## FACTS:

In this case, the petitioners, the Sajonas couple, purchased a property from the Uychocde spouses. However, a Notice of Levy on Execution was already inscribed on the title of the property by the private respondent, Domingo Pilares, who was the judgment creditor of the Uychocdes. The Sajonas couple filed a complaint in the Regional Trial Court seeking the cancellation of the notice of levy, asserting that the Uychocdes had already transferred their rights to them when the notice of levy was annotated. Pilares countered that the plaintiffs had no cause of action and that their adverse claim had expired.

The trial court ruled in favor of the petitioners, cancelling the notice of levy and dismissing Pilares' counterclaim. But the Court of Appeals reversed the decision, upholding the annotation of the notice of levy. The petitioners then sought review before the Supreme Court, arguing that their ownership based on the sale contract and adverse claim should take precedence over Pilares' levy on the property.

Pilares claimed that the sale between the Uychocdes and the petitioners was done in fraud of a judgment creditor. He argued that his notice of levy was valid and should prevail over the petitioners' claims. The appellate court agreed with Pilares' interpretation of the law and ruled that the notice of levy was proper and justified since the petitioners' adverse claim had already expired.

The court also cited previous rulings which held that a sale recorded later than an attachment would give way to the attachment, as the act of registration is the operative act to affect the land. They referred to a provision of the law that allows the registered owner to convey or deal with the property.

## ISSUES:

1. Whether the adverse claim annotated on the Transfer Certificate of Title No. N-79073 was still effective on February 12, 1985 when the notice of levy on execution was annotated, considering that more than thirty days had already lapsed since its annotation.

2. Whether the petitioners were buyers in good faith of the subject property, insulating their rights from the claims of the private respondent.

## RULING:

1. Effectiveness of the Adverse Claim:

   The Supreme Court ruled that the adverse claim inscribed on the Transfer Certificate of Title No. N-79073 was still in effect on February 12, 1985, when the notice of levy on execution was annotated. This decision was based on the interpretation that the cancellation of the adverse claim was necessary to render it ineffective; otherwise, it would remain annotated and continue as a lien upon the property. The court held that the annotation of an adverse claim serves as a warning to third parties and protects the interest of the claimant, with its validity subject to court determination.

2. Petitioner's Status as Buyers in Good Faith:

   The Supreme Court found that the petitioners were buyers in good faith as they purchased the property without notice of any adverse claims or liens other than what was recorded on the title. The court noted that there was a lack of competent proof to establish that the purchase by the petitioners was made in fraud of creditors. Therefore, the petitioners' rights to the property were upheld, and their title was insulated from the claims of the private respondent, Domingo Pilares.

## PRINCIPLES:

1. Adverse Claim in Property Law:

   • An adverse claim serves as a warning to third parties that someone claims an interest in or a better right than the registered owner of the property.

   • The adverse claim remains effective until a court, upon the petition by an interested party, orders its cancellation after determining its validity.

2. Good Faith Acquisition:

   • A purchaser in good faith and for value buys property without notice that some other person has a right or interest in such property and pays a full and fair price at the time of such purchase, or before he has notice of the claims or interest of some other person in the property.

   • Good faith is presumed, while bad faith must be proven by competent evidence.

3. Operative Act of Registration under the Torrens System:

   • Registration of property under the Torrens system is the operative act that gives validity to the transfer, creating a lien upon the land in favor of the judgment creditor over the right, title, and interest of the judgment debtor in the property at the time of the levy, subject to existing liens or encumbrances.