11 Biñan Steel Corporation

11. Biñan Steel Corporation vs.
Court of Appeals
Property; Obligation; Execution; Attachment; Attachment is a proceeding in rem and in ef ect means
that the property attached is an indebted thing and a virtual condemnation of it to pay the owner’s
debt.— This Court has always held that attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor acquires a specific lien on the
attached property which ripens into a judgment against the res when the order of sale is made. Such a
proceeding in effect means that the property attached is an indebted thing and a virtual condemnation
of it to pay the owner’s debt.
Same; Same; Same; Same; Insofar as third person’s interest in real property is the registration of the
deed.—The Garcias claim they acquired the subject property by means of a deed of sale with
assumption of mortgage dated June 29, 1998, meaning, they purchased the property ahead of the
inscription of the levy on attachment thereon on July 27, 1998. But, even if consensual, not all contracts
of sale become automatically and immediately effective. In Ramos vs. Court of Appeals we held: In sales
with assumption of mortgage, the assumption of mortgage is a condition precedent to the seller’s
consent and therefore, without approval of the mortgagee, the sale is not perfected. Apart therefrom,
notwithstanding the approval of the sale by mortgagee FEBTC (BPI), there was yet another step the
Garcias had to take and it was the registration of the sale from the Ngs to them. Insofar as third persons
are concerned, what validly transfers orconveys a person’s interest in real property is the registration of
the deed.
FACTS:
On July 22, 1998, Biñan Steel Corporation (BSC) filed with the RTC of Manila a complaint against Joenas
Metal Corporation and spouses Ng Ley Huat and Leticia Dy Ng (the spouses Ng) for collection of a sum of
money with damages. The trial court issued a Writ of Preliminary Attachment, subsequently, the sheriff
levied on the property registered in the names of the spouses Ng. This property was in fact mortgaged
to the Far East Bank and Trust Company (FEBTC), now Bank of the Philippine Islands (BPI).
In the meantime, defendant-spouses Ng sold the property to Mylene and Myla Garcia by means of a
deed of sale dated June 29, 1998. Said transaction was registered only about a month-and-a-half later,
on August 12, 1998, after the mortgagee FEBTC gave its approval to the sale. Then, the latter caused the
transfer of title under their names with annotation of the preliminary attachment made earlier.
ISSUE:
Whether or not there was a perfected contract of sale in view of a deed of sale with assumption of
mortgage.
RULING:
NO
In the instant case, the records reveal that the levy on attachment covering the subject property was
annotated on July 27, 1998. The deed of sale executed on June 29, 1998 in favor of the Garcias was
approved by FEBTC only on August 12, 1998 which was also the date when the sale was registered. From
the foregoing, it can be seen that, when the Garcias purchased the property in question, it was already
under a duly registered preliminary attachment. In other words, there was already notice to said
purchasers (and the whole world) of the impending acquisition by BSC, as the judgment creditor, of a
legal lien on the title of the Ng spouses as judgment debtors—in case BSC won its case in the Manila
RTC. The court ruled that but, even if consensual, not all contracts of sale become automatically and
immediately effective. In Ramos vs. Court of Appeals we held: In sales with assumption of mortgage, the
assumption of mortgage is a condition precedent to the seller’s consent and therefore, without approval
of the mortgagee, the sale is not perfected.
The Garcias claim they acquired the subject property by means of a deed of sale with assumption of
mortgage dated June 29, 1998, meaning, they purchased the property ahead of the inscription of the
levy on attachment thereon on July 27, 1998. But, even if consensual, not all contracts of sale become
automatically and immediately effective. In Ramos vs. Court of Appeals we held: In sales with
assumption of mortgage, the assumption of mortgage is a condition precedent to the seller’s consent
and therefore, without approval of the mortgagee, the sale is not perfected. Apart therefrom,
notwithstanding the approval of the sale by mortgagee FEBTC (BPI), there was yet another step the
Garcias had to take and it was the registration of the sale from the Ngs to them. Insofar as third persons
are concerned, what validly transfers orconveys a person’s interest in real property is the registration of
the deed.
Because of the principle of constructive notice to the whole world, one who deals with registered
property which is the subject of an annotated levy on attachment cannot invoke the rights of a
purchaser in good faith. As between two purchasers who both registered the respective sales in their
favor, the one who registered his sale ahead of the other would have better rights than the other who
registered later.
In the instant case, when the disputed property was consequently sold on execution to BSC, this auction
sale retroacted to the date of inscription of BSC’s notice of attachment on July 27, 1998. The earlier
registration thus gave BSC superior and preferential rights over the attached property as against the
Garcias who registered their purchase of the property at a later date. Notably, the Garcias were not
purchasers for value in view of the fact that they acquired the property in payment of the loan earlier
obtained from them by the spouses Ng.

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