WILLIAM H. ANDERSON & CO., PETITIONER AND APPELLANT, VS. GREGORIO GARCIA, OPPOSITOR AND APPELLEE.

Pursuant to an order of execution issued on
June 22, 1927 by the municipal court of the City of Manila in civil
case No. 54079, entitled William H. Anderson & Co., plaintiff, vs.
Cipriano Obcena, defendant, two parcels of land in Paniqui, Tarlac,
identified as lots 4019 and 4043 (cadastral case No. 26, G. L. R. O.
record No. 395) belonging to the defendant and registered in his name
under original certificate of title No. 13639, were levied upon and
sold at public auction by the sheriff of the province and awarded “to
the judgment creditor, William H. Anderson & Co. This was on
September 7, 1927. On the following day, the sheriff of Tarlac issued a
certificate of sale which was filed and recorded in the office of the
register pf deeds of the province on the 21st of the month and
annotated on the back of certificate of title No. 13639. Cipriano
Obcena, the judgment debtor, having failed to exercise his right of
redemption within the statutory period, the sheriff of Tarlac, on July
12, 1934, executed a final deed of sale covering lots 4019 and 4043 in
favor of William H. Anderson & Co. It appears, however, that on
March 23, 1927, by a document of absolute sale (Exhibit B) dated March
23, 1927, acknowledged before a notary public, Cipriano Obcena and his
wife, Magdalena Labitoria, conveyed lot No. 4019 to Aurora Riquez for
the sum of P160. Although the document inserted in the bill of
exceptions as Exhibit B does not appear to have been registered in the
registry of deeds of the province, an examination of the duplicate
original presented as evidence in the lower court shows that the same
was presented and registered on November 3, 1930. On this same date,
Aurora Riquez obtained the cancellation of the original certificate of
.title No. 13639 and the issuance in her name of transfer certificate
of title No. 5214 covering lot 4019. The sale in favor of William H.
Anderson & Co. was annotated on the back of Riquez’ new
certificate. On March 23, 1927, Aurora Riquez sold with pacto de retracto
the same lot 4019 to Gregorio Garcia, as evidenced by document
presented as Exhibit A, and the sale was also registered in the
registry of deeds of the province on November 3, 1930. As in the case
of Riquez, the transfer certificate of title No. 5215 issued to
Gregorio Garcia bore an annotation of the lien in favor of William H.
Anderson & Co.

The purpose of the original petition filed in this case and
bearing date of July 20,1934, was to have the original certificate of
title 13639 and transfer certificate 5214 covering lot 4019 issued to
Obcena and Riquez, respectively, cancelled and this petition appears to
have been granted by the lower court in its order of August 6, 1934
(bill of exceptions, p. 7). The petitioner, however, upon learning that
Riquez had transferred lot 4019 to Gregorio Garcia and that transfer
certificate of title 5215 had been issued to the latter filed an
amended petition bearing date of August 28, 1934 praying, among other
things, for the cancellation of transfer certificate 5215 issued to
Gregorio Garcia. This second petition was opposed by Garcia alleging,
among other things, that he was the owner of lot No. 4019, having
acquired the same from Aurora Riquez by virtue of a contract of sale
with pacto de retracto on March 23, 1927 (Exhibit A); that
Aurora Riquez in turn acquired lot 4019 from the spouses Cipriano
Obcena and Magdalena Labitoria by virtue of a contract of absolute sale
executed on March 23, 1927 (Exhibit B); that he was a purchaser in good
faith and that, when the contract of sale with pacto de retracto
was had on March 23, 1927 between him and Aurora Riquez, lot 4019 was
free from all encumbrances; that the absolute sale effected by Cipriano
Obcena and Magdalena Labitoria in favor of Aurora Riquez on March 23,
1927, and the subsequent sale made by the latter in his favor on the
same date, took place before the issuance of the order of execution in
civil case No. 54079 of the municipal court of Manila, and that at the
time of said execution Cipriano Obcena was no longer the owner of said
lot 4019.

Acting upon this second petition of William H.
Anderson & Co. and the opposition thereto of Gregorio Garcia the
court below, on September 27, 1934, entered an order’ denying the
petition on the ground that the issue therein involved could only be
determined in a separate ordinary action. The petitioner-appellant duly
excepted to this order, moved for a new trial which was denied, and
after due exception and notice of appeal, the case was elevated to this
court by bill of exceptions.

The petitioner-appellant
assigns various errors in this appeal. The primary question, however,
which is presented for determination is: On the foregoing related
facts, who has a superior right over the controverted lot No. 4019,
William H. Anderson & Co. or Gregorio Garcia?

The several decisions of this court may indeed have given rise to
difficulties in the application of the proper rule. In the case of
Worcester vs. Ocampo and Ocampo (34 Phil., 646), it was held that a pacto de retracto
sale which was not recorded, filed, or entered in the office of the
register of deeds until after the purchaser at an execution sale had
secured his lien by attachment was subject to the rights of the latter
and the same could not be enforced against the land until after the
rights of the purchaser had been fully satisfied. Under the facts of
that case, the rights of the judgment creditor who was the purchaser at
the auction sale were declared superior to those of a vendee or
transferee of the same property under a contract of sale with pacto de retracto
entered into before the levy and unregistered at the time of such levy.
Such result was arrived at in view of the provisions of sections 50 and
51 of the Land Registration Act (No. 496). In the case of Lanci vs.
Yangco (52 Phil., 563), it was said that a judgment creditor only
acquires at an execution sale the identical interest possessed by the
judgment debtor in the property which is the subject of the sale and
that he takes the property subject to all existing equities to which
the property will have been subject in the hands of the debtor. It was
held, further, that the circumstance that at the time of the levy of
the execution, and the consequent sale of the property, the certificate
of title showed the debtor in the execution to be the unqualified owner
of the property, did not interfere with the application of this rule.
In Laxamana vs. Carlos (57 Phil., 722), it Was held,
following the Lanci-Yangco case, that a purchaser at public auction of
the rights, interests and participation of the judgment debtor in the
property which the latter had validly sold, acquires only the judgment
debtor’s right to repurchase, and the fact that the vendee in a sale
with the right of repurchase did not object to the auction sale or file
a third party claim does not safeguard said purchaser at the auction
sale from the claim of the vendee in a sale with the right of
repurchase even if the sheriff’s deed be registered in the registry of
deeds, since the provisions of section 194 of the Revised
Administrative Code, as amended by Act No. 2837, do not apply to
judicial sales (citing Williams vs. Suner, 49 Phil., 534),
and because it was his duty, before bidding at the auction sale, to
ascertain the real rights of the judgment debtor, which are to be sold
(citing 23 Corpus Juris, 746; Sarmiento vs. Villamor, 13 Phil., 112; Pabico vs. Ong Pauco, 43 Phil., 572).

It should be observed that in Lanci vs. Yangeo, supra, unlike the case of Worcester vs. Ocampo and Ocampo, supra,
the vendees under a contract of sale anterior to the execution had
presented a third party claim to the sheriff, alleging that the
property belonged to them. The purchaser at the auction sale,
therefore, had notice of the claim, a situation which did not obtain in
Worcester vs. Ocampo and Ocampo. Upon the other hand, the
levy in the former case included the house built on the property with
the money supplied by the predecessor in interest of the third party
claimants, and this court took further notice of the fact that the
certificate of title issued in the name of the judgment debtor
contained no special notation with respect to improvements on the
property, but the levy effected by the sheriff purported to be executed
upon the debtor’s interest not only in the land but also in the
improvements. Under these circumstances, it was said that a judgment
creditor only acquires at an execution sale the identical interest
possessed by the judgment debtor in the property which is the subject
of the sale, and that “he therefore takes the property subject to all
existing equities to which the property would have been subject in the
hands of the debtor.” In Laxamana vs. Carlos, supra,
the property involved was at the time an unregistered land as could be
inferred from the stipulation between the parties concerned that the
vendor was to procure its registration under the Torrens system. Other
cases apparently involving the application of the same legal principle
are not here mentioned because of wide dissimilarity of facts.

In the case at bar, the record does not show when civil case No.
54079 was initiated in the municipal court of Manila, but it does
appear that the order of execution was issued on June 22, 1927. The
sales from the Obcena spouses to Aurora Riquez and from the latter to
Gregorio Garcia, the appellee, were effected on the same date, or on
March 23, 1927, and both documents were also registered on the same
date, November 3,1930, or more than two years after their
accomplishment by the parties. The order of execution having been
issued on June 22, 1927, the complaint against the judgment debtor
Obcena must have been presented some time before. At any rate, there is
nothing to indicate that William H. Anderson & Co. had actual or
constructive notice of the previous conveyance to Gregorio Garcia or of
any outstanding equities in favor of the latter at the time of the
adjudication to that company of lot 4019. On the contrary, lot 4019 was
at the time registered in the name of the judgment debtor, free from
all encumbrances. When the certificate of title was issued to him on
November 3, 1930, it bore an annotation of the lien in favor of William
H. Anderson & Co., the judgment creditor and purchaser at the
auction sale. No third party claim was presented by Gregorio Garcia to
the sheriff.

Whatever might have been generally or unqualifiedly stated in the
cases heretofore decided by this court, we hold that under the Torrens
system registration is the operative act that gives validity to the
transfer or creates a lien upon the land (secs. 50 and 51, Land
Registration Act). A person dealing with registered land is not
required to go behind the register to determine the condition of the
property. He is only charged with notice of the burdens on the property
which are noted on the face of the register or the certificate of
title. To require him to do more is to defeat one of the primary
objects of the Torrens system. A bona fide purchaser for
value of such property at an auction sale acquires good title as
against a prior transferee of the same property if such transfer was
unrecorded at the time of the auction sale. The existence or absence of
good faith will, of course, have to be determined upon the facts and
the legal environment of each particular case.

From what has been said it follows that judgment should be rendered
in favor of the petitioner-appellant, William H. Anderson & Co. The
corresponding certificate of title covering lot No. 4019 should,
therefore, be issued in its name. Without pronouncement as to costs. So
ordered.

Avancena, C. J., Villa-Real, Abad Santos, Imperial, Diaz, and Concepcion, JJ., concur.