C.T. No. 195616 of the Register of Deeds of Pangasinan be cancelled.3
Petitioner filed a Motion for Reconsideration of the 9 October 1995 Order of the RTC, arguing that it had a better right over the subject property and that the filing by respondent with the RTC, in Civil Case No. D-10583, of a Motion to Release Property from Attachment, was the improper remedy. In an Order dated 27 February 1996, the RTC denied the Motion for Reconsideration of petitioner for lack of merit.
On 12 April 1997, petitioner filed a Petition for Certiorari with this Court, alleging that the RTC committed grave abuse of discretion, amounting to lack or excess of jurisdiction, in canceling the Writ of Attachment and ordering the release of the subject property. The Petition was docketed as G.R. No. 124343. In a Resolution dated 27 May 1997, this Court referred the case to the Court of Appeals for appropriate action.
The Court of Appeals docketed the Petition for Certiorari as CA-G.R. SP No. 41042. On 29 July 1997, the Court of Appeals issued the assailed Decision dismissing the Petition.
Hence, petitioner again comes before this Court via the present Petition for Review, contending that the Court of Appeals erred in not finding grave abuse of discretion on the part of the RTC when the latter directed the release of the subject property from attachment. Petitioner insists that it has a better right to the subject property considering that: (1) the attachment of the subject property in favor of petitioner was made prior to the registration of the sale of the same property to respondent; and (2) respondent availed itself of the wrong remedy in filing with the RTC, in Civil Case No. D-10583, a Motion to Release Property from Attachment. We shall discuss ahead the second ground for the instant Petition, a matter of procedure, since its outcome will determine whether we still need to address the first ground, on the substantive rights of the parties to the subject property.
Propriety of the Motion to Release Property from Attachment
According to petitioner, the Motion to Release Property from Attachment filed by respondent before the RTC, in Civil Case No. D-10583, is not the proper remedy under Section 14, Rule 57 of the Rules of Court,4 which provides:
SEC. 14. Proceedings where property claimed by third person.—If the property attached is claimed by any person other than the party against whom attachment had been issued or his agent, and such person makes an affidavit of his title thereto, or right to the possession thereof, stating the grounds of such right or title, and serves such affidavit upon the sheriff while the latter has possession of the attached property, and a copy thereof upon the attaching party, the sheriff shall not be bound to keep the property under attachment, unless the attaching party or his agent, on demand of the sheriff, shall file a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied upon. In case of disagreement as to such value, the same shall be decided by the court issuing the writ of attachment. No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the bond.
The sheriff shall not be liable for damages for the taking or keeping of such property, to any such third-party claimant, if such bond shall be filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property, or prevent the attaching party from claiming damages against a third-party claimant who filed a frivolous or plainly spurious claim, in the same or a separate action.
When the writ of attachment is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff is sued for damages as a result of the attachment, he shall be represented by the Solicitor General, and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of the funds to be appropriated for the purpose.
Petitioner argues that, pursuant to the aforequoted section, the remedy of a third person claiming to be the owner of an attached property are limited to the following: (1) filing with the Sheriff a third-party claim, in the form of an affidavit, per the first paragraph of Section 14; (2) intervening in the main action, with prior leave of court, per the second paragraph of Section 14, which allows a third person to vindicate his/her claim to the attached property in the "same x x x action"; and (3) filing a separate and independent action, per the second paragraph of Section 14, which allows a third person to vindicate his/her claim to the attached property in a "separate action."
Respondent explains that it tried to pursue the first remedy, i.e., filing a third-party claim with the Sheriff. Respondent did file an Affidavit of Title and Ownership with the Sheriff, but said officer advised respondent to file a motion directly with the RTC in the main case. Respondent heeded the Sheriff’s advice by filing with the RTC, in Civil Case No. D-10583, a Motion to Release Property from Attachment. The Court of Appeals recognized and allowed said Motion, construing the same as an invocation by respondent of the power of control and supervision of the RTC over its officers, which includes the Sheriff.
We agree with the Court of Appeals on this score. The filing by respondent of the Motion to Release Property from Attachment was made on the advice of the Sheriff upon whom respondent served its Affidavit of Title and Ownership. Respondent should not be faulted for merely heeding the Sheriff’s advice. Apparently, the Sheriff, instead of acting upon the third-party claim of respondent on his own, would rather have some direction from the RTC. Indeed, the Sheriff is an officer of the RTC and may be directed by the said court to allow the third-party claim of respondent. Therefore, the filing of the Motion in question can be deemed as a mere continuation of the third-party claim of respondent, in the form of its Affidavit of Title and Ownership, served upon the Sheriff, in accord with the first paragraph of Section 14, Rule 57 of the Rules of Court.
Alternatively, we may also consider the Motion to Release Property from Attachment, filed by respondent before the RTC, as a Motion for Intervention in Civil Case No. D-10583, pursuant to the second paragraph of Section 14, Rule 56, in relation to Rule 19 of the Rules of Court. Respondent, to vindicate its claim to the subject property, may intervene in the same case, i.e., Civil Case No. D-10583, instituted by petitioner against the spouses Soliven, in which the said property was attached. Respondent has the personality to intervene, as it "is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof."5 The RTC, in acting upon and granting the Motion to Release Property from Attachment in its Order dated 9 October 1995, is deemed to have allowed respondent to intervene in Civil Case No. D-10583.
Moreover, it may do petitioner well to remember that rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that on the balance, technicalities take a backseat to substantive rights, and not the other way around. Thus, if the application of the Rules would tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the rules, or except a particular case from its operation.6 Hence, even if the Motion to Release Property from Attachment does not strictly comply with Section 14, Rule 56 of the Rules of Court, the RTC may still allow and act upon said Motion to render substantive justice.
This leads us to the substantive issue in this case, on which between the two transactions should be given priority: the previous yet unregistered sale of the subject property by the spouses Soliven to respondent, or the subsequent but duly annotated attachment of the same property by petitioner.
Previous yet unregistered sale versus subsequent but duly annotated attachment
Petitioner does not dispute the allegation of respondent that the subject property was sold by the spouses Soliven to respondent on 18 May 1992, before petitioner instituted Civil Case No. D-10583 against the spouses Soliven on 15 April 1993; the RTC ordered the issuance of the Writ of Attachment on 7 May 1993; and the attachment of the subject property pursuant to the Writ on 27 May 1993.
Neither did petitioner offer evidence to counter the following documents presented by respondent establishing the fact of the sale of the subject property to the latter by the spouses Soliven: (1) the notarized Deed of Sale dated 18 May 1992; (2) BPI Manager’s Check No. 010685 dated 8 May 1992 in the sum of ₱42,500.00 to represent the tender of payment of capital gains tax; (3) BIR Official Receipt No. 0431320 dated 18 May 1992 of BPI Check No. 010625 for the payment of the sum of ₱8,5000.00; and (4) a letter dated 11 August 1992 of Manila Mission’s former counsel, Lim Duran & Associates, to the Revenue District Officer, District 7, Bureau of Internal Revenue, relative to its request for the "reconsideration/condonation" of the assessment of the capital gains tax on its purchase of the subject property.
Petitioner, however, invokes jurisprudence wherein this Court in a number of instances allegedly upheld a subsequent but duly annotated attachment, as opposed to a previous yet unregistered sale of the same property. Petitioner particularly calls our attention to the following paragraph in Ruiz, Sr. v. Court of Appeals7:
[I]n case of a conflict between a vendee and an attaching creditor, an attaching creditor who registers the order of attachment and the sale of the property to him as the highest bidder acquires a valid title to the property, as against a vendee who had previously bought the same property from the registered owner but who failed to register his deed of sale. This is because registration is the operative act that binds or affects the land insofar as third persons are concerned. It is upon registration that there is notice to the whole world.
In the more recent case Valdevieso v. Damalerio,8 we have expounded on our foregoing pronouncement in Ruiz.
On 5 December 1995, therein petitioner Bernardo Valdevieso (Valdevieso) bought a parcel of land from spouses Lorenzo and Elenita Uy (spouses Uy), the registered owners thereof. On 19 April 1996, therein respondents, spouses Candelario and Aurea Damalerio (spouses Damalario), filed a Complaint against the spouses Uy for a sum of money before the RTC of General Santos City. On 23 April 1996, the RTC issued a Writ of Preliminary Attachment by virtue of which the subject parcel of land was levied. The levy was duly recorded in the Register of Deeds, and annotated on the TCT of the spouses Uy over the subject parcel of land. It was only on 6 June 1996 that the TCT in the name of the spouses Uy was cancelled, and a new one issued in the name of Valdevieso. As in the case at bar, the annotation on the attachment was carried over to Valdevieso’s TCT. Valdevieso filed a third-party claim before the RTC seeking to annul the attachment. In a resolution, the RTC ruled in Valdevieso’s favor, but the Court of Appeals reversed said RTC resolution. On appeal, we adjudged:
The sole issue in this case is whether or not a registered writ of attachment on the land is a superior lien over that of an earlier unregistered deed of sale.
x x x x
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.
Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when petitioner had his purchase recorded. The effect of the notation of said lien was to subject and subordinate the right of petitioner, as purchaser, to the lien. Petitioner acquired ownership of the land only from the date of the recording of his title in the register, and the right of ownership which he inscribed was not absolute but a limited right, subject to a prior registered lien of respondents, a right which is preferred and superior to that of petitioner.9
It is settled, therefore, that a duly registered levy on attachment takes preference over a prior unregistered sale.
Nonetheless, respondent argues that there is a special circumstance in the case at bar, which should be deemed a constructive registration of the sale of the subject property in its favor, preceding the attachment of the same property by petitioner.
Knowledge of previous yet unregistered sale
In Ruiz, the very case cited by petitioner, we made a qualification of the general rule that a duly annotated attachment is superior to an unregistered prior sale. In fact, we resolved Ruiz in favor of the vendee in the unregistered prior sale, because knowledge of the unregistered sale by the attaching creditor is deemed equivalent to registration. We explained in Ruiz:
But where a party has knowledge of a prior existing interest which is unregistered at that time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. Knowledge of an unregistered sale is equivalent to registration. As held in Fernandez v. Court of Appeals [189 SCRA 780 (1990)],
Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that the registration of the deed is the operative act to bind or affect the land insofar as third persons are concerned. But where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. The torrens system cannot be used as a shield for the commission of fraud (Gustillo v. Maravilla, 48 Phil. 442). As far as private respondent Zenaida Angeles and her husband Justiniano are concerned, the non-registration of the affidavit admitting their sale of a portion of 110 square meters of the subject land to petitioners cannot be invoked as a defense because (K)nowledge of an unregistered sale is equivalent to registration (Winkleman v. Veluz, 43 Phil. 604).
This knowledge of the conveyance to Honorato Hong can not be denied. The records disclose that after the sale, private respondent was able to introduce improvements on the land such as a concrete two-door commercial building, a concrete fence around the property, concrete floor of the whole area and G.I. roofing. Acts of ownership and possession were exercised by the private respondent over the land. By these overt acts, it can not therefore be gainsaid that petitioner was not aware that private respondent had a prior existing interest over the land.10
In the case at bar, respondent averred in its Motion to Release Property from Attachment that the construction of a church edifice on the subject property was about to be finished at the time the Writ of Preliminary Attachment was implemented on 24 May 1993, and that the construction of the church was actually completed by mid-1993. Respondent asserts that since petitioner did not deny these allegations, much less adduce evidence to the contrary, then the latter tacitly recognized the construction of the church.
Petitioner contends, on the other hand, that respondent failed to present evidence to prove the fact that a church had already been constructed on the subject property by the time the said property was attached, thus, constituting notice to petitioner of the claim or right of respondent to the same.lawph!1
Was there, at the time of the attachment, knowledge on the part of petitioner Rural Bank of the interest of respondent Manila Mission on the subject property?
If the allegation of respondent Manila Mission anent the building of the chapel even before the issuance of the writ of attachment is true, this case would be similar to Ruiz where the vendee of the subject property was able to introduce improvements. However, respondent Manila Mission presented no evidence of the building of the chapel other than its bare allegation thereof. More importantly, even assuming for the sake of argument that the chapel was indeed being built at the time of the attachment of the property, we cannot simply apply Ruiz and conclude that this confirms knowledge of a previous conveyance of the property at that time. In Ruiz, the attaching party was the wife of the vendor of the subject property, whom she sued for support. It was thus very probable that she knew of the sale of the property to the vendee therein, considering that the vendee had already introduced improvements thereon. In the case at bar, there is no special relationship between petitioner Rural Bank and the spouses Soliven sufficient to charge the former with an implied knowledge of the state of the latter’s properties. Unlike in the sale of real property, an attaching creditor is not expected to inspect the property being attached, as it is the sheriff who does the actual act of attaching the property.
Neither did respondent Manila Mission present any evidence of knowledge on the part of petitioner Rural Bank of the prior existing interest of the former at the time of the attachment. Respondent Manila Mission merely argues that there was a tacit recognition on the part of petitioner Rural Bank of the construction of the chapel when the latter did not deny this allegation in its Opposition to the Motion to Discharge Property from Attachment.
The Motion, however, merely mentions the construction of the chapel and does not charge petitioner Rural Bank with knowledge of the construction. There was, therefore, nothing to deny on the part of petitioner Rural Bank, as the mere existence of such construction at that time would not affect the right of petitioner Rural Bank to its lien over the subject property. Also, the mention in the Motion of the construction of the chapel would have the effect of being a notice of an adverse third-party claim only at the time of such Motion. Since such notice, which was deemed in Ruiz as constructive registration of the sale, was effected only after the attachment of the subject property, it could not affect the validity of the attachment lien.
In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v. Damalerio oblige us to rule that the duly registered levy on attachment by petitioner Rural Bank takes preference over the prior but then unregistered sale of respondent Manila Mission. There was likewise no evidence of knowledge on the part of petitioner Rural Bank of any third-party interest in the subject property at the time of the attachment. We are, therefore, constrained to grant the instant Petition for Review and nullify the Orders of the RTC discharging the subject property from attachment.
Nevertheless, respondent Manila Mission would not be left without remedy. It could file a counter-bond pursuant to Section 12, Rule 5711 of the Rules of Court in order to discharge the attachment. If respondent Manila Mission fails to do the same and the property ends up being subjected to execution, respondent can redeem the property and seek reimbursement from the spouses Soliven.
WHEREFORE, the instant Petition for Review on Certiorari is hereby GRANTED. The Decision dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders of the Regional Trial Court of Dagupan City dated 9 October 1995 and 27 February 1996 issued in Civil Case No. D-10583 is hereby REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
Acting Chairperson
WE CONCUR:
CONCHITA CARPIO MORALES*
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice |
ANTONIO EDUARDO B. NACHURA
Associate Justice |
DIOSDADO M. PERALTA
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
MINITA V. CHICO-NAZARIO**
Associate Justice
Acting Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
Footnotes
* Per Special Order No. 679 dated 3 August 2009, signed by Chief Justice Reynato S. Puno, designating Associate Justice Conchita Carpio Morales to replace Associate Justice Consuelo Ynares-Santiago, who is on official leave.
** Per Special Order No. 681 dated 3 August 2009, signed by Chief Justice Reynato S. Puno, designating Associate Justice Minita V. Chico-Nazario as Acting Chairperson to replace Associate Justice Consuelo Ynares-Santiago, who is on official leave.
1 Penned by Associate Justice Ricardo P. Galvez with Associate Justices Gloria C. Paras and B.A. Adefuin-de la Cruz, concurring; rollo, pp. 40-46.
2 Rollo, p. 47.
3 Id. at 59.
4 Id. at 269.
5 Rule 19, Section 1 of the Rules of Court provides:
SECTION 1. Who may intervene.—A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding.
6 Coronel v. Desierto, 448 Phil. 894, 902-903 (2003).
7 414 Phil. 311, 323 (2001).
8 492 Phil. 51 (2005).
9 Id. at 55-58.
10 Ruiz, Sr. v. Court of Appeals, supra note 7 at 323-324.
11 SEC. 12. Discharge of attachment upon giving counter-bond.—After a writ of attachment has been enforced, the party whose property has been attached, or the person appearing on his behalf, may move for the discharge of the attachment wholly or in part on the security given. The court shall, after due notice and hearing, order the discharge of the attachment if the movant makes a cash deposit, or files a counter-bond executed to the attaching party with the clerk of the court where the application is made, in an amount equal to that fixed by the court in the order of attachment, exclusive of costs. But if the attachment is sought to be discharged with respect to a particular property, the counter-bond shall be equal to the value of that property as determined by the court. In either case, the cash deposit or the counter-bond shall secure the payment of any judgment that the attaching party may recover in the action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an attachment in accordance with the provisions of this section, the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so released. Should such counter-bond for any reason be found to be or become insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new order of attachment.
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