Traders Royal Bank vs. Court of Appeals, Patria Capay, et al G.R. No. 118862, Sept.

24, 1999 (315 SCRA 190)

FACTS:

A parcel of land owned by the spouses Capay was mortgaged to and subsequently
extrajudicially foreclosed by Traders Royal Bank (TRB).

To prevent property sale in public auction, the Capays filed a petition for preliminary
injunction alleging the mortgage was void because they did not receive the proceeds
of the loan.

A notice of lis pendens (suit pending) was filed before the Register of Deeds with the
notice recorded in the Day Book.

Meanwhile, a foreclosure sale proceeded with the TRB as the sole and winning
bidder. The Capays title was cancelled and a new one was entered in TRBs name
without the notice of lis pendens carried over the title.

The Capays filed recovery of the property and damages. Court rendered a decision
declaring the mortgage was void for want of consideration and thus cancelled TRBs
title and issued a new cert. of title for the Capays.

Pending its appeal before the court, TRB sold the land to Santiago who subsequently
subdivided and sold to buyers who were issued title to the land. Court ruled that the
subsequent buyers cannot be considered purchasers for value and in good faith
since they purchase the land after it became a subject in a pending suit before the
court. Although the lis pendens notice was not carried over the titles, its recording in
the Day Book constitutes registering of the land and notice to all persons with
adverse claim over the property. TRB was held to be in bad faith upon selling the
property while knowing it is pending for litigation. The Capays were issued the cert.
of title of the land in dispute while TRB is to pay damages to Capays.

ISSUE:
Who has the better right over the land in dispute in the present case?
HELD:
The purchasers in good faith.
The court ruled that a Torrens title is presumed to be valid which purpose is to avoid
conflicts of title to real properties. When the subsequent buyers bought the property
there was no lis pendens annotated on the title,Every person dealing with a registered
land may safely rely on the correctness of the title and is not obliged to interpret what is

beyond the face of the registered title. Hence the court ruled that the subsequent
buyers obtained the property from a clean title in good faith and for value.
On one hand, the Capays are guilty of latches. After they filed the notice for lis
pendens, the same was not annotated in the TRB title. They did not take any action
for 15 years to find out the status of the title upon knowing the foreclosure of the
property. In consideration to the declaration of the mortgage as null and void for want of
consideration, the foreclosure proceeding has no legal effect.
However, in as much as the Capays remain to be the real owner of the property it has
already been passed to purchasers in good faith and for value. Therefore, the property
cannot be taken away to their prejudice. Thus, TRB is duty bound to pay the Capays
the fair market value of the property at the time they sold it to Santiago.