GR L 21752; (April, 1966) (Digest)
G.R. No. L-21752; April 25, 1966
SIMEON HIDALGO, plaintiff-appellee, vs. LA TONDEĂ‘A, INC., ET AL., defendants, LA TONDEĂ‘A, INC., defendant-appellant.
FACTS
The property, owned pro-indiviso by Manuel Valenciano and Purita Valenciano, was mortgaged by them to La Tondeña, Inc. on December 12, 1952, to secure a debt. The mortgage deed was registered under Act No. 3344 on August 14, 1954. Separately, Celedonio Benipayo obtained a judgment against Manuel Valenciano and levied his interest in the property on July 23, 1954 (registered under Act No. 3344). At the execution sale, Benipayo bought Manuel Valenciano’s interest on August 16, 1954 (deed registered August 20, 1954). Benipayo later sold this interest to Simeon Hidalgo, who received a definite deed of sale after the redemption period expired. Meanwhile, due to non-payment, La Tondeña, Inc. foreclosed the mortgage, obtained a judgment on October 27, 1955, bought the property at the foreclosure sale, and had the definite deed registered on December 6, 1956. La Tondeña, Inc. took possession, paid taxes, and collected rentals. Hidalgo filed an action on July 30, 1959, to recover the property and rentals, seeking partition or, alternatively, warranty against eviction from his vendors. The trial court ordered partition share and share alike and payment of a sum to Hidalgo. La Tondeña, Inc. appealed.
ISSUE
Which right has priority: the mortgage right of La Tondeña, Inc. created on December 12, 1952, or the interest acquired by Simeon Hidalgo through the execution sale of Manuel Valenciano’s interest on August 16, 1954?
RULING
The mortgage right of La Tondeña, Inc. has priority. The Supreme Court reversed the trial court’s decision and dismissed Hidalgo’s complaint. The Court held that the mortgage, executed on December 12, 1952, was valid between the parties even before its registration under Act No. 3344, pursuant to Section 194 of the Revised Administrative Code and Article 2125 of the Civil Code. Since the mortgage was created prior to the levy in execution and subsequent sale to Hidalgo’s predecessor-in-interest, it constitutes a “better right” under Section 194. The principle of caveat emptor applies to judicial sales; a purchaser at an execution sale acquires only the rights of the judgment debtor at the time of sale and is bound to ascertain existing liens. Therefore, La Tondeña, Inc.’s earlier mortgage lien is preferred over Hidalgo’s interest.