G.R. No. 156318; September 5, 2011
SPOUSES ANSELMO and PRISCILLA BULAONG, Petitioners, vs. VERONICA GONZALES, Respondent.

FACTS

This case involves conflicting claims over two parcels of land originally registered in the names of Fortunato E. Limpo (and spouse) and Pacifica E. Limpo (and spouse). The properties were mortgaged by the daughter, Regina Christi Limpo, to petitioners Spouses Bulaong on January 13, 1993, to secure a loan of ₱4,300,000.00. Before the mortgage, petitioners allegedly verified with the Register of Deeds of Bulacan, Atty. Elenita Corpus, who assured them the titles were clear. After execution, they sought to annotate the mortgage but learned the Register of Deeds’ copies were destroyed in a 1987 fire. They were convinced to cause reconstitution of the titles, which were issued on February 4, 1993. Subsequently, on February 24, 1993, new titles were issued in Regina’s name upon extrajudicial settlement of her parents’ estate.
Petitioners discovered that these new titles contained an annotation of a “NOTICE OF LEVY ON EXECUTION” (Entry No. 7808) dated January 4, 1993, in favor of respondent Veronica Gonzales. This levy arose from a writ of execution issued on December 29, 1992, in a criminal case where Regina was ordered to pay Gonzales actual damages. The levy was based on unregistered Deeds of Absolute Sale dated November 5, 1991, purportedly transferring the properties from Regina’s parents to her. The notice was entered in the Primary Entry Book on January 4, 1993, but was not on the original titles as they were still in the parents’ names at that time.
To satisfy the judgment debt, the properties were sold at public auction to Gonzales on June 8, 1993. After the redemption period, her titles were consolidated, and a final deed of sale was annotated on June 24, 1994. Meanwhile, petitioners extrajudicially foreclosed the mortgage, with the sheriff’s auction sale held on August 22, 1994, where they were the highest bidders. The Certificate of Sale in their favor was inscribed on August 23, 1994.

ISSUE

The core legal issue is the priority of rights between the two conflicting claims: whether the mortgage right of petitioners Spouses Bulaong or the levy on execution and subsequent auction purchase by respondent Veronica Gonzales has a better right to the subject properties.

RULING

The Supreme Court ruled in favor of respondent Veronica Gonzales. The levy on execution in her favor, annotated on January 4, 1993, is superior to the petitioners’ mortgage, which was annotated only on March 1, 1993. The Court applied the principle of “first in time, first in right” under the rules of registration. The notice of levy, having been entered in the Primary Entry Book of the Registry on January 4, 1993, constituted effective registration that bound the world from that date, even though the annotation on the certificates of title themselves occurred later. In contrast, the petitioners’ mortgage was registered only on March 1, 1993. Therefore, Gonzales’s levy, being earlier registered, acquired priority over the subsequently registered mortgage.
The Court rejected the petitioners’ argument that they were mortgagees in good faith, finding that their failure to discover the prior levy, which was a matter of public record, constituted negligence. The assurance by the Register of Deeds did not relieve them of the duty to exercise due diligence. Furthermore, the Court noted that the extrajudicial settlement of the estate by Regina was defective for lack of the required bond, but this did not invalidate Gonzales’s prior accrued rights from the levy. Consequently, the Court of Appeals’ decision reversing the Regional Trial Court and upholding Gonzales’s titles was affirmed.