G.R. No. L-44100 April 28, 1983
SPECIAL SERVICES CORPORATION, petitioner, vs. CENTRO LA PAZ (SAMAHANG ESPIRITISTA SA LUNDUYANG LA PAZ), A CHAPTER OF UNION ESPIRITISTA CRISTIANA DE FILIPINAS, INC., respondents.

FACTS

Petitioner Special Services Corporation obtained a judgment against Alejandro Estudillo. To satisfy the judgment debt, the Sheriff levied upon Estudillo’s rights and interests in properties covered by Transfer Certificate of Title No. 51837, registered in the names of Estudillo and several others. Prior to the scheduled auction sale, Estudillo filed a motion to cancel the levy, asserting that he and the other registered owners held the properties merely in trust for respondent Centro La Paz, a religious chapter. CENTRO itself filed a third-party claim and subsequently instituted a separate civil case for damages and injunction to prevent the sale, presenting documentary evidence including acknowledgments of trust executed by the registered owners and correspondence with the City Assessor seeking tax exemption for the properties as religious assets.

ISSUE

The core issue is whether the properties registered in the names of Alejandro Estudillo and others can be levied upon to satisfy Estudillo’s personal debt, given CENTRO’s claim of ownership based on an implied trust.

RULING

The Supreme Court affirmed the lower courts’ decisions, ruling that the levy and sale could not proceed. The legal logic rests on the principle that the Torrens system does not preclude the introduction of evidence to prove that the registered owner holds the property in trust for another. While the trust was not annotated on the title, the Court held that CENTRO had sufficiently established through preponderant evidence—including deeds of acknowledgment and petitions for tax exemption—that the registered owners were mere trustees for CENTRO. Consequently, Estudillo had no leviable interest in the properties. Furthermore, the Court ruled that the petitioner could not be considered a purchaser in good faith at the execution sale because it had prior knowledge of CENTRO’s claim through the third-party claim filed with the Sheriff. Such knowledge was deemed equivalent to registration for the purpose of defeating a claim of good faith. Since a court’s execution power extends only to properties unquestionably belonging to the judgment debtor, and Estudillo held no beneficial ownership, the injunction against the sale was properly made permanent. The Court also recognized CENTRO’s legal capacity to sue as a duly registered entity.