G.R. No. L-9628; August 30, 1957.
VICENTE P. CAPISTRANO, plaintiff-appellee, vs. PHILIPPINE NATIONAL BANK AND PROVINCIAL SHERIFF OF QUEZON, defendants-appellants.

FACTS

On July 17, 1946, spouses Fulgencio Moreno and Maria Salome sold a parcel of land to Vicente P. Capistrano. The land was covered by TCT No. 19920 and was subject to an existing mortgage in favor of the Agricultural and Industrial Bank (later succeeded by the Rehabilitation Finance Corporation or RFC). Capistrano assumed the mortgage obligation. However, the sale could not be registered because the RFC, which held the owner’s duplicate certificate of title, refused to release it unless Capistrano also assumed a separate deficiency claim against seller Fulgencio Moreno. Consequently, the deed of sale remained unregistered. Nearly four years later, on June 22, 1950, the same land was levied upon by the Provincial Sheriff of Quezon to satisfy a judgment against Moreno in favor of the Philippine National Bank (PNB). This levy was recorded and annotated on the certificate of title on the same day. On July 25, 1952, the RFC informed the PNB that the land could no longer be attached because it had already been sold to Capistrano. Later, when the sheriff advertised the land for auction, Capistrano filed a third-party claim. The PNB posted an indemnity bond, and the sheriff proceeded with the auction sale, with the PNB as the sole bidder. A certificate of sale was issued to the PNB and registered on November 26, 1952. On November 16, 1953, after Capistrano paid Moreno’s mortgage obligation to the RFC and obtained a cancellation of the mortgage, he was issued a clean title (T-16984), except for the annotation of the PNB’s execution lien. The deed of sale from the Morenos to Capistrano was finally registered on November 19, 1953. Capistrano filed an action to cancel the annotation of the execution lien and to declare the execution sale void.

ISSUE

Whether the unregistered sale of the land to Capistrano in 1946 takes precedence over the levy of execution by the PNB in 1950, which was registered prior to the registration of the sale.

RULING

No. The levy of execution takes precedence over the prior unregistered sale. The Supreme Court reversed the trial court’s judgment and dismissed Capistrano’s action. The Court abandoned the doctrine in Lanci vs. Yangco and instead applied the rule that if an attachment or levy of execution, though posterior to a sale, is registered before the sale is registered, it takes precedence over the sale. This rule is not altered by the fact that the PNB had information about the prior sale at the time of the execution sale, as the auction sale retroacts to the date of the levy. To hold otherwise would render the preference created by a registered levy meaningless.