GR 76537; (August, 1989) (Digest)
G.R. No. 76537 August 28, 1989
QUEZON BEARING & PARTS CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS and TOP RATE INTERNATIONAL SERVICES, INC., respondents.
FACTS
Petitioner Quezon Bearing & Parts Corporation filed a collection suit against Consolidated Mines, Inc. (CMI) and obtained a writ of preliminary attachment. On December 9, 1981, the sheriff levied on CMI’s interest in two real properties. These properties were, however, already encumbered by a prior real estate mortgage in favor of a consortium of banks, annotated on December 20, 1978. Subsequently, the insolvency court overseeing CMI’s proceedings authorized the sale of these mortgaged properties to respondent Top Rate International Services, Inc. The Deed of Confirmation of Sale was dated September 17, 1982, though the sale was claimed to have occurred on December 10, 1981.
Top Rate filed a third-party claim over the properties, leading the trial court to lift the writ of attachment. It ruled that CMI only held an equity of redemption due to the prior mortgage, and that Top Rate, as vendee who assumed the mortgage, stepped into the shoes of the mortgagee banks. The Court of Appeals affirmed this decision, prompting petitioner’s appeal to the Supreme Court.
ISSUE
Whether the petitioner’s attachment lien on the mortgaged properties is superior to the rights acquired by Top Rate through its purchase from CMI.
RULING
The Supreme Court modified the appellate court’s decision, ruling in favor of the petitioner. The Court clarified that a levy of attachment on a mortgagor’s property attaches only to the judgment debtor’s remaining interest in that property. Since the properties were already mortgaged, CMI’s sole attachable interest was its equity or right of redemption, not the full ownership of the properties themselves. This incorporeal right is distinct from the property’s market value and cannot be quantified in the same manner.
The sale to Top Rate was not an assignment of the mortgagee banks’ rights but a sale by the mortgagor, CMI, with the banks’ consent. This arrangement did not extinguish the petitioner’s attachment lien on CMI’s equity of redemption. Consequently, the petitioner’s lien, though inferior to the mortgagee’s primary claim, remained superior to Top Rate’s purchase rights. For Top Rate to fully exercise its right of redemption from the mortgage, it must first discharge the petitioner’s attachment lien by satisfying the judgment debt. The Court maintained the levy but limited its scope to CMI’s (or its successor’s) right of redemption. The validity of the sale itself was deemed a matter for separate proceedings.