G.R. No. 204778 , December 06, 2021
KHOO BOO BOON, PETITIONER, VS. BELLE CORPORATION, RESPONDENT.

FACTS

Petitioner Khoo Boo Boon, a Malaysian national and former CEO of Legend International Resorts, Ltd. (LIRL), sued for illegal dismissal after his termination by LIRL’s liquidators. The Labor Arbiter (LA) ruled in his favor, ordering LIRL and its liquidator to jointly and severally pay him monetary awards. The LA’s decision became final and executory after LIRL’s appeal was dismissed for failure to post a bond. To satisfy the judgment, Boon moved to levy a parcel of land in Parañaque City (the Parañaque property) registered under Transfer Certificate of Title (TCT) No. 169886 in the name of Manila Bay Landholdings, Inc. (MBLI). Boon alleged LIRL was the real owner, tracing the property’s history: MBLI was a subsidiary of Belle Bay City Corporation (BBCC), whose stockholders included LIRL. After a merger and BBCC’s dissolution, a distribution plan allocated the Parañaque property to LIRL as liquidating dividends. The LA granted the motion, and a notice of levy was annotated on the title.
Respondent Belle Corporation, the parent company of MBLI and BBCC, filed a third-party claim, asserting ownership based on a Contract to Sell dated June 2, 2010 (where BBCC, with LIRL’s conformity, sold LIRL’s liquidation rights to the property to respondent) and a Deed of Absolute Sale dated August 5, 2010. These instruments were not registered with the Register of Deeds. Boon opposed, arguing the registered levy took preference over the unregistered sale and that the sale was fraudulent, being executed for a low price shortly after LIRL’s motion for reconsideration was denied in the labor case. The LA denied the third-party claim and ordered the sheriff to proceed with the auction. The National Labor Relations Commission (NLRC) affirmed the LA. The Court of Appeals reversed, setting aside the NLRC resolutions and upholding respondent’s third-party claim, finding the sale was in good faith and the property was not owned by the judgment debtor (LIRL) at the time of levy.

ISSUE

Whether the Court of Appeals erred in upholding respondent Belle Corporation’s third-party claim over the Parañaque property, thereby setting aside the execution levy initiated by petitioner Khoo Boo Boon to satisfy a final labor judgment against LIRL.

RULING

Yes, the Court of Appeals erred. The Supreme Court granted the petition, reversed the Court of Appeals’ Decision and Resolution, and reinstated the NLRC resolutions which affirmed the LA’s order denying the third-party claim and allowing the levy on execution to proceed.
The Supreme Court held that the registered notice of levy on execution, annotated on TCT No. 169886 on August 17, 2010, acquired preference over respondent’s prior but unregistered claim arising from the Contract to Sell (June 2, 2010) and Deed of Absolute Sale (August 5, 2010). Under the Property Registration Decree (P.D. No. 1529), the act of registration is the operative act that conveys or affects registered land concerning third persons. A levy on execution, once registered, constitutes constructive notice to all persons and creates a lien on the property superior to any unregistered interest. Since respondent’s documents of sale were not registered, they did not bind third persons like petitioner, a judgment creditor who caused the registration of the levy.
Furthermore, the Court found that LIRL had a real and beneficial interest in the property subject to execution at the time of levy. The Contract to Sell itself confirmed that the property was allocated to LIRL as its liquidating dividend from BBCC. Although legal title was still with MBLI/BBCC, LIRL’s liquidation rights constituted an equitable interest or beneficial ownership that was a proper subject of execution to satisfy its judgment debt. The subsequent unregistered sale to respondent could not defeat the prior registered levy by a creditor. The Court also noted indications that the sale might have been intended to defraud creditors, given its timing after the labor case became final and the low purchase price, but the resolution primarily rested on the superiority of the registered levy.