ASG Law

Tag: Priority of Liens

  • Priority of Liens: Understanding Attachment vs. Execution in Philippine Law

    When Does an Execution Lien Take Priority Over an Attachment Lien?

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    G.R. No. 119577, August 28, 1996

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    Imagine a scenario where a property is subject to multiple claims. Two creditors, both seeking to recover debts, have placed liens on the same property. One creditor initiated an attachment lien before judgment, while the other secured an execution lien after obtaining a favorable court decision. Which lien takes priority? This question is crucial in determining who gets paid first when the property is sold.

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    The Supreme Court case of First Integrated Bonding & Insurance Co., Inc. vs. Court of Appeals and Pilipinas Bank (G.R. No. 119577, August 28, 1996) clarifies the rules on priority of liens, specifically addressing the difference between attachment and execution liens and their impact on subsequent transactions. The case revolves around conflicting claims on condominium units, highlighting the importance of proper annotation and the legal consequences of errors in recording liens.

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    Understanding Attachment and Execution Liens

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    To fully understand the complexities of this case, it’s important to understand the difference between an attachment lien and an execution lien, and how they function within the Philippine legal system.

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    • Attachment Lien: An attachment is a provisional remedy where a party’s property is seized before a judgment is rendered, providing security for the satisfaction of any judgment that may be obtained. The Rules of Court, Rule 57, Sec. 1, states, “At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered.”n
    • Execution Lien: An execution is the process of enforcing a final judgment of a court. An execution lien arises when a writ of execution is levied on a property to satisfy a judgment. Rule 39, Sec. 9 of the Rules of Court states, “The officer must enforce an execution order without any delay and in a circumspect manner.”n

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    The priority of these liens determines who has the superior right to the property and who gets paid first from the proceeds of its sale. It’s not simply about who filed first, but the nature of the lien and the validity of its annotation.

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    Example: A supplier, fearing non-payment, obtains a writ of attachment on a client’s warehouse. Later, a bank, holding a final judgment against the same client, levies an execution on the warehouse. The question then becomes: who has the superior claim to the warehouse?

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    The Case: FIBICI vs. Pilipinas Bank

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    The case involves a dispute over three condominium units owned by Olympia International, Inc. (OII). Both Pilipinas Bank and First Integrated Bonding & Insurance Co., Inc. (FIBICI) had claims on these properties, leading to a legal battle over who had the preferential right.

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    • Pilipinas Bank sought to recover a debt of over P6 million from OII and obtained a writ of preliminary attachment on March 12, 1982. However, the sheriff erroneously annotated a