Unicorp Finance Limited vs. Herma Corporation

A Regional Trial Court sitting as a land registration court has jurisdiction under Presidential Decree No. 1529 to hear and determine a petition for cancellation of annotations of levy on title, even if the levies originated from writs issued by a court of coordinate jurisdiction. Furthermore, a levy on execution creates a lien only over the right, title, and interest of the judgment obligor in the property at the time of the levy; consequently, no valid lien attaches if the judgment obligor had already absolutely sold the property to a third person prior to the levy, regardless of whether the sale was registered.

Spouses Thelma and Margarita Escalona owned three parcels of land in Quezon City. In 1995 and 1996, they sold these properties to TERP Construction Corporation (TERP) via separate deeds of sale. TERP subsequently contributed the properties to the Margarita Asset Pool. When the asset pool failed, its guarantor, Home Guaranty Corporation (HGC), settled claims and acquired the properties. Later, HGC sold the properties to Herma Corporation, which obtained new titles. Prior to Herma's acquisition, however, Unicorp Finance Limited and AsianBank Corporation had caused the annotation of notices of levy on attachment and levy on execution on the earlier titles (still in the names of HGC or TERP) to secure judgments against Spouses Escalona. Herma, as the new registered owner, filed a petition before the Regional Trial Court (RTC), acting as a land registration court, to cancel these annotations.

• Nature of the Properties and Initial Ownership: Three parcels of land in Quezon City were originally owned by Spouses Thelmo and Margarita Escalona.
• Sale to TERP: Spouses Escalona sold the properties to TERP Construction Corporation via two Deeds of Absolute Sale dated December 14, 1995, and a Deed of Sale dated March 19, 1996. New titles were issued in TERP's name.
• Transfer to HGC and Herma: TERP contributed the properties to the Margarita Asset Pool. After the pool's failure, guarantor Home Guaranty Corporation (HGC) acquired the properties. HGC subsequently sold them to Herma Corporation in 2013, and new titles were issued in Herma's name.
• Annotation of Liens: During the pendency of cases against Spouses Escalona, Unicorp and AsianBank caused the annotation of notices of levy on attachment and levy on execution on the titles (then held by HGC or TERP) to secure money judgments against the Spouses.
• Herma's Petition for Cancellation: As the new registered owner, Herma filed a petition before the RTC (land registration court) to cancel these annotations, arguing the properties were no longer owned by the judgment debtors when levied.
• RTC Ruling: The RTC cancelled the lis pendens but denied cancellation of the levies, holding it lacked jurisdiction over levies annotated pursuant to writs from a co-equal court.
• CA Ruling on Cancellation: The CA reversed, holding the land registration court had jurisdiction under PD 1529 and that the levies were invalid because the properties belonged to TERP at the time of levy.
• CA Ruling on Injunction: In a separate case, the CA enjoined the execution sale of the properties, finding Herma's ownership clear and its right to the properties in imminent danger.
• Finality of Prior Case: A prior CA decision upholding the validity of the sale of one property from Spouses Escalona to TERP had become final and executory, a fact relied upon by the CA in the present case.

• Jurisdiction of Land Registration Court: Petitioner argued that the RTC, acting as a land registration court, has no jurisdiction to lift or cancel annotations made pursuant to writs of attachment issued by another RTC branch (Branch 226) of coordinate jurisdiction.
• Immutability of Liens: Petitioner contended that the annotations constituted superior liens that had become immutable due to the finality of the judgment in the main case (Civil Case No. Q-99-36998). It argued that the finality of the decision upholding the sale pertained only to one property, not all three.
• Superior Right as Third Person: Petitioner asserted that as a third person, it was not bound by the unregistered sale between Spouses Escalona and TERP at the time of the levy in 1999 and 2001. Under Section 52 of PD 1529, registration is the operative act to affect third persons.
• Forum Shopping: Petitioner alleged that Herma committed forum shopping by filing a petition for injunction (CA-G.R. SP No. 155574) while its appeal on the cancellation petition (CA-G.R. CV No. 105736) was pending.

• Ownership and Superior Title: Respondent maintained that it was the absolute owner of the properties, having purchased them from HGC, which derived title from TERP. TERP acquired ownership in 1995/1996, long before the levies in 1999 and 2001.
• Jurisdiction Under PD 1529: Respondent argued that under Section 2 of PD 1529, the land registration court has jurisdiction over all petitions filed after original registration, including cancellation of annotations.
• Invalidity of Levy on Third Party's Property: Respondent contended that a levy can only be made on properties belonging to the judgment obligor. Since Spouses Escalona no longer owned the properties at the time of levy, the annotations were invalid and should be cancelled.
• No Forum Shopping: Respondent countered that the two cases (cancellation and injunction) involved different causes of action, reliefs, and additional parties (the Sheriff and the RTC branch), thus not meeting the test for forum shopping.

• Jurisdiction of Land Registration Court: Whether the RTC Branch 223, sitting as a land registration court, has jurisdiction over a petition to cancel notices of levy annotated on titles by virtue of writs issued by a court of coordinate jurisdiction.
• Validity and Superiority of Liens: Whether Herma's ownership of the subject properties is subordinate to the liens annotated on the titles to satisfy the obligations of the previous owners, Spouses Escalona.
• Propriety of Injunction: Whether the Court of Appeals properly issued a writ of injunction to enjoin the sale of the properties to satisfy the judgment against Spouses Escalona.
• Forum Shopping: Whether Herma committed forum shopping by filing a petition for injunction despite the pendency of its appeal on the petition for cancellation of annotations.

• Jurisdiction of Land Registration Court: The RTC, acting as a land registration court, has jurisdiction. Presidential Decree No. 1529 eliminated the distinction between the general jurisdiction of the RTC and its limited jurisdiction as a land registration court. Section 2 explicitly grants RTCs jurisdiction over petitions filed after original registration, with power to determine all questions arising therefrom.
• Validity and Superiority of Liens: Herma's ownership is superior. A levy on execution creates a lien only over the right, title, and interest of the judgment obligor at the time of the levy. Because Spouses Escalona had absolutely sold the properties to TERP in 1995/1996, they had no right, title, or interest left to be levied upon in 1999 and 2001. The subsequent registration of the sale in 2003 bound third persons like Unicorp from that date forward, confirming the prior transfer of ownership and invalidating the basis for the liens.
• Propriety of Injunction: The injunction was proper. As the absolute owner, Herma had the right to challenge the wrongful levy and prevent the sale of its properties through any available legal remedy, including an action for injunction.
• Forum Shopping: No forum shopping was committed. The test requires identity of parties, rights/cause of action, and reliefs. The cancellation case and the injunction case differed in parties (the latter included the Sheriff and the issuing court), reliefs (cancellation of annotations vs. injunction against sale), and the specific annotations involved (the injunction case addressed a later-annotated writ of execution).

• Elimination of Distinction Between General and Limited Jurisdiction of RTCs under PD 1529 — The enactment of the Property Registration Decree (PD 1529) merged the previously separate jurisdictions of the RTC. An RTC sitting as a land registration court now has the power to hear and determine all questions, including contentious and substantial ones, arising from applications for original registration and petitions filed after such registration. This aims to avoid multiplicity of suits and expedite case disposition.
• Levy Binds Only the Judgment Obligor's Interest — A levy on execution, pursuant to Section 9(b), Rule 39 of the Rules of Court, may be made only upon the properties of the judgment obligor. The effect of a levy is to create a lien over the right, title, and interest of the judgment obligor at the time of the levy. If the judgment obligor has previously divested himself of all right, title, and interest in the property through an absolute sale, no lien in favor of the judgment creditor attaches, regardless of whether the prior sale was registered.

• "One man's goods shall not be sold for another man's debts." — Cited to illustrate the fundamental principle that execution can only be issued against property unquestionably belonging to the judgment debtor.
• "[T]he power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone. An execution can be issued only against a party and not against one who did not have his day in court." — From Villasi v. Garcia, reiterating the limitation on execution to the debtor's property.

• Ignacio v. CA, G.R. No. 107426, August 14, 1995 — Held that PD 1529 eliminated the distinction between the general jurisdiction of the RTC and its limited jurisdiction as a land registration court, aiming to avoid multiplicity of suits.
• Lozada v. Bracewell, G.R. No. 174447, December 10, 2014 — Reiterated that under PD 1529, RTCs have the power to hear and determine all questions, even contentious ones, arising from land registration proceedings.
• Villasi v. Garcia, G.R. No. 180428, April 7, 2014 — Affirmed that the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor.
• Miranda v. Sps. Mallari, G.R. No. 211707, August 28, 2018 — Discussed that the purpose of a levy on execution is to subject the properties of the judgment obligor to answer for the judgment debt.

• Section 2, Presidential Decree No. 1529 (Property Registration Decree) — Grants Courts of First Instance (now RTCs) exclusive jurisdiction over all applications for original registration and all petitions filed after original registration, with power to hear and determine all questions arising upon such applications or petitions. This provision was the basis for upholding the land registration court's jurisdiction.
• Section 9(b), Rule 39 of the Rules of Court — Provides that a writ of execution may be enforced by levy upon the properties of the judgment obligor. This was cited to establish that only the obligor's properties may be levied.
• Section 12, Rule 39 of the Rules of Court — States that the effect of levy on execution as to third persons is to create a lien over the right, title, and interest of the judgment obligor at the time of the levy. This was applied to conclude that no lien attached because the obligor had no interest at the time of levy.
• Section 52, Presidential Decree No. 1529 — Provides that the act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned. The Court used this to explain that while the unregistered sale initially did not bind Unicorp, the subsequent registration in 2003 made the prior transfer binding from that date forward.

• Justice Caguioa (Chairperson)
• Justice Gaerlan
• Justice Dimaampao
• Justice Singh