Consolidated Bank and Trust Corp. vs. Intermediate Appellate Court

A prior attachment of real property, when duly annotated on the certificate of title, creates a lien that places the property in custodia legis and operates to transfer the debtor’s right of redemption in a subsequent extrajudicial foreclosure to the attaching creditor, and the pendency of an action to enforce that right tolls the one‑year redemption period under Section 6 of Act No. 3135.

SOLIDBANK granted loans totaling over ₱4 million to NICOS Industrial Corporation. NICOS defaulted. SOLIDBANK sued for collection in Manila and obtained a writ of attachment over NICOS’s two parcels of land in Bulacan, which were already mortgaged to United Coconut Planters Bank. The attachment was annotated on the titles. UCPB later extrajudicially foreclosed its mortgage, sold the property to an individual, who immediately sold to Golden Star Industrial Corporation. NICOS then executed a waiver of its right of redemption in favor of Golden Star. Golden Star obtained a writ of possession from the Bulacan court and forcibly took over the premises from the Manila sheriff’s guards. SOLIDBANK moved to annul the writ and for contempt, asserting its rights under the attachment.

• The Loan and Attachment: SOLIDBANK extended loans to NICOS totaling ₱4,076,518.64. NICOS defaulted. SOLIDBANK sued for collection before the Court of First Instance of Manila (Civil Case No. 82‑11611). On August 30, 1982, the Manila court issued an order of attachment over NICOS’s rights, interests, and participation in two parcels of land covered by TCT No. T‑210581 (T‑32.505 M) and TCT No. T‑210580 (T‑32.504 M) located in Meycauayan, Bulacan. The Manila Sheriff levied on the properties on September 1, 1982, and sent Notices of Levy Upon Realty to the Registrar of Deeds of Malolos, Bulacan for annotation. On September 7, 1982, the notices were duly inscribed at the back of both titles. Guards were deputized by the Manila Sheriff to secure the premises.

• Prior Mortgage and Foreclosure: The same properties had been mortgaged by NICOS to United Coconut Planters Bank (UCPB) on March 11, 1982—before the attachment. On July 11, 1983, UCPB extrajudicially foreclosed the mortgage and, as the highest bidder, a certificate of sale over the realties and improvements was issued to it by the Sheriff of Bulacan.

• Successive Transfers and Waiver: On August 29, 1983, UCPB sold all its rights, interests, and participation over the properties to Manuel Go. On the same day, Go sold those rights to Golden Star Industrial Corporation (GOLDEN STAR). On October 5, 1983—despite the one‑year redemption period from July 11, 1983 not yet having expired—NICOS executed a “Waiver of Right of Redemption” in favor of GOLDEN STAR.

• Writ of Possession and Takeover: On September 15, 1983, GOLDEN STAR petitioned the Regional Trial Court of Malolos, Bulacan (Branch VI) for a writ of possession. The court granted the petition on November 4, 1983. Armed men representing GOLDEN STAR forcibly took over the properties from the Manila Sheriff’s deputized guards.

• SOLIDBANK’s Omnibus Motion: On November 21, 1983, SOLIDBANK filed an omnibus motion before the Malolos court to annul the writ of possession and to cite for contempt those who implemented it with force and intimidation. It argued that the properties were in custodia legis by virtue of the prior attachment and that its right as attaching creditor had been defeated. NICOS and GOLDEN STAR opposed: NICOS relied on its waiver of redemption, while GOLDEN STAR claimed ignorance that the lands were under custodia legis. The Malolos court denied the motion on June 9, 1984, ruling that the properties were not in custodia legis at the time of the extrajudicial foreclosure.

• Custodia Legis: Petitioner argued that the properties were in custodia legis by virtue of the prior and duly registered attachment; therefore, the subsequent extrajudicial foreclosure and writ of possession were null and void.
• Right of Redemption: Petitioner maintained that as attaching creditor, it stepped into NICOS’s right to redeem the auctioned properties under Section 6 of Act No. 3135 and that this right could not be defeated by NICOS’s subsequent waiver.

• No Custodia Legis: Respondents asserted that the properties were not in custodia legis at the time of foreclosure, as found by the trial court and affirmed by the appellate court.
• Good Faith and Lack of Notice: GOLDEN STAR argued that it was unaware the lands were under custodia legis, relying on copies of titles that did not reflect the attachment annotation.
• Lapse of Redemption Period: GOLDEN STAR contended that even if the attachment were valid, the certificate of sale was registered on September 6, 1983, and the one‑year redemption period expired on September 6, 1984 without petitioner ever exercising any right of redemption.

• Custodia Legis: Whether the disputed properties were in custodia legis by reason of the prior attachment when they were extrajudicially foreclosed.
• Validity of Writ of Possession: Whether the writ of possession issued by the Malolos court was valid.
• Right of Redemption: Whether SOLIDBANK, as attaching creditor, acquired the right of redemption over the foreclosed properties.
• Effect of Waiver: Whether NICOS’s waiver of the right of redemption defeated SOLIDBANK’s rights.
• Tolling of Redemption Period: Whether the pendency of SOLIDBANK’s action tolled the one‑year redemption period.

• Custodia Legis: The properties were in custodia legis. The Notices of Levy Upon Realty were duly inscribed on the titles on September 7, 1982, as confirmed by the entries on the certificates of title. This created a lien that nothing could destroy but its dissolution. The annotation is constructive notice to the whole world; the contrary finding of the courts below was plainly contradicted by the record.
• Validity of Writ of Possession: The writ of possession was null and void ab initio. Property in custodia legis is in the possession of the court that levied upon it, and another court of coordinate jurisdiction cannot disturb that possession. The Malolos court’s order issuing the writ invaded the jurisdiction of the Manila court. The surrounding circumstances—sale from UCPB to Go, same‑day sale to GOLDEN STAR, and NICOS’s waiver—showed a patent attempt to defeat SOLIDBANK’s lien.
• Right of Redemption: SOLIDBANK acquired the right of redemption by operation of law. Under Section 6 of Act No. 3135, any person having a lien on the property subsequent to the mortgage may redeem within one year from the date of the extrajudicial sale. The attachment, being annotated after the mortgage, constituted such a subsequent lien. An attaching creditor succeeds to the debtor’s incidental rights, including the right to redeem from a prior mortgagee.
• Effect of Waiver: NICOS’s waiver of the right of redemption executed on October 5, 1983 was ineffectual. At that point, NICOS no longer possessed any right to waive, because the attachment had already vested the redemption right in SOLIDBANK.
• Tolling of Redemption Period: The one‑year redemption period was tolled. It is settled that the pendency of an action brought in good faith and relating to the validity of the sale tolls the term for redemption. SOLIDBANK’s omnibus motion was filed on November 21, 1983—barely two months after the certificate of sale was registered on September 6, 1983—well within the one‑year period. The right of redemption continues during the pendency of an appeal until final adjudication.

• Custodia Legis by Attachment — When a writ of attachment is levied on real property and the levy is duly annotated on the certificate of title, the property is placed in custodia legis; the levy creates a lien which nothing can destroy but its dissolution. Possession of the officer holding the property is the possession of the court; any interference by another court or party invades the jurisdiction of the attaching court.
• Right of Redemption of Attaching Creditor — Under Section 6 of Act No. 3135, a person holding a lien on the property subsequent to the mortgage may redeem the property within one year from the date of the extrajudicial sale. An attaching creditor succeeds to the debtor’s incidental rights, including the right to redeem from a prior mortgage.
• Tolling of Redemption Period by Pendency of Action — The pendency of an action brought in good faith concerning the validity of a foreclosure sale tolls the term for the right of redemption. The right of redemption continues during appeal until the final disposition of the case.

• “The rule is well settled that when a writ of attachment has been levied on real property or any interest therein belonging to the judgment debtor, the levy thus effected creates a lien which nothing can destroy but its dissolution (Chua Pua Hermanos v. Register of Deeds of Batangas, 50 Phil. 670; Government, et. al. v. Mercado, 67 Phil. 409).”
• “While property or money is in custodia legis, the officer holding it is the mere hand of the court, his possession is the possession of the court, and to interfere with it is to invade the jurisdiction of the court itself.”
• “It has been held that ‘an attaching creditor may succeed to the incidental rights to which the debtor was entitled by reason of his ownership of the property, as for example, a right to redeem from a prior mortgage’ (Lyon v. Stanford, 5 Conn. 541, 7 SJS 505).”
• “the pendency of an action tolls the term for the right of redemption.”

• Chua Pua Hermanos v. Register of Deeds of Batangas, 50 Phil. 670 — Applied: a levy of attachment creates a lien that only its dissolution can destroy.
• Government, et. al. v. Mercado, 67 Phil. 409 — Applied: reiterates the prior lien rule.
• De Leon v. Salvador, 36 SCRA 567 — Applied: a court cannot issue process that interferes with property in custodia legis of a coordinate court.
• Ong Chua v. Carr, 53 Phil. 975 — Followed: pendency of an action relating to the validity of a sale tolls the redemption period.
• Fernandez v. Suplido, 96 Phil. 541 — Followed: reiterates the tolling rule.
• Lyon v. Stanford, 5 Conn. 541 (U.S.) — Persuasive authority: an attaching creditor succeeds to the debtor’s right of redemption.
• Philadelphia Mortgage Co. v. Gustus, 75 N.W. 1107 (U.S.) — Persuasive authority: the right of redemption continues after perfection of an appeal until the decision on appeal.

• Section 6, Act No. 3135 — Grants any person having a lien on the property subsequent to the mortgage the right to redeem the same within one year from the date of the extrajudicial sale. The provision was applied to vest SOLIDBANK, the attaching creditor whose lien was annotated after the mortgage, with the right of redemption.

Fernan (Chairman), Paras, Padilla, Bidin, and Cortes, JJ., all concurred.