Vashdeo Gagoomal vs. Spouses Ramon and Natividad Villacorta

A notice of lis pendens is valid and effective only when the action directly affects title to or the right of possession of real property; it has no application in a purely personal action for the recovery of money, and any annotation made in such an action is void ab initio and confers no preferential right over the property. Where a writ of possession is issued against property not incontrovertibly belonging to the judgment debtor, a third party in possession claiming an adverse interest may seek its quashal, and the court retains supervisory authority over the execution process to correct the wrongful enforcement.

Albert Zeñarosa owned a parcel of land covered by TCT No. 170213 in Ayala Alabang Village, Muntinlupa City. He mortgaged the property to BPI Family Savings Bank and later obtained a loan from RAM Holdings Corporation secured by a second mortgage and a promissory note. Zeñarosa defaulted on both obligations. RAM filed a collection suit against him and caused the annotation of a notice of lis pendens on the title in 1999. Meanwhile, another creditor, Luis Lorenzo, Jr., filed a separate collection case and obtained a writ of preliminary attachment over the same property, annotated on the title in September 2002. Zeñarosa redeemed the property from BPI, sold it to Patricia Tan in 2003, and Lorenzo subsequently caused an execution sale at which he himself purchased the property; title was consolidated in his name. Lorenzo then sold the property to respondents, Spouses Ramon and Natividad Villacorta, who took possession. RAM’s collection case later resulted in a final money judgment in its favor. An execution sale was held in 2004 at which petitioner, as RAM’s successor-in-interest, was the highest bidder. A writ of possession was eventually issued in petitioner’s favor in 2007, and petitioner ousted respondents. Respondents moved to quash the writ.

The Property and the Obligations: Albert Zeñarosa was the registered owner of a parcel of land in Ayala Alabang Village covered by TCT No. 170213, which he mortgaged to BPI Family Savings Bank (annotation: June 7, 1990). He later obtained a $300,000.00 loan from RAM Holdings Corporation, secured by a second mortgage and a promissory note. The parties executed a Memorandum of Agreement on March 2, 1995 by which Zeñarosa, through an Irrevocable Special Power of Attorney, authorized RAM to sell the property in the event of default.

RAM’s Collection Suit and Notice of Lis Pendens: Zeñarosa defaulted. RAM filed a complaint for collection of sum of money with damages against Zeñarosa and BPI before the RTC of Pasig City, Branch 152, docketed as Civil Case No. 67381. RAM caused the annotation of a notice of lis pendens on TCT No. 170213 on June 11, 1999.

Foreclosure, Redemption, and Sale to Tan: Zeñarosa also defaulted on his BPI obligation; the property was foreclosed, and the certificate of sale was annotated on March 24, 2000. Meanwhile, RAM assigned its rights and interests to New Summit International, Inc., represented by petitioner Vashdeo Gagoomal; the assignment was annotated on October 16, 2000. Zeñarosa redeemed the property from BPI on March 23, 2003, then sold it to Patricia A. Tan, in whose favor TCT No. 10206 was issued on April 4, 2003. The annotations of the notice of lis pendens in Civil Case No. 67381 and the subsequent attachment in Civil Case No. 02-1038 were carried over to Tan’s title.

Lorenzo’s Action and Attachment: Luis P. Lorenzo, Jr. filed a separate complaint for recovery of sum of money with application for preliminary attachment against Zeñarosa (Civil Case No. 02-1038, RTC Makati City, Branch 64). A writ of preliminary attachment was issued on September 20, 2002 and annotated on TCT No. 170213 on September 30, 2002. Lorenzo obtained a final and executory judgment; a notice of levy and execution was annotated, and the property was sold at public auction to Lorenzo on January 15, 2004 for ₱9,034,166.00, with the certificate of sale annotated on TCT No. 10206 on January 30, 2004. Zeñarosa’s redemption period expired on January 29, 2005 without redemption, and title was consolidated in Lorenzo’s name. Lorenzo sold the property to respondents Natividad Villacorta and Ramon Villacorta for ₱6,000,000.00; respondents immediately took possession.

RAM’s Judgment and Execution Sale to Petitioner: In Civil Case No. 67381, the RTC rendered judgment in RAM’s favor on April 30, 2004. While Zeñarosa’s appeal was pending, the RTC granted execution pending appeal. At the public auction on December 14, 2004, petitioner, as RAM’s successor-in-interest, bid ₱19,793,500.00 and obtained a certificate of sale annotated on December 17, 2004. The appeal was later dismissed, and the decision became final on October 7, 2005. A final Deed of Sale was issued to petitioner on December 14, 2005.

Writ of Possession and Motion to Quash: On February 1, 2007, the RTC issued a writ of possession in favor of petitioner, who ousted respondents. Respondents filed a Motion to Quash Writ of Possession in Civil Case No. 67381 on March 20, 2007 and also instituted a separate action for quieting of title and recovery of possession (Civil Case No. 08-011, RTC Muntinlupa City, Branch 276). The RTC denied the motion to quash and directed the Registry of Deeds to issue a new title in petitioner’s name. The CA reversed, quashed the writ, and ordered restoration of possession to respondents.

• Superior Right of Petitioner: Petitioner maintained that his right over the property was superior to that of respondents because his predecessor, RAM, caused the annotation of a notice of lis pendens on June 11, 1999, earlier than the attachment obtained by Lorenzo on September 30, 2002.
• Finality of Judgment: Petitioner contended that respondents could no longer seek the quashal of the writ of possession because the RTC’s decision in Civil Case No. 67381 had already attained finality, and the writ had already been implemented; any challenge constituted an impermissible modification of a final judgment.
• Power to Order Transfer of Title: Petitioner argued that the RTC possessed the authority to direct the transfer of title to him as the highest bidder in the execution sale, and that the CA overstepped the issues in reversing that directive.

• Impropriety of the Lis Pendens Annotation: Respondents contended that the notice of lis pendens in Civil Case No. 67381 was void because the action was purely personal — for collection of sum of money — and did not directly affect title to or possession of the property; therefore, it conferred no preferential right upon petitioner.
• Levied Right Merely Redemption Interest: Respondents maintained that at the time of the execution sale to petitioner on December 14, 2004, Zeñarosa no longer owned the property; he possessed only a statutory right of redemption following the prior execution sale to Lorenzo, and petitioner acquired nothing more than that expiring right of redemption.
• Property Not Belonging to Judgment Debtor: Respondents argued that the writ of possession was improperly enforced against them because the property did not incontrovertibly belong to the judgment debtor Zeñarosa; as third parties in possession claiming an adverse interest derived from a valid execution sale, they could not be bound by a judgment in a case to which they were not parties.

• Validity and Effect of Lis Pendens Annotation: Whether the notice of lis pendens annotated in a purely personal action for collection of sum of money is valid and confers any right or preference over the property.
• Superiority of Rights: Whether petitioner acquired a superior right over the property by virtue of the earlier annotation of lis pendens compared to Lorenzo’s subsequent attachment and execution sale.
• Propriety of the Writ of Possession and Its Quashal: Whether the writ of possession was properly issued against respondents, who were third parties in possession claiming an adverse interest, and whether the RTC’s refusal to quash the writ constituted grave abuse of discretion.
• Authority to Order Transfer of Title: Whether the RTC had legal basis to order the transfer of the certificate of title to petitioner in the face of the competing claim of respondents and the pending quieting-of-title case.

• Validity and Effect of Lis Pendens Annotation: The notice of lis pendens was invalid. Under Section 14, Rule 13 of the Rules of Court, a notice of lis pendens is proper only in an action affecting the title or the right of possession of real property. Civil Case No. 67381 was a complaint for collection of sum of money with damages — a purely personal action. The doctrine of lis pendens has no application to a proceeding in which the only object sought is the recovery of a money judgment, even if title or possession may be incidentally affected. The property must be directly affected, as where the relief sought includes recovery of possession, enforcement of a lien, or an adjudication of conflicting claims of title or possession. Because the underlying action was personal, the annotation was rendered functus officio and conferred no rights upon RAM or its successor-in-interest, petitioner.

• Superiority of Rights: Without a valid lis pendens, petitioner could not claim a superior right. The attachment in favor of Lorenzo was annotated on September 30, 2002, earlier than the execution levy in petitioner’s favor on October 14, 2004. The earlier attachment and the resulting execution sale to Lorenzo — later transferred to respondents — were valid and produced a title superior to any interest petitioner subsequently acquired. What petitioner levied upon was only the statutory right of redemption Zeñarosa retained until January 29, 2005, which expired unexercised. Consequently, petitioner obtained no title that could defeat respondents’ ownership.

• Propriety of the Writ of Possession and Its Quashal: The writ of possession was improper. The court’s power to execute a money judgment extends exclusively to property incontrovertibly belonging to the judgment debtor. The property did not belong to Zeñarosa at the time of the execution sale to petitioner; it had already been sold to respondents. As third parties in possession holding an adverse claim, respondents were entitled to challenge the levy by moving to quash the writ and by filing a separate action for quieting of title. The RTC’s refusal to quash the writ amounted to grave abuse of discretion. The court issuing execution retains supervisory authority to correct an erroneous enforcement, and the quashal of a writ of possession does not modify a final judgment but rectifies an execution directed against a non-party’s property.

• Authority to Order Transfer of Title: The RTC’s directive to transfer the title to petitioner was without legal basis. Apart from the motion to quash, respondents had already instituted a case for quieting of title and recovery of possession (Civil Case No. 08-011). The property rights of the parties could not be summarily adjudicated through a writ of possession, and the title could not be transferred to petitioner where his claim rested on an execution sale that affected only the redemption interest of Zeñarosa, who was no longer the owner.

• Doctrine of Lis Pendens — A notice of lis pendens operates (i) to keep the property within the power of the court until final judgment to prevent defeat of the judgment by successive alienations, and (ii) to bind purchasers to the judgment subsequently rendered. It is available only in actions that directly affect title to or the right of possession of real property, such as actions for recovery of possession, quieting of title, removal of cloud, partition, and other proceedings of any kind directly affecting title, use, occupation, or buildings on the land. In a purely personal action for recovery of a money judgment, lis pendens has no application, and any annotation made therein is void and functus officio. (Applied: the notice of lis pendens in RAM’s collection suit was improper; thus it created no priority or right over the property.)

• Execution of Judgments — Property of Judgment Debtor — A money judgment may be enforced only against property incontrovertibly belonging to the judgment debtor. If the sheriff levies upon property of a third person in which the judgment debtor has no interest, the levy is void. A third person may avail of the remedies of terceria (under Rule 39, Section 16) or an independent separate action to vindicate ownership or possession, and such third person is not precluded from other legal remedies, including a motion to quash the writ of possession. (Applied: respondents, as third parties with adverse title, properly assailed the writ because the property did not belong to Zeñarosa at the time of execution.)

• Supervisory Control Over Execution — The court issuing a writ of execution retains general supervisory control over the execution process and may determine every question involved in the execution, including the propriety of the levy and the writ of possession. A writ of possession may be quashed even after implementation if it is shown that the levy was made against property not belonging to the judgment debtor. The quashal does not modify the final judgment but corrects a wrongful enforcement. (Applied: the CA correctly found that the RTC gravely abused its discretion in refusing to quash the writ.)

• “The filing of a notice of lis pendens has a dual effect: (1) to keep the property subject matter of the litigation within the power of the court until the entry of the final judgment in order to prevent the defeat of the final judgment by successive alienations; and (2) to bind a purchaser, bona fide or otherwise, of the property subject of the litigation to the judgment that the court will subsequently promulgate.”
• “A notice of lis pendens is only valid and effective when it affects title over or right of possession of a real property. … The doctrine of lis pendens has no application to a proceeding in which the only object sought is the recovery of a money judgment, though the title or right of possession to property be incidentally affected. It is essential that the property be directly affected such as when the relief sought in the action or suit includes the recovery of possession, or the enforcement of a lien, or an adjudication between conflicting claims of title, possession, or the right of possession to specific property, or requiring its transfer or sale. Even if a party initially avails of a notice of lis pendens upon the filing of a case in court, such notice is rendered nugatory if the case turns out to be a purely personal action. In such event, the notice of lis pendens becomes functus officio.”
• “A judgment can only be executed or issued against a party to the action, not against one who has not yet had his day in court.”
• “The settled rule is that a judgment which has acquired finality becomes immutable and unalterable, and hence may no longer be modified in any respect except only to correct clerical errors or mistakes — all the issues between the parties being deemed resolved and laid to rest.”

• Atlantic Erectors, Inc. v. Herbal Cove Realty Corporation, G.R. No. 148568, March 20, 2003, 399 SCRA 409 — Followed. Established that the doctrine of lis pendens has no application to a proceeding whose sole object is a money judgment; the property must be directly affected.
• Spouses Romero v. Court of Appeals, G.R. No. 142406, May 16, 2005, 458 SCRA 483 — Cited. Enumerated the dual effects of a notice of lis pendens and the actions to which it properly applies.
• Motos v. Real Bank (A Thrift Bank), Inc., G.R. No. 171386, July 17, 2009, 593 SCRA 216 — Cited. Clarified the instances when a writ of possession may be issued: land registration proceedings, judicial foreclosure where the debtor is in possession and no third party has intervened, and extrajudicial foreclosure under Act No. 3135 as amended.
• Naguit v. Court of Appeals, G.R. No. 137675, December 5, 2000, 347 SCRA 60 — Cited. Stressed that a judgment can only be enforced against a party to the action and that the sheriff acts beyond authority when levying on property of a third person in which the judgment debtor has no interest.
• Yupangco Cotton Mills, Inc. v. Court of Appeals, G.R. No. 126322, January 16, 2002, 373 SCRA 451 — Cited. Affirmed that a third-party claimant may avail of remedies beyond terceria to prosecute his claim.
• Kukan International Corporation v. Hon. Amor Reyes, G.R. No. 182729, September 29, 2010, 631 SCRA 596 — Cited. Acknowledged the trial court’s general supervisory control over execution, including the right to determine every question involved.

• Section 14, Rule 13 of the Rules of Court — Governs the filing of a notice of lis pendens; restricts its application to “an action affecting the title or the right of possession of real property.” Applied to hold the annotation invalid because Civil Case No. 67381 was a purely personal collection action.
• Section 33, Rule 39 of the Rules of Court — Provides that, upon expiration of the redemption period, the purchaser is entitled to a conveyance and possession, and that the purchaser shall be substituted to the rights, title, interest, and claim of the judgment obligor as of the time of the levy. Applied to explain the limited right petitioner acquired, which pertained only to Zeñarosa’s redemption interest.
• Section 16, Rule 39 of the Rules of Court — Prescribes the remedy of terceria where a third person claims the property levied upon, and recognizes the third party’s right to vindicate his claim through a separate action. Applied to support respondents’ motion to quash and separate quieting-of-title case.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Roberto A. Abad, Jose C. Mendoza