G.R. No. 93640, 7 January 1994, 229 SCRA 151

FACTS:

On 9 May 1978, Sta. Clara Lumber Co., Inc. (SCLC), obtained a loan from private respondent Development Bank of the Philippines (DBP). As security for the loan, SCLC mortgaged some of its properties. Upon SCLC’s failure to pay the loan, the mortgage was foreclosed. On 18 August 1982, the Clerk of Court and Provincial Sheriff conducted an auction sale and sold the vessel to DBP. He thereafter issued a certificate of sale dated 18 August 1982 in favor of DBP. However, DBP did not register with the Philippine Coast Guard the mortgage; neither the foreclosure nor the auction sale.

In December 1983, DBP and Sta. Clara Housing Industries, Inc. (SCHI), entered into a Lease/Purchase Agreement which provided that DBP should lease some of the former properties of SCLC to the latter and transfer actual ownership over these properties upon completion by the lessee of the stipulated lease/purchase payment. On 10 July 1986, petitioner caused the levy and attachment of the same vessel in order to satisfy a judgment.

Meanwhile, the vessel was again levied upon and attached by Deputy Sheriff by virtue of a writ of attachment issued by the Court. On 24 July 1986, the same court issued an order appointing Philippine Trigon Shipyard Shipping Corporation as depository of the attached vessel with authority to operate the vessel temporarily. MV Sta. Clara I was then taken from the port of Davao City to Cebu City.

Upon being informed of the execution sale to petitioner, DBP filed a complaint before the Regional Trial Court for annulment of the execution sale, recovery of possession, damages and attorney’s fees with prayer for restraining order and preliminary injunction. Petitioner moved to dismiss the complaint for alleged lack of jurisdiction, cause of action and/or legal personality to sue on the part of DBP. The court denied the motion. The court likewise denied the motion for reconsideration.

ISSUE:

Whether the respondent’s failure to register its title over the property to the Philippine Coast Guard is fatal to its claim of ownership.

RULING:

The court ruled that the lower court correctly held that a certificate of registration of ownership of a vessel is only presumptive evidence that the registered owner has a legal title to the vessel, and that DBP’s failure to register with the Philippine Coast Guard its prior acquisition of the vessel is not fatal to its ownership of said vessel, vis-a-vis petitioner herein, who similarly failed to register the alleged subsequent sale of the vessel to itself (sic) in an execution sale.

Further, petitioner’s contention that he is a bona fide purchaser for value at the auction sale and that he came to know about the acquisition by DBP only upon its filing of complaint for annulment of the execution sale belies such contention. Before the auction sale started, counsel for petitioner was already aware of the cloud on the title of SCLC to the vessel.

Notwithstanding his knowledge of the prior claim of DBP, petitioner insisted that the sheriff proceeded with the auction sale. Under the caveat emptor rule, he assumed the risk of losing the vessel because his right to it cannot be considered superior to that of DBP. As we held in one case, an execution creditor generally acquires no higher or better right than what the execution debtor has in the property levied upon. It follows then that if the judgment debtor had no interest in the property, the execution creditor acquires no interest therein.

*Case digest by Lowel Dave D. Manuel, JD-4, Andres Bonifacio Law School, S.Y. 2019-2020