FACTS:

The respondent spouses, Antonio and Maridel Calingo, sold their house and lot to the respondent spouses, Christopher and Ma. Angelica Barrameda. The Barramedas assumed the outstanding loan balance and issued checks for the purchase price, which the Calingos acknowledged. The Calingos also notified the Home Mutual Development Fund (HMDF) about the sale.

The Barramedas, after moving into the property, filed an affidavit of adverse claim and wrote to the HMDF seeking assistance in settling the loan arrearages. Meanwhile, a notice of levy was annotated on the certificate of title due to a writ of execution in favor of the petitioners, Francisco and Bernardina Rodriguez.

The Barramedas completed the payment of the purchase price and obtained a receipt from the Calingos, who waived their rights to the property. The Barramedas executed a joint affidavit confirming their ownership and filed a petition for quieting of title with the Regional Trial Court of Makati.

The trial court ruled in favor of the petitioners, dismissing the Barramedas' petition on grounds that their adverse claim had lost its efficacy and that there was collusion between the Barramedas and the Calingos.

The Court of Appeals reversed the trial court's decision, citing a previous ruling that the Barramedas' adverse claim, inscribed on the certificate of title, was still effective when the notice of levy on execution was made. The notice of levy was deemed unable to prevail over the Barramedas' adverse claim on the property.

ISSUES:

1. Whether the annotation of respondents Barrameda's adverse claim on the certificate of title was sufficient to establish their claim over the property.

2. Whether there was collusion between respondents Barrameda and respondents Calingo to transfer the property to defraud third parties who may have a claim against the Calingos.

RULING:

1. The Court of Appeals held that the annotation of respondents Barrameda's adverse claim on the certificate of title was still effective at the time the property was levied on execution. Thus, it was considered an encumbrance on the property that the notice of levy could not prevail over.

2. The Court of Appeals did not agree with the trial court's finding of collusion between respondents Barrameda and respondents Calingo to transfer the property to defraud third parties. This issue was not further discussed or ruled upon by the appellate court.

PRINCIPLES:

• Annotation of an adverse claim on a certificate of title is an effective means of establishing a claim over the property and can serve as an encumbrance on the property that subsequent actions, such as a notice of levy, cannot prevail over.

• The efficacy of an adverse claim is not dependent on the lapse of thirty days as stated in the Land Registration Act, as this issue was not raised or discussed in the decision.

• The existence of collusion in transferring property to defraud third parties must be proven by clear and convincing evidence. In this case, the Court of Appeals did not find evidence of collusion between respondents Barrameda and respondents Calingo.