G.R. No. 169541; October 9, 2009
GERMAN CAYTON and the HEIRS OF THE DECEASED SPOUSE CECILIA CAYTON, Petitioners, vs. ZEONNIX TRADING CORPORATION; SPOUSES VICENTE MAÑOSCA and LOURDES MAÑOSCA; MAXIMO CONTRERAS, Ex-Officio Sheriff; and PABLO L. SY, Senior Sheriff for Makati, Metro Manila, Respondents.

FACTS

Spouses Vicente and Lourdes Mañosca owned a house and lot mortgaged to Family Savings Bank (FSB). On July 21, 1981, a levy on attachment was annotated on the title in favor of Zeonnix Trading Corporation pursuant to a writ in a collection suit. Subsequently, on September 1, 1981, the Mañoscas sold the property to spouses German and Cecilia Cayton via a Deed of Absolute Sale with Assumption of Mortgage. The Caytons assumed the FSB mortgage and paid realty taxes but failed to register the deed as the owner’s duplicate title was with FSB. The Caytons later defaulted on the mortgage, leading to the extrajudicial foreclosure and sale of the property at public auction on April 23, 1984, where the Caytons themselves were the highest bidders.
Zeonnix secured a favorable money judgment against Vicente Mañosca on February 3, 1984. As a judgment creditor, Zeonnix sought to redeem the foreclosed property from the Caytons (as auction purchasers) within the redemption period, tendering payment to the Clerk of Court. The Caytons filed a suit for quieting of title, arguing Zeonnix had no right of redemption because all rights to the property had passed to them via the 1981 sale, and alternatively, that Zeonnix’s tender was invalid for initially excluding realty tax payments.

ISSUE

Whether respondent Zeonnix Trading Corporation validly exercised the right of legal redemption over the foreclosed property.

RULING

Yes, Zeonnix validly exercised the right of redemption. The Supreme Court affirmed the Court of Appeals, ruling that Zeonnix, as a judgment creditor who had an annotated levy on attachment prior to the foreclosure sale, was a legal redemptioner under Section 29 of Rule 39 of the Rules of Court. The right of legal redemption in a foreclosure sale is granted to the judgment debtor or his successor in interest, and any redemptioner, which includes a creditor having a lien by attachment on the property sold.
The Court held that the unregistered 1981 sale to the Caytons, while binding between the parties, did not bind Zeonnix as a third person. Under the Torrens system, the act of registration is the operative act that conveys or affects land insofar as third persons are concerned. Since the Caytons’ deed was unregistered, Zeonnix’s prior annotated levy remained an existing encumbrance. Consequently, Zeonnix retained its status as a redemptioner. The Caytons, by purchasing the property at the foreclosure sale, merely stepped into the shoes of the mortgagee (FSB) and acquired the Mañoscas’ (the judgment debtor’s) redeemable interest. Zeonnix’s timely tender of the redemption price, subsequently completed to include the realty taxes, was a valid exercise of its right. The Caytons’ remedy, if any, lies against the Mañoscas for breach of warranty against encumbrances in their sale, not against Zeonnix’s superior right of redemption.