In Villavicencio vs. Mojares, the Supreme Court addressed the crucial issue of conflicting rights over a property subject to both a prior attachment and a subsequent sale. The Court ruled that a levy on attachment, when properly recorded, creates a superior lien that takes precedence over the rights of subsequent purchasers. This decision underscores the importance of due diligence in property transactions and the binding effect of recorded liens, even if not reflected in the owner’s copy of the title.

Attachment Showdown: Who Gets the Property When a Debt and a Sale Collide?

The case revolves around a property initially owned by the Martell spouses, who mortgaged it to Home Bankers Savings and Trust Company (HBSTC). Alejandro Mojares, who had a pending case against the Martell spouses, secured a writ of attachment on the property, which was annotated on the title in December 1987. Later, the Martell spouses defaulted, HBSTC foreclosed the mortgage, and Jose Villavicencio purchased the property. Villavicencio’s heirs then filed a complaint to annul the sheriff’s sale that followed Mojares’ successful execution of his judgment against the Martells.

At the heart of the dispute was whether the attachment, annotated on the title years before the sale to Villavicencio, was binding. The petitioners, Villavicencio’s heirs, argued that the sheriff’s sale to Mojares was invalid due to lack of proper notice to the judgment debtor and failure of the purchaser to pay in cash. They also claimed the attachment was not binding because it was not annotated on the owner’s copy of the title and was not properly reconstituted after a fire destroyed the Registry of Deeds.

The Court addressed the issue of notice, finding that personal notice to the mortgagor is not necessary in an extrajudicial foreclosure sale, with publication being sufficient. On the issue of cash payment, the Court clarified that Section 21, Rule 39, allows a judgment obligee to not pay the bid amount if it doesn’t exceed the judgment, absent a third-party claim, emphasizing the flexibility of the rule rather than a strict cash requirement. Regarding the attachment, the Supreme Court affirmed the Court of Appeals’ finding that the attachment was duly recorded and thus binding, despite not being on the owner’s copy. The court reasoned that attachment is an involuntary process, and resistance from the owner is expected, rendering the annotation on the registry’s copy controlling.

The legal framework underpinning this decision rests on the principles of notice and priority of liens. As the court emphasized, the attachment, being prior in time, established a superior lien on the property. Subsequent purchasers, like Villavicencio, take the property subject to this pre-existing lien. This is supported by established jurisprudence:

The priority enjoyed by the first levy on execution extended with full force and effect to the buyer at the auction sale conducted by virtue of such levy.

This principle is critical for understanding the risks associated with purchasing property with encumbrances. The court also addressed the argument regarding improper reconstitution of the title, noting that some deviations from standard procedures were understandable, considering the fire at the Quezon City Hall that destroyed the Registry of Deeds. Furthermore, the court underscored that the execution sale retroacts to the date of the levy of attachment.

Considering the points, between Villavicencio and Mojares, Mojares had the superior right as the purchaser-judgment creditor. The levy/attachment was binding on Villavicencio as their right therein was subordinate to that of Mojares.

FAQs

What was the key issue in this case?	The primary issue was determining the priority of rights between a party with a prior attachment lien and a subsequent purchaser of the property.
What is a writ of attachment?	A writ of attachment is a court order that allows a property to be seized to secure a potential judgment in a lawsuit. It creates a lien on the property.
Why was the sheriff’s sale challenged?	The sheriff’s sale was challenged on grounds of improper notice and failure to pay the bid in cash. Petitioners hoped that proving these procedural irregularities could invalidate the sale.
What does it mean for a lien to be “annotated” on a title?	To annotate a lien on a title means to record it officially in the Register of Deeds, providing public notice of the encumbrance. This gives the lien legal effect against subsequent transactions.
Why was the absence of the attachment on the owner’s copy not fatal?	Because official recording with the registry is what matters. Attachment is an involuntary lien, resistance of including to the owner’s copy is anticipated.
Can a buyer ignore an attachment if not properly reconstituted?	No. Even if reconstitution is imperfect, a recorded attachment gives notice and the buyer proceeds at their own risk, thus they cannot simply ignore a recorded attachment.
What if the judgment debtor only owns half the property?	Generally, a levy can only attach to the judgment debtor’s interest. Here, there was no interest to justify the Martells own the property entirely.
What is the practical implication of this ruling for property buyers?	Buyers must conduct thorough due diligence, including checking the records at the Register of Deeds, to uncover any existing liens before purchase. Buyers must be cautious, and cannot be imprudent.

This case reinforces the necessity of thorough due diligence when purchasing property. A recorded lien, such as an attachment, has significant legal weight and binds subsequent transferees, regardless of whether it appears on the owner’s copy of the title. This highlights the importance of consulting legal experts and thoroughly examining property records before completing any transaction.

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: Villavicencio vs. Mojarez, G.R. No. 142648, February 27, 2003