In a dispute over real property, the Supreme Court ruled that an earlier unregistered sale takes precedence over a later registered levy if ownership had already transferred to the buyer before the levy was made. This decision clarifies the rights of parties in property transactions and provides guidance on determining the better right of possession when competing claims arise. It emphasizes that a judgment creditor can only acquire rights to property that the judgment debtor actually owns at the time of the levy.
Possession Prevails: The Tale of an Unregistered Deed and a Subsequent Levy
This case revolves around a dispute over a 7.3-hectare parcel of land in Nueva Ecija. Jun Miranda claimed ownership based on a Deed of Absolute Sale from 1996, which, however, remained unregistered. Years later, Spouses Ernesto and Aida Mallari sought to recover possession of the property through an execution sale after winning a judgment against the previous owners, Spouses Domiciano and Carmelita Reyes. The Mallaris had the Notice of Levy annotated on the title. The central legal question is: Who has the better right of possession – the prior unregistered buyer or the subsequent judgment creditor who registered the levy?
The lower courts sided with the Spouses Mallari, prioritizing the registered levy over the prior unregistered sale. The Court of Appeals, relying on the Property Registration Decree, emphasized that registration serves as constructive notice to all persons, thus giving preference to the registered levy. However, the Supreme Court reversed this decision, focusing on the nature of an accion publiciana, which is a plenary action to determine the better right of possession independently of title. The court clarified that while an accion publiciana primarily concerns possession, it may also provisionally resolve issues of ownership to determine who has the better right to possess.
The Supreme Court highlighted that ownership of the subject property had already been transferred to Miranda in 1996 through the execution of the Deed of Absolute Sale and the subsequent transfer of possession, both constructively and actually. Article 1498 of the Civil Code states that “when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract.” Because the Spouses Reyes no longer owned the property at the time of the levy, it could not be made answerable for their debts. The levy on execution can only affect properties that incontrovertibly belong to the judgment debtor.
Section 9(b), Rule 39 of the Rules of Court authorizes a “levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution.” This presupposes that the property to be levied belongs to and is owned by the judgment debtor.
The Court emphasized the principle that a judgment creditor only acquires the interest possessed by the judgment debtor in the auctioned property; thus, the principle of caveat emptor (buyer beware) applies even in execution sales. If the judgment debtor has no interest in the property, the purchaser at the execution sale acquires nothing. In this case, the Spouses Mallari acquired nothing because the Spouses Reyes had already transferred ownership to Miranda seven years prior to the levy.
The court also cited the case of Sapto v. Fabiana, emphasizing that registration is not necessary to make a sale valid and effective between the parties; actual notice is equivalent to registration. Building on this principle, the Supreme Court ruled that Miranda had a better right of possession. His acquisition of ownership prior to the levy on execution prevailed over the Mallaris’ claim. The Court then issued a final note, reiterating that the ruling was limited to determining the better right of possession, and that it did not bar future actions to definitively resolve the issue of ownership.
While the Court acknowledged Miranda’s better right of possession, it denied his claim for damages due to the lack of sufficient factual basis. The Supreme Court, while reversing the Court of Appeals decision, left open the possibility of a separate action to definitively determine ownership.
FAQs
| What was the key issue in this case? |
The key issue was determining who had the better right of possession over a property: the prior unregistered buyer or the subsequent judgment creditor who registered a levy on execution. |
| What is an accion publiciana? |
An accion publiciana is a plenary action to recover the better right of possession (possession de jure) of real property, filed when dispossession has lasted for more than one year. |
| Does registration always guarantee ownership? |
No. While registration provides constructive notice, it does not automatically validate a claim if the seller no longer owned the property at the time of the levy, due to a prior transfer. |
| What does caveat emptor mean in the context of execution sales? |
Caveat emptor means “buyer beware.” It implies that the buyer in an execution sale acquires only the rights that the judgment debtor possessed, and the buyer assumes the risk of any existing equities. |
| When does ownership transfer in a sale? |
Ownership typically transfers upon actual or constructive delivery of the property, as stated in Article 1477 of the Civil Code, regardless of registration. |
| What is the effect of non-registration of a sale? |
Non-registration does not invalidate a sale between the parties. Registration primarily protects the buyer against claims of third persons arising from subsequent alienations by the vendor. |
| Can a property be levied upon for the debts of a previous owner? |
No, a property cannot be levied upon for the debts of a previous owner if ownership has already been transferred to another party before the levy. |
| What happens if the judgment debtor no longer owns the property at the time of the levy? |
If the judgment debtor no longer owns the property, the levy does not create any lien in favor of the judgment obligee. There is nothing for the judgment debtor to transfer in the execution sale. |
This case serves as a reminder of the importance of promptly registering property transactions to protect one’s rights against third parties. However, it also highlights that even without registration, a prior transfer of ownership can defeat a subsequent levy on execution. Moving forward, those purchasing properties should diligently check for any unregistered claims or encumbrances.
For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Jun Miranda v. Spouses Ernesto and Aida Mallari, G.R. No. 218343, November 28, 2018
