The Supreme Court has denied the petition of La Paz Housing and Development Corporation (La Paz Housing) and upheld the validity of the public auction sale of four properties in San Pedro, Laguna, ruling that the company was bound by a reinstated Notice of Levy on Attachment annotated on its land titles.
The Court affirmed the Decision dated June 30, 2020, and the Resolution dated February 26, 2021, of the Court of Appeals in CA-G.R. CV No. 109578.
The Case
The controversy revolved around four real properties in San Pedro, Laguna, registered in the name of La Paz Housing under Transfer Certificate of Title (TCT) Nos. T-104325, T-104376, T-120845, and T-120846. These were previously registered in the name of La Paz Investment and Realty Corporation (La Paz Investment).
The case originated from a collection suit filed by Traders Royal Bank (TRB) against La Paz Investment, among others, docketed as Civil Case No. 0891-P before Branch 112, RTC, Pasay City. On January 21, 1983, the RTC Pasay City issued a Writ of Preliminary Attachment in favor of TRB, and on January 24, 1983, a Notice of Levy on Attachment was annotated on the La Paz Investment Titles.
The RTC Pasay City initially granted La Paz Investment's motion to discharge the attachment in an Order dated July 12, 1983, and the Notice of Levy on Attachment was cancelled on September 21, 1983. However, TRB filed a Motion for Reconsideration dated August 4, 1983. While it was pending, La Paz Investment conveyed the subject properties.
On September 21, 1983, the same day as the cancellation, La Paz Investment sold the property covered by TCT No. T-56905 to La Paz Housing. On September 23, 1983, it transferred TCT No. T-61774 to La Paz Housing, and the properties covered by TCT Nos. T-62266 and T-62267 to Federico O. Campos and others (Campos et al.). In December 1984, La Paz Housing acquired those latter properties from Campos et al.
In the Order dated September 26, 1983, the RTC Pasay City granted TRB's Motion for Reconsideration and reinstated the writ of attachment, which was later affirmed with finality by the then Intermediate Appellate Court. On April 5, 1989, the Notice of Levy on Attachment was reinstated and annotated on the La Paz Housing Titles under Entry No. 223706.
The RTC Pasay City ruled in favor of TRB on March 5, 1998, and the subject properties were sold at public auction to TRB as the highest bidder on April 15, 2002. La Paz Housing then filed a Complaint for Declaration of Nullity of Auction Sale and Damages before the RTC San Pedro, docketed as Civil Case No. SPL-0978, asserting it was a stranger to the suit with a separate personality from La Paz Investment.
The Issue
The central question was whether La Paz Housing lacked notice of TRB's attachment lien over the subject properties and could be considered a buyer in good faith, such that the auction sale would be invalid.
The Ruling
The Court was not convinced that La Paz Housing lacked notice of TRB's attachment lien over the subject properties. It held that the company was bound by the reinstated Notice of Levy on Attachment under Entry No. 223706 annotated on TCT Nos. T-104325, T-104376, T-120845, and T-120846, and that the validity of the auction sale must be upheld.
The dispositive portion reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The Decision dated June 30, 2020, and the Resolution dated February 26, 2021, of the Court of Appeals in CA-G.R. CV No. 109578 are AFFIRMED."
By the Numbers
- January 21, 1983 — Writ of Preliminary Attachment issued in favor of TRB
- January 24, 1983 — Notice of Levy on Attachment annotated (Entry No. 129501)
- September 21, 1983 — cancellation annotated (Entry No. 139963); sale of T-56905
- September 23, 1983 — transfers of T-61774, T-62266, and T-62267
- April 5, 1989 — Notice of Levy on Attachment reinstated (Entry No. 223706)
- March 5, 1998 — RTC Pasay City judgment: PHP 14,703,145.09, with interest
- April 15, 2002 — public auction sale to TRB for PHP 30,650,287.34
The Court's Reasoning
The Court found several circumstances that should have alerted La Paz Housing to TRB's lien and to the defect in the vendors' title. The cancellation of the Notice of Levy on Attachment was facially deficient as it was based only on an interlocutory order that could be reversed. Under Article 1387 of the Civil Code, the sale of the properties after a writ of attachment had been issued against La Paz Investment is presumed fraudulent. The sale of the properties covered by TCT Nos. T-62266 and T-62267 to the directors of La Paz Investment was voidable under Section 32 of the Corporation Code.
The Court noted that La Paz Housing and La Paz Investment had interlocking directors, and that knowledge acquired by Federico and Noel Campos as interlocking corporate directors was notice to both corporations. As a corporation engaged in the business of buying and selling real properties, La Paz Housing was expected to exercise a higher degree of diligence and could not simply rely on the face of the certificates of title.
The Court observed that La Paz Investment, La Paz Housing, and their directors acted in concert to evade payment of the judgment debt by transferring the properties immediately after the dissolution order, despite the pending motion for reconsideration. It noted the suspicious timing of the conveyances and that annotations showed a Deed of Sale executed by La Paz Housing over properties it did not even own.
Source: Supreme Court Decision, G.R. No. 255978.
This report summarizes a public Supreme Court decision and is not legal advice.