October 2009 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
G.R. No. 169541 - German Cayton, et al. v. Zeonnix Trading Corporation, et al.
THIRD DIVISION
[G.R. NO. 169541 : October 9, 2009]
GERMAN CAYTON and the HEIRS OF THE DECEASED SPOUSE CECILIA CAYTON, Petitioners, v. ZEONNIX TRADING CORPORATION; SPOUSES VICENTE MA�OSCA and LOURDES MA�OSCA; MAXIMO CONTRERAS, Ex-Officio Sheriff; and PABLO L. SY, Senior Sheriff for Makati, Metro Manila, Respondents.
D E C I S I O N
NACHURA, J.:
Before the Court is a Petition for Review on Certiorari assailing the Decision1 dated September 27, 2004 and the Resolution2 dated September 5, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 71294.
At the heart of the controversy is a three hundred fifty-seven (357) square meter residential house and lot located in BF Homes, Phase III, Sucat, Para�aque, covered by Transfer Certificate of Title (TCT) No. S-90836 of the Registry of Deeds of Manila in the name of Vicente Ma�osca, married to Lourdes Ma�osca (Ma�oscas).3
On May 24, 1980, the Ma�oscas executed a deed of real estate mortgage over the house and lot as security for the loan of one hundred fifty thousand pesos (P150,000.00) that they obtained from Family Savings Bank (FSB). On June 2, 1980, the real estate mortgage was annotated on TCT No. S-90836.4
On July 21, 1981, a levy on attachment was annotated on TCT No. S-90836 in favor of Zeonnix Trading Corporation (Zeonnix) pursuant to a writ of preliminary attachment issued by the Court of First Instance of Pasay City in Civil Case No. 9225-P, a case for recovery of a sum of money, entitled "Zeonnix Trading Corporation v. Vicente D. Ma�osca, doing business under the name and style of Vic D. Ma�osca Brokerage." The case was re-raffled to the Regional Trial Court (RTC) of Makati and re-docketed as Civil Case No. 2173, due to the judicial reorganization in 1983.5
On September 1, 1981, a Deed of Absolute Sale with Assumption of Mortgage6 was executed between the Ma�oscas and the spouses German G. Cayton and Cecilia R. Cayton (Caytons) over the subject house and lot for the amount of one hundred sixty thousand pesos (P160,000.00). As part of the consideration, the Caytons assumed payment to FSB of the real estate mortgage amortizations on the property. The Caytons also paid the real estate taxes on the property beginning in 1982.7 The Deed of Absolute Sale with Assumption of Mortgage contained the following stipulations:
2. That the Vendee shall pay Vendors the sum of ONE HUNDRED SIXTY THOUSAND (
P160,000.00) PESOS, the amount of ONE HUNDRED EIGHTEEN THOUSAND FIVE HUNDRED SIXTY THREE PESOS and SIXTEEN CENTAVOS (P118,563.16) of which have been paid by the former unto the latter and the balance of FORTY ONE THOUSAND FOUR HUNDRED THIRTY SIX PESOS and EIGHTY FOUR CENTAVOS (P41,436.84) to be paid by the Vendee unto the Vendors within six (6) months in six equal monthly installments commencing December 7, 1981 and every 7th of the month thereafter until fully paid, said installments shall be covered by postdated checks of the Vendee.3. That as part of the consideration of this sale, the Vendee agrees to assume as [he] hereby assumes, all the duties and obligations of the Vendors imposed upon the latter on the Deed of Real Estate Mortgage executed by the Vendors in favor of Family Savings Bank denominated as Doc. 388; Page No. 79; Book No. V; Series of 1980 of the Notarial Registry of Notary Public Fe Tengco Becina; that Vendee's assumption of the mortgage obligation shall be limited only to the amortization that will fall due [in] September 1981 and that all arrears in the amortizations, penalties and charges that have accrued before said date shall be borne and paid by the Vendors.
x x x
7. That Vendors hereby warrant that save to the restrictions annotated in the Transfer of Title, the said property is free from any lien and encumbrance and that Vendors undertake to defend title to the same from whatever claim.8
The Caytons failed to register the deed of absolute sale with assumption of mortgage because the owner's duplicate copy of TCT No. S-90836 was in the possession of FSB in view of the loan of the Ma�oscas wherein the property was used as security.9
Meanwhile, on February 3, 1984, a Decision10 was rendered by the RTC in Civil Case No. 2173, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered sentencing defendant Vicente D. Ma�osca, doing business under the name and style "Vic D. Ma�osca Brokerage" to pay plaintiff [Zeonnix] the amount of P167,037.00, with interest thereon at the rate of 12% per annum from May 12, 1981, until fully paid.
Defendant is likewise ordered to pay plaintiff the amount of P20,000.00 as and for attorney's fees and the costs of suit.
SO ORDERED.11
Subsequently, the Caytons defaulted in the payment to FSB of the monthly amortizations, and the property was extrajudicially foreclosed. On April 23, 1984, the property was sold at public auction. The Caytons were declared as the highest bidder, in the amount of ninety-five thousand pesos (P95,000.00). A Certificate of Sale12 was issued by the Ex-Officio Sheriff, and the same was annotated on TCT No. S-90836 on April 25, 1984.13
On April 15, 1985, the Caytons filed before the RTC of Makati a civil case for quieting of title and/or removal/prevention of cloud on title against Zeonnix. The case was docketed as Civil Case No. 10316.14 The Caytons claimed that, with the execution of the deed of absolute sale with assumption of mortgage, all the rights, interests and participation over the property had been transferred to them by the Ma�oscas, including the right of redemption. Thus, Zeonnix had no more right of redemption to speak of.15
On April 17, 1985, the Caytons filed an amended complaint, in which they impleaded the Ma�oscas and the then Clerk of Court and the Senior Deputy Sheriff of Makati City, as additional defendants.16
On April 18, 1985, Zeonnix, as judgment creditor of the Ma�oscas in Civil Case No. 2173, offered to redeem the property by tendering to the Clerk of Court of the RTC of Makati one hundred six thousand four hundred pesos (P106,400.00) through Manager's Check No. DV008913 dated April 15, 1985. The amount tendered represented the purchase price of the property and interest that had accrued thereon.17
On May 7, 1985, the Caytons filed a supplemental complaint in which they alleged that assuming that Zeonnix had the right of redemption, still the amount it tendered was insufficient to effect a valid redemption because it failed to include the amount of real estate taxes paid by them, amounting to two thousand one hundred seventy-five pesos (P2,175.00).18
On June 4, 1985, Zeonnix tendered to the Clerk of Court of Makati the additional amount of P2,175.00 to cover the real estate taxes paid by the Caytons. The latter, however, maintained that the tender of the deficiency amount representing the real estate taxes did not cure the defect because the payment was done beyond the period of redemption, which lapsed on April 26, 1985.19
On March 20, 2001, the RTC rendered a Decision in Civil Case No. 10316, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiffs [Caytons] and against the defendant [Zeonnix], holding that:
1) defendant Zeonnix Trading Corporation has no right of redemption over the property in question as against the plaintiffs [Caytons];
2) plaintiffs [Caytons] are the legitimate owners of the property in question.
SO ORDERED.20
Zeonnix filed an appeal with the CA, assigning the following errors of the trial court: (1) the RTC erred in considering the Caytons as owner-bidders in the foreclosure sale of the property and not as ordinary bidders or buyers; (2) the RTC erred in ruling that Zeonnix was not entitled to redeem the property, which was foreclosed by FSB; (3) the RTC erred in not finding that Zeonnix had a superior or better right, by virtue of the prior attachment/lien on the subject property, than the Caytons who were negligent in buying it despite the recorded or existing attachment lien thereon by Zeonnix; (4) the RTC erred in ruling that the deed of sale with assumption of mortgage was not spurious or fictitious in character; and (5) the RTC erred in not ruling that Zeonnix was entitled to damages and attorney's fees.21
On September 27, 2004, the CA rendered a Decision,22 the fallo of which reads:
WHEREFORE, the appeal [is] GRANTED and the appealed Decision is REVERSED and SET ASIDE. In its place judgment is rendered dismissing the complaint, and ordering the ex-officio Sheriff of Makati to accept and receipt for the redemption price paid and to issue the corresponding certificate and other papers of redemption to Zeonnix.
SO ORDERED.23
In reversing the decision of the trial court, the CA ratiocinated that:
The levy on attachment was duly annotated and registered in the title of the property on July 21, 1981[,] while the deed of sale with assumption of mortgage was executed on September 1, 1981. The registration of the levy created a constructive notice to the whole world and served to protect the interest of Zeonnix. The Caytons therefore could not raise their mere childlike reliance on the real estate agent to justify their ignorance of the recorded levy for they should have checked the title with the Register of Deeds (tsn Oct. 3, 1986, p. 28). The Caytons did not even cause the registration of the deed of sale with assumption of mortgage. Notable too are the payments of the monthly amortizations by the Caytons with FSB wherein the bank in its receipts simply acknowledged payments in the following manner: "Paid by Cecilia Cayton for the account of Vicente Ma�osca" x x x. This means that the bank while it received payments from the Caytons, however it did not fully recognize them as the new owners.24
The Caytons filed a motion for reconsideration. However, the CA denied the same in a Resolution25 dated September 5, 2005.
Hence, this petition.
The Caytons submitted the following grounds in support of the petition:
I
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER GERMAN CAYTON AND DECEASED SPOUSE ARE NOT SUCCESSORS-IN-INTEREST WHO HAVE PREFERENTIAL RIGHT OVER THE SUBJECT PROPERTY THAN A REDEMPTIONER WHOSE RIGHT TO CLAIM AROSE FROM A MONEY JUDGMENT.
II
THE COURT OF APPEALS ERRED IN RULING THAT THE PAYMENT OF THE INSUFFICIENT REDEMPTION PRICE BY ZEONNIX AS REDEMPTIONER DID NOT RESULT IN ITS FAILURE TO PERFECT ITS RIGHT OF REDEMPTION OVER THE SUBJECT PROPERTY.26
The petition is without merit and must be denied.
I
Section 27, Rule 39 of the Rules of Court provides:
Sec. 27. Who may redeem real property so sold.
Real property sold as provided in the last preceding section, or any part thereof sold separately, may be redeemed in the manner hereinafter provided, by the following persons:
(a) The judgment obligor, or his successor in interest in the whole or any part of the property;
(b) A creditor having a lien by virtue of an attachment, judgment or mortgage on the property sold, or on some part thereof, subsequent to the lien under which the property was sold. Such redeeming creditor is termed a redemptioner.
Right of redemption is the prerogative to reacquire a mortgaged property after registration of the foreclosure sale. It exists only in the case of the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure unless the mortgagee is a bank.27 An attaching creditor acquires the right to redeem the debtor's attached property subsequently foreclosed extra-judicially by a third party.
The "successor-in-interest" of a judgment debtor includes one to whom the debtor has transferred his statutory right of redemption; one to whom the debtor has conveyed his interest in the property for the purpose of redemption; one who succeeds to the interest of the debtor by operation of law; one or more joint debtors who were joint owners of the property sold; or his spouse or heirs.28
A "redemptioner," on the other hand, is a creditor with a lien subsequent to the judgment which was the basis of the execution sale. If the lien of the creditor is prior to the judgment under which the property was sold, he is not a redemptioner and, therefore, cannot redeem because his interests in his lien are fully protected, since any purchase at public auction of said property takes the same subject to such prior lien which he has to satisfy. Unlike the judgment debtor, a redemptioner must prove his right to redeem by producing the documents called for by Section 30, Rule 3929 of the Rules of Court.30
In the instant case, the Caytons aver that as successor-in-interest of the Ma�oscas by virtue of the deed of absolute sale with assumption of mortgage, they have a better right than Zeonnix to redeem the property. This stance deserves scant consideration.
Indeed, they are successors in interest of the Ma�oscas. However, their supposed title or right over the property is unregistered and, as such, the same cannot affect third persons. This is because it is registration that is the operative act to convey or affect the land insofar as third persons are concerned. A deed, mortgage, lease, or other voluntary instrument, except a will, purporting to convey or affect conveyance involving registered land, shall not take effect as a conveyance or bind the land but shall operate only as a contract between the parties and as evidence of authority of the Register of Deeds to make registration.31
The unregistered sale of the house and lot to the Caytons by the Ma�oscas cannot prejudice the right of redemption granted by law in favor of Zeonnix. The levy on attachment of Zeonnix on the subject property was duly recorded on TCT No. S-90836. Thus, the levy on attachment created a constructive notice to all persons from the time of such registration.32 The record is notice to the entire world. All persons are charged with the knowledge of what it contains. All persons dealing with the land so recorded, or any portion of it, must be charged with notice of whatever it contains. The purchaser is charged with notice of every fact shown by the record and is presumed to know every fact which the record discloses.33
When a conveyance has been properly recorded, such record is constructive notice of its contents and all interests, legal and equitable, included therein. Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption is irrefutable. He is charged with notice of every fact shown by the record and is presumed to know every fact which an examination of the record would have disclosed. This presumption may not be overcome by proof of innocence or good faith. Otherwise, the very purpose and object of the law requiring a record would be destroyed. Such presumption may not be defeated by proof of want of knowledge of what the record contains, any more than one may be permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take notice of the facts that the public record contains is a rule of law. The rule must be absolute. Any variation would lead to endless confusion and useless litigation.34
Zeonnix has acquired by operation of law the right of redemption over the foreclosed properties. By virtue of the RTC decision in Civil Case No. 2173, it had the right to redeem the property. This is pursuant to Section 6 of Act No. 3135,35 as amended by Act No. 4118, which provides:
SECTION 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.
The writ of attachment entitled the attaching creditor to exercise the right to redeem the foreclosed properties. A writ of attachment that has been levied on real property or any interest therein belonging to the judgment debtor creates a lien which nothing can destroy but its dissolution.36
II
Section 28, Rule 39 of the Rules of Court provides for the manner of payment in redemption:
Section 28. Time and manner of, and amounts payable on, successive redemptions; notice to be given and filed.
The judgment obligor, or redemptioner, may redeem the property from the purchaser, at any time within one (1) year from the date of the registration of the certificate of sale, by paying the purchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last named amount at the same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment under which such purchase was made, the amount of such lien, with interest.
Property so redeemed may again be redeemed within sixty (60) days after the last redemption upon payment of the sum paid on the last redemption, with two per centum thereon in addition, and the amount of any assessments or taxes which the last redemptioner may have paid thereon after redemption by him, with interest on such last-named amount, and in addition, the amount of any liens held by said last redemptioner prior to his own, with interest. The property may be again, and as often as a redemptioner is so disposed, redeemed from any previous redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last previous redemption, with two per centum thereon in addition, and the amounts of any assessments or taxes which the last previous redemptioner paid after the redemption thereon, with interest thereon, and the amount of any liens held by the last redemptioner prior to his own, with interest.???�r?bl?�
