PACIENCIA B. SALITA, PLAINTIFF AND APPELLANT, VS. EDUARDO CALLEJA, ET AL., DEFENDANTS AND APPELLEES.

Salita versus Calleja

The Case

This is a lecture on Salita versus Calleja, a 1961 decision of the Supreme Court of the Philippines. Paciencia Salita sued Eduardo Calleja and the Sheriff of Manila for injunction and damages, to stop the sheriff from selling a house at public auction in satisfaction of a money judgment that Calleja had obtained against one Francisco Domingo, the original owner of the house. The case matters because it fixes the boundary between two registration laws: Act Number 3344, which governs the recording of instruments dealing with unregistered land, and Act Number 496, the Land Registration Act, which governs Torrens titles. The Court tells us when an attachment of a house standing on registered land is validly recorded, and what happens to a buyer who relies on a clean certificate of title.

Procedural History

Salita filed the action for injunction and damages in the Court of First Instance of Manila. The trial court upheld Calleja's contention, dismissed Salita's complaint, and ordered her to pay Calleja 500 pesos as attorney's fees on his counterclaim. Salita appealed. The appeal was originally taken to the Court of Appeals, but that court certified the case to the Supreme Court on the ground that it involved only questions of law. The Supreme Court reversed the trial court.

Facts

Francisco Domingo was the original owner of a house. The house stood on a lot that his wife, Mercedes Domingo, had bought from Realty Investments, Inc. on the installment plan. Because the price was not yet fully paid, the certificate of title covering the land was still in the name of the vendor company. Calleja, who had a money claim against Francisco Domingo, obtained a preliminary writ of attachment, and on January 7, 1954 the attachment was levied on the house. The notice of attachment stated that the land on which the house stood had not yet been fully paid for, and that the house had not been registered under either Act Number 496 or the Spanish Mortgage Law. It asked that the notice be registered under Act Number 3344. The attachment was entered in the corresponding book, but it was never annotated on the certificate of title covering the land, which did not mention any improvement.

On June 3, 1954, Realty Investments, Inc. conveyed the lot to Mercedes Domingo, with the marital consent of her husband. Because she still owed the company 4,566.20 pesos, the transfer was made by a deed of sale with mortgage over the lot and the house and other improvements in favor of the vendor company. A new certificate of title was issued in her name, with the company's mortgage annotated on it. That title made no mention of a house or other improvement, and no mention of the attachment. On February 3, 1955, Mercedes Domingo, with the marital consent of her husband, who knew of the existing attachment on the house, sold both the lot and the house to Salita. Salita assumed the mortgage in favor of Realty Investments, Inc. A new title was issued in her name, again with no mention of the house and no annotation of the attachment. She later mortgaged the lot and house to the Rehabilitation Finance Corporation as security for loans, and part of the proceeds paid off what Mercedes Domingo still owed the vendor company.

Meanwhile, on February 14, 1955, Calleja obtained judgment against Francisco Domingo in the other case, and the Court of Appeals affirmed it. On October 13, 1956, Calleja obtained a writ of execution and required the sheriff to satisfy the judgment by selling the attached house. Salita filed a third-party claim with the sheriff, and Calleja filed a bond to indemnify the sheriff. To prevent the scheduled execution sale, Salita filed this action for injunction and damages, and the trial court issued a preliminary injunction. The trial court later ruled for Calleja, dismissed Salita's complaint, and awarded attorney's fees against her.

Issues

• Whether or not the registration of Calleja's notice of attachment under Act Number 3344 was valid and binding on Salita, considering that the attachment referred to a house erected on land registered under the Torrens system.
• Whether or not Calleja, having failed to annotate his lien on the certificate of title of the registered land, may enforce that lien against Salita as a purchaser in good faith.
• Whether or not Salita acquired the house even though the certificate of title issued to her did not mention the improvement.

Applicable Provisions

Act Number 3344, as carried in Section 194 of the Revised Administrative Code, provides:

The character of the contract and its conditions, the nature of each piece of land (unregistered) and its own improvements only, and not any other kind of real estate or properties, its situation, boundaries, area in square meters, whether or not the boundaries of the property are visible on the land by means of monuments or otherwise, and in the affirmative case, in what they consist; the permanent improvements existing in the property.

This is the provision under which Calleja registered his attachment, and the Court reads its words "own" and "only" to confine registration to unregistered land and the improvements on it.

Section 112 of Act Number 496, the Land Registration Act, provides:

Any registered owner or other person in interest may at any time apply by petition to the court, upon the ground that registered interests of any description, whether vested, contingent, expectant, or inchoate, have terminated and ceased; or that new interests have arisen or been created which do not appear upon the certificate; or that any error, omission, or mistake was made in entering a certificate or any memorandum thereon, or any duplicate certificate.

This is the remedy Calleja should have used to annotate the house and his lien on the title of the registered land, and his failure to do so defeats his claim against Salita.

Ruling

On the first issue, the Court held that the registration of the attachment under Act Number 3344 was invalid and of no legal or binding effect on third persons, particularly on Salita. The law requires that the instrument refer only to unregistered land and its own improvements only, and not any other kind of real estate or properties. The words "own" and "only" clearly mean improvements on unregistered lands alone. The deed cannot refer to improvements or buildings on lands registered under the Torrens system or under the Spanish Mortgage Law. To hold otherwise would produce the anomalous situation of two registrations, one under Act Number 496 for unimproved land, and another under Act Number 3344 for improvements later introduced on the same land. Since the attachment referred to a house erected on registered land, its registration under Act Number 3344 was invalid.

On the second issue, the Court held that Calleja could not enforce his lien against Salita, a purchaser in good faith. Calleja knew that the land on which the house was built had been bought from C. M. Hoskins and Company, Inc. on the installment plan. He should have investigated whether the land was duly titled and, finding that it was titled in the name of Realty Investments, Inc., he should have taken steps to perfect his lien by filing a petition for annotation of the improvement and the registration of his lien on the title of the land under Section 112 of Act Number 496. Having failed to perfect his lien in that manner, he cannot enforce it against Salita.

On the third issue, the Court held that the fact that the clean title acquired by Salita did not mention the improvement did not preclude the acquisition of the house with the land described in the title. Unless it otherwise appears on the title itself, the title includes not only the land described therein but also all improvements existing on that land. The Court also noted that the sale to Salita included both the house and the lot, and so did the mortgage she assumed and later paid. Salita actually parted with her money to acquire the house, while Calleja merely sought security for an otherwise unsecured pre-existing claim.

Doctrine

An instrument may be registered under Act Number 3344 only if it refers to unregistered land and its own improvements only, and not any other kind of real estate or properties. An attachment of a house erected on land registered under the Torrens system cannot be validly recorded under Act Number 3344; it must be annotated on the certificate of title of the land under Section 112 of Act Number 496. Registration under the wrong statute is invalid and binds no third person. A purchaser in good faith of registered land acquires the improvements existing on it, because unless the title itself states otherwise, the title includes the land and all improvements on it.

Disposition

The Supreme Court reversed and set aside the decision of the trial court, revived and made permanent the injunction against the execution sale, and left Calleja free to enforce his judgment against Francisco Domingo in a separate action, without pronouncement as to costs.

Remember This

Memorize this line: a house on Torrens land cannot be attached by registering the notice under Act Number 3344, because that law covers unregistered land and its own improvements only. Examiners use this case to test the difference between registration under Act Number 3344 and annotation under Section 112 of the Land Registration Act, and the rights of a buyer in good faith who relies on a clean certificate of title.