The Importance of Timely Registration in Securing Property Rights

Christian B. Guillermo and Victorino B. Guillermo v. Orix Metro Leasing and Finance Corporation, G.R. No. 237661, September 07, 2020

Imagine you’ve finally secured your dream property, only to find out it’s been levied by a creditor of the previous owner. This nightmare scenario became a reality for Christian and Victorino Guillermo, who found themselves in a legal battle over a piece of land they believed they rightfully owned. The central question in their case was whether a sale of property, even if unregistered, could take precedence over a creditor’s levy on execution. This case sheds light on the critical importance of timely registration and the nuances of property law in the Philippines.

The Guillerimos purchased a property from the Cando spouses, who were indebted to Orix Metro Leasing and Finance Corporation. Despite completing the sale in June 2012, the registration process was delayed, allowing Orix to levy on the property in August 2012. The Guillerimos argued that their sale should take precedence, while Orix maintained that their levy, being registered first, should prevail.

Legal Context: Understanding Property Registration and Levies

In the Philippines, the Torrens system governs property registration. Under Presidential Decree No. 1529, also known as the Property Registration Decree, the act of registration is the operative act that conveys or affects land as far as third parties are concerned. Section 51 of PD 1529 states, “The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned.”

A levy on execution, as defined in Rule 39, Section 12 of the 1997 Rules of Civil Procedure, creates a lien in favor of the judgment creditor over the debtor’s property at the time of the levy, subject to existing liens and encumbrances. This means that if a property is already encumbered by a mortgage or other lien, the levy is subject to these prior claims.

For the general reader, a levy on execution is akin to a creditor placing a hold on a debtor’s property to satisfy a debt. Imagine you lend money to a friend who owns a car, and when they can’t pay you back, you ask the court to seize the car. However, if your friend had already sold the car to someone else, the sale could potentially take precedence over your claim, depending on when it was registered.

Case Breakdown: The Journey from Sale to Supreme Court

The Guillerimos’ journey began when they agreed to purchase a property from the Cando spouses to settle a fuel purchase debt. The property was mortgaged to BPI, and the Guillerimos paid off this mortgage, stepping into BPI’s shoes as the mortgagee. On June 5, 2012, the Cando spouses executed a Deed of Absolute Sale in favor of the Guillerimos, but the registration was delayed until September 3, 2012.

Meanwhile, Orix, having obtained a Writ of Execution against the Cando spouses for unpaid loans, levied on the property on August 17, 2012. The Guillerimos filed a third-party claim, arguing that the property was theirs by virtue of the earlier sale, despite the delay in registration.

The Regional Trial Court initially ruled in favor of the Guillerimos, but the Court of Appeals reversed this decision, asserting that the registered levy took precedence over the unregistered sale. The Guillerimos then appealed to the Supreme Court, which ultimately sided with them.

The Supreme Court’s decision hinged on two key points:

• The Guillerimos had fulfilled all necessary steps for registration on July 26, 2012, and thus should be considered registered from that date, despite the Register of Deeds’ delay.
• Ownership had been transferred to the Guillerimos before the levy, through both constructive and actual delivery of the property.

The Court stated, “The registration of the Cancellation of the Real Estate Mortgage and the Deed of Absolute Sale on July 26, 2012 in the primary entry book or day book of the Register of Deeds operates as a constructive notice to the whole world that the property covered by TCT No. N-328930 is no longer owned by the Sps. Cando.”

Additionally, the Court emphasized, “Ownership of the property was constructively delivered by the Sps. Cando to the petitioners upon the execution of the Deed of Absolute Sale on June 5, 2012.”

Practical Implications: Lessons for Property Owners and Creditors

This ruling underscores the importance of timely registration in securing property rights. For property buyers, it’s crucial to ensure that all documentation is promptly filed and that any delays are addressed swiftly. For creditors, this case serves as a reminder to thoroughly investigate any liens or encumbrances on a property before proceeding with a levy.

Businesses and individuals involved in property transactions should:

• Ensure all necessary documents are submitted promptly to the Register of Deeds.
• Monitor the registration process closely to avoid any unnecessary delays.
• Be aware of any existing liens or encumbrances on a property before engaging in transactions.

Key Lessons:

• Timely registration is essential to protect property rights.
• Ownership can be transferred through constructive and actual delivery, even if registration is delayed.
• Creditors must be diligent in checking for prior claims on a property before levying.

Frequently Asked Questions

What is a levy on execution? A levy on execution is a legal process where a creditor, with a court’s permission, can seize a debtor’s property to satisfy a debt.

How does property registration work in the Philippines? Property registration in the Philippines is governed by the Torrens system, where the act of registration is crucial for conveying or affecting land rights against third parties.

Can a sale of property take precedence over a levy? Yes, if the sale is completed and all necessary steps for registration are taken before the levy is registered, the sale can take precedence.

What should I do if there’s a delay in property registration? Monitor the process closely and follow up with the Register of Deeds. If necessary, seek legal assistance to ensure your rights are protected.

How can I protect my property from being levied by a creditor? Ensure all transactions are properly documented and registered promptly. Also, be aware of any debts or liens on the property before purchasing.

ASG Law specializes in property law and can help you navigate these complex issues. Contact us or email hello@asglawpartners.com to schedule a consultation.