Exception to Consensual Sale: Conditional Sale

Bian Steel Corporation vs CA and Mylene Garcia

- On July 22, 1998, Bian filed a complaint against Joenas Metal Corporation and spouse Ng for a collection of sum of money with
damages. And 5 days after, RTC issued a writ of Preliminary Attachment on the estate of spouses Ng, but this property was mortgage to
Far East Bank & Trust Company (FEBTC) now BPI.
- On June 29, 1998, spouses Ng, sold the property to petitioner, Garcia but the property was only registered 2 and half months later
(August 12, 1998) with the approval of FEBTC. Thus the preliminary attachment was transferred and annotated at the back of the Garcias
title. However the writ of preliminary attachment was decided in favor of Bian and the notice of Sale of Execution was issued on the
lands now owned by the Garcias.
- On February 18, 1999, the Garcias filed an action against Bian for the cancellation of the annotation with assumption of mortgage and
claimed that they are now the registered owner of the land having acquired the same on June 29, 1998 by deed of sale from spouses Ng.
thus a TRO was issued in their favor to prevent the execution of the said property.

Issue:
Who has a better right?

Held:
Supreme Court ruled on the following points:

1. It should be noted that at the time of the attachment of the property, the Spouses Ng was still the registered owners of the
said land and when the Garcias purchased the property in question, it was under a duly registered preliminary attachment. In
other words, there was already a notice to the said purchaser and the whole world of the impending acquisition in favor of
Bian.

2. In the contention of the Garcias that they acquired the subject property ahead of the inscription of the attachment, Supreme
Court held that even if the contract of sale is consensual in nature, not all contacts of sale becomes automatic and effective
immediately. In a sale with assumption of mortgage, as in this case, the assumption of mortgage is a condition precedent to
the sellers consent and therefore, without approval of the mortgagee, the sale is not perfected. Since it was only on the later
part that the Garcias registered the land (2 and half months after the FEBTC approved of the sale).

- They registered the property only on august 12, 1998. It was already too late because on July 27, 1998, the
attachment in favor of Bian was annotated on the title of Spouses Ng. thus the attachment became already binding
to the whole world including the Garcias. If only the Garcias checked with RD, they would have seen Bians superior
rights over the said land.

The sale between Spouses Ng and the Garcias is a valid sale between them, however, in view od the priory levy on attachment on the
same property, the Garcias took the property subject to the attachment, this their tittle became subject to the results of the pending
litigation between spouses Ng and Bian.

All told, the purchaser of a property subject to an attachment legally and validly levied thereon is merely subrogated to the right of an
attachment creditor.

Thus, Bian has a better right.