In Ruiz v. Court of Appeals, the Supreme Court addressed the conflict between an unregistered sale of land and a subsequent attachment by a creditor. The Court ruled that a party with knowledge of a prior unregistered sale cannot claim superior rights over the land, even if they register their attachment first. This decision underscores the importance of good faith and the principle that knowledge of an existing interest in property serves as equivalent to registration, preventing the use of the Torrens system to perpetrate fraud.

Can a Support Claim Trump a Prior Land Sale? The Case of Ruiz vs. Hong

The consolidated cases of Genaro Ruiz, Sr., Amor C. Ruiz And Maria Lourdes Ruiz vs. Court of Appeals and Honorato Hong, and Genaro Ruiz, Jr., Angelo Ruiz, et al., vs. Court of Appeals and Honorato Hong, G.R. Nos. 121298 & 122123, decided on July 31, 2001, revolve around a contested piece of land in Tabunok, Talisay, Cebu. Genaro Ruiz, Sr., facing financial difficulties due to his failing health, sold his property to his neighbor, Honorato Hong. However, Ruiz’s heirs later challenged the sale, asserting their rights over the land were superior to Hong’s. This dispute reached the Supreme Court, requiring a determination of who had the preferential right to the property.

The facts reveal that Genaro Ruiz, Sr., burdened by medical expenses, borrowed money from Honorato Hong, using his land as collateral. Eventually, on April 23, 1986, Ruiz, Sr. decided to sell the land to Hong for P350,000. Hong issued a check for P100,000 as partial payment, with the understanding that Ruiz, Sr. would handle the transfer of the title. However, Ruiz, Sr.’s wife, Amor Ruiz, who was estranged from him but also borrowing money from Hong using the same land as security, complicated matters. Amor obtained the title from Hong, promising to register the sale but failed to do so.

To rectify the situation, Genaro Ruiz, Sr. executed a second deed of sale on July 22, 1986, with the same terms as the first. Subsequently, on August 18, 1986, Amor Ruiz, along with her children, filed a case for support against Genaro Ruiz, Sr., seeking a writ of attachment on the land. Hong then filed a third-party claim, asserting his ownership based on the prior sale. This led to a separate case for specific performance filed by Hong against the Ruizes, seeking the delivery of the title and an injunction against the auction sale resulting from the support case. The trial court initially did not grant the injunction, and Amor Ruiz acquired the property as the highest bidder in the auction sale.

The Regional Trial Court (RTC) ruled in favor of Hong, declaring him the owner of the land and nullifying the writ of attachment, levy, and execution sale in the support case. The Court of Appeals (CA) affirmed the RTC’s decision. The petitioners, the heirs of Genaro Ruiz, Sr., argued that their registered attachment should take precedence over Hong’s unregistered deed of sale. However, the Supreme Court upheld the CA’s decision, emphasizing that the petitioners were aware of the prior sale to Hong.

The Supreme Court reiterated the principle that factual findings of the trial court, especially when affirmed by the Court of Appeals, are generally conclusive. The trial court found that Genaro Ruiz, Sr. had indeed sold the land to Honorato Hong as early as April 23, 1986, a fact further supported by the execution of another deed of sale on July 22, 1986. Despite Hong’s failure to register the sale, the Court considered the petitioners’ knowledge of the transaction to be a critical factor.

The Court acknowledged the general rule that a registered attachment takes precedence over an unregistered sale. Registration serves as the operative act that binds or affects the land concerning third parties, providing notice to the whole world. However, this rule has an exception: when a party has knowledge of a prior existing interest that is unregistered, their knowledge equates to registration. This principle is rooted in equity and prevents the Torrens system from being used as a tool for fraud.

As the Supreme Court emphasized,

Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that the registration of the deed is the operative act to bind or affect the land insofar as third persons are concerned. But where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. The torrens system cannot be used as a shield for the commission of fraud (Gustillo v. Maravilla, 48 Phil. 442). As far as private respondent Zenaida Angeles and her husband Justiniano are concerned, the non-registration of the affidavit admitting their sale of a portion of 110 square meters of the subject land to petitioners cannot be invoked as a defense because (K)nowledge of an unregistered sale is equivalent to registration (Winkleman v. Veluz, 43 Phil. 604).

In this case, the Court found that the petitioners were aware of the sale to Hong. Hong had introduced improvements on the land, exercising acts of ownership. Furthermore, Genaro Ruiz, Sr. himself, in his answer to the support case, admitted to selling the land to Hong. This admission was considered a declaration against interest, carrying significant weight.

The deeds of sale, duly notarized, further supported Hong’s claim. Notarized documents are public documents and are admissible as evidence without preliminary proof of their authenticity. The petitioners attempted to challenge the authenticity of the sale, arguing that Hong would not have surrendered the title to Amor Ruiz and that it was illogical for Ruiz, Sr. to offer the same land for sale again. However, the Court found these arguments unpersuasive, noting that the trial court had observed the credibility of the witnesses and found Hong’s testimony more credible than Amor Ruiz’s.

The Court also addressed the Court of Appeals’ decision in CA-G.R. SP No. 23032, which had ruled on the validity of the levy and execution sale. The Supreme Court clarified that the CA’s decision only pertained to the validity of the injunction and did not definitively settle the issue of ownership. The certificate of sale to be issued by the Sheriff was to expressly mention the existence of Hong’s third-party claim.

Ultimately, the Supreme Court concluded that Genaro Ruiz, Sr. had already sold the land to Honorato Hong before it was subjected to the execution sale. Consequently, the petitioners did not acquire any rights over the land. Since Ruiz, Sr. no longer had any interest in the property at the time of the levy, the purchaser at the execution sale, Amor Ruiz, acquired nothing.

The Supreme Court cited the case of Dagupan Trading Co. v. Macam, emphasizing that the purchaser at an execution sale acquires only the right, title, interest, and claim of the judgment debtor at the time of the levy. As such, Hong, as the rightful owner of the land, was entitled to injunctive relief, and the petitioners were not entitled to a writ of possession.

FAQs

What was the key issue in this case?	The central issue was determining who had the superior right to the land: Honorato Hong, who had an unregistered deed of sale, or the Ruiz heirs, who had a registered attachment from a support case.
What is the significance of registration in land ownership disputes?	Registration generally provides notice to the world about a claim on the property. However, the Court clarified that knowledge of a prior unregistered interest can be equivalent to registration.
What did the Court rule about the knowledge of a prior unregistered sale?	The Court ruled that if a party knows about a prior unregistered sale when they acquire rights to the same land, that knowledge has the same effect as registration, preventing them from claiming ignorance.
How did the Court weigh the evidence in this case?	The Court considered the factual findings of the lower courts, the deeds of sale, and the admission by Genaro Ruiz, Sr. in his answer to the support case that he had already sold the land.
Why was Honorato Hong considered to have a stronger claim despite not registering the sale?	Hong’s claim was favored because the Ruiz heirs were aware of the existing sale, evidenced by improvements on the land, Genaro Ruiz, Sr.’s admission, and the execution of the deeds of sale.
What is a declaration against interest, and how did it apply here?	A declaration against interest is a statement made by someone that is against their own interest, making it more credible. Genaro Ruiz, Sr.’s admission that he sold the land was considered a declaration against interest.
What happens to a purchaser’s rights at an execution sale if the debtor had already sold the property?	The purchaser at an execution sale only acquires the rights, title, interest, and claim of the judgment debtor at the time of the levy. If the debtor had already sold the property, the purchaser acquires nothing.
Can a party use the Torrens system to commit fraud?	No, the Court emphasized that the Torrens system cannot be used as a shield for committing fraud. Equity prevents a party from benefiting from their knowledge of a prior unregistered interest.

The Ruiz v. Court of Appeals decision reinforces the importance of good faith and the principle that knowledge of a prior interest in property affects the rights of subsequent claimants. This case serves as a reminder that registration is not the only determinant of ownership; knowledge and equitable considerations also play a significant role in land disputes.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Ruiz v. Court of Appeals, G.R. Nos. 121298 & 122123, July 31, 2001