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ESTANISLAO PADILLA, JR. G.R. No.

141256
Petitioner,
versus
PHILIPPINE PRODUCERS
COOPERATIVE MARKETING
ASSOCIATION, INC.,
Respondent. Promulgated:

July 15, 2005

x----------------------------------------------x

DECISION

CORONA, J.:

The undisputed facts of the case follow.[5]

Petitioner and his wife are the registered owners of THREE real properties in Bago City: Lot Nos.
2904-A (covered by TCT No. T-36090), 2312-C-5 (covered by TCT No. T-3849), and 2654 (covered by TCT
No. T-8053).

Respondent is a marketing cooperative which had a money claim against petitioner.

- Respondent filed a civil case against petitioner for collection of a sum of money in the
Regional Trial Court of Bacolod City.[6] Despite receipt of summons petitioner (then
defendant) opted not to file an answer; respondent (then plaintiff) moved to have
petitioner-defendant declared in default, which the trial court granted. The trial court
rendered a decision in respondents favor.[10] Petitioner was furnished a copy of this decision
by mail on but, because of his failure to claim it, the copy was returned.

- Court issued a writ of execution. The three lots were levied by virtue of that writ; auctioned
off the lots to satisfy the judgment, with respondent as the only bidder. A certificate of sale
was executed in favor of respondent and was recorded in the Register of Deeds.[12]

- When petitioner failed to exercise his right of redemption within the 12-month period
allowed by law, the court, on motion of respondent, the issuance of a writ of possession for
the sheriff to cause the delivery of the physical possession of the properties in favor of
respondent.[13]

- Respondent filed a motion to direct the Register of Deeds to issue new titles over the
properties in its name, alleging that the Register of Deeds (RD) of Bago City would not issue
new titles (in respondents name) unless the owners copies were first surrendered to him.
Respondent countered that such surrender was impossible because this was an involuntary
sale and the owners copies were with petitioner.[14]
- Motion was granted by the RTC, denied motion for reconsideration by petitioners and after
four years CA affirmed the decision of the trial court.

- Petitioner contends that respondents motion for the RD to cancel the existing certificates of
title and issue new ones in its name was in fact a real action and that the motion was
procedurally infirm because respondent did not furnish him a copy.[15] He also claims that
under Section 6 of Rule 39 of the 1997 Rules of Civil Procedure, the execution of the
judgment was barred by prescription, given that the motion was filed more than 5 years
after the writ of execution was issued on March 23, 1990.[16] He also argues that respondent
failed to follow the correct procedure for the cancellation of a certificate of title and the
issuance of a new one, which is contained in Section 107 of PD 1529.[17]

- Respondent claims that the motion dated May 15, 1995 to direct the RD to issue new
certificates of title was but a continuation of the series of events that began with the
decision in its favor on November 28, 1989, and from there, the auction of the properties
and the issuance of a certificate of sale in 1990.

The principal issues


(1) whether or not respondents right to have new titles issued in its name is now barred by
prescription - NO
(2) whether or not the motion in question is the proper remedy for cancelling petitioners
certificates of title and new ones issued in its name - NO

Ruling
NO, it has not yet prescribed. ***KAY NISUGOD UG RUN ANG RIGHT SA MOMENT NA GIPALIT SA
RESPONDENT SA AUCTION SALE ANG MGA YUTA! EXECUTION IS CONSTITUTED BY THE FACT OF LEVY
AND SALE, NOT BY THE ISSUANCE OF A NEW CERTIFICATE OF TITLE! THE RULE INVOKED BY THE
PETITIONER IS MISPLACED!!!

In Heirs of Blancaflor vs. Court of Appeals,


It is settled that execution is enforced by the fact of levy and sale. The result
of such execution sale with Sarmiento Trading Corporation as the highest bidder was
that title to Lot No. 22 of TCT No. 14749 vested immediately in the purchaser subject
only to the judgment debtors right to repurchase. Therefore, upon Sarmiento Trading
Corporations purchase of Lot No. 22 covered by TCT No. 14749 at the auction sale,
private respondents successor-in-interest had acquired a right over said title.

The right acquired by the purchaser at an execution sale is inchoate and does
not become absolute until after the expiration of the redemption period without the
right of redemption having been exercised. But inchoate though it be, it is like any
other right, entitled to protection and must be respected until extinguished by
redemption. Gaudencio Blancaflor was not able to redeem his property after the
expiration of the redemption period, which was 12 months after the entry or
annotation of the certificate of sale made on the back of TCT No. 14749.
Consequently, he had been divested of all his rights to the property. (underscoring
ours)
In this case, the rule being invoked by petitioner[20] states:

SEC. 6. Execution by motion or by independent action.A final and executory


judgment or order may be executed on motion within five (5) years from the date of its
entry. After the lapse of such time, and before it is barred by the statute of limitations,
a judgment may be enforced by action. The revived judgment may also be enforced by
motion within five (5) years from the date of its entry and thereafter by action before it
is barred by the statute of limitations.

As should be evident from Blancaflor, petitioner Padillas reliance on Section 6 of Rule 39 of


the 1997 Revised Rules of Civil Procedure is misplaced. The fact of levy and sale constitutes
execution, and not the action for the issuance of a new title. Here, because the levy and sale of the
properties took place in June and July of 1990, respectively, or less than a year after the decision
became final and executory, the respondent clearly exercised its rights in timely fashion.

- In addition, petitioner himself admits his failure to redeem the properties within the one-
year period by adopting the facts stated in the Court of Appeals decision.[21] There is thus no
doubt he had been divested of his ownership of the contested lots. Respondents position
hinges on petitioners failure to redeem the properties 12 months after the certificate of
sale was recorded in the Register of Deeds. There is no uncertainty about respondents
having become the new lawful owner of the lots in question by virtue of the levy and the
execution sale.

2. Petitioner is correct in assailing as improper respondents filing of a mere motion for the cancellation
of the old TCTs and the issuance of new ones as a result of petitioners refusal to surrender his owners
duplicate TCTs. ***DAPAT IEXHAUST SA TANAN LEGAL REMEDIES BEFORE RESORTING TO MERE
ISSUANCE OF TITLES IN ORDER TO MAINTAIN DUE PROCESS OF LAW. FIRST, THERE SHOULD BE
PETITION TO COMPEL THE SURRENDER OF THE DUPLICATE TO THE REGISTER OF DEEDS. IF HOLDER IS
NOT AMENABLE, COURT MAY ORDER THE ANNULMENT OF THE SAME AND THE ISSUANCE OF THE
NEW CERTIFICATE OF TITLE. LASTLY, AFTER THE FAILURE OF EXERCISING THE RIGHT OF REDEMPTION
PERIOD, CLAIMANT MAY PETITION THE COURT FOR THE ENTRY OF A NEW CERTIFICATE TO HIM!

Indeed, this called for a separate cadastral action initiated via petition.
Section 107 of PD 1529,[22] formerly Section 111 of Act 496,[23] provides:
Sec. 107. Surrender of withheld duplicate certificates.Where it is necessary to issue a
new certificate of title pursuant to any involuntary instrument which divests the title
of the registered owner against his consent or where a voluntary instrument cannot
be registered by reason of the refusal or failure of the holder to surrender the owners
duplicate certificate of title, the party in interest may file a petition in court to compel
the surrender of the same to the Register of Deeds. The court, after hearing, may
order the registered owner or any person withholding the duplicate certificate to
surrender the same, and direct the entry of a new certificate or memorandum upon
such surrender. If the person withholding the duplicate certificate is not amenable to
the process of the court, or if for any reason the outstanding owners duplicate
certificate cannot be delivered, the court may order the annulment of the same as
well as the issuance of a new certificate of title in lieu thereof. Such new certificate
and all duplicates thereof shall contain a memorandum of the annulment of the
outstanding duplicate.

Respondent alleges that it resorted to filing the contested motion because it could not obtain
new certificates of title, considering that petitioner refused to surrender his owners duplicate TCTs. This
contention is incorrect. The proper course of action was to file a petition in court, rather than merely
move, for the issuance of new titles. This was the procedure followed in Blancaflor by Sarmiento
Trading which was in more or less the same situation as the respondent in this case:[24]

Petitioners reliance on prescription and laches is unavailing in this instance. It


was proper for Sarmiento Trading Corporation to file a petition with the Court of First
Instance of Iloilo, acting as a cadastral court, for the cancellation of TCT No. 14749 in
the name of Gaudencio Blancaflor and the issuance of another in its name. This is a
procedure provided for under Section 78 of Act No. 496 and Section 75 of PD No. 1529

Section 78 of Act 496 reads:

Sec. 78. Upon the expiration of the time, if any allowed by law for redemption after
registered land has been sold on any execution, or taken or sold for the enforcement of
any lien of any description, the person claiming under the execution or under any deed
or other instrument made in the course of the proceedings to levy such execution or
enforce any lien, may petition the court for the entry of a new certificate to him, and
the application may be granted: Provided, however, That every new certificate entered
under this section shall contain a memorandum of the nature of the proceeding on
which it is based: Provided, further, That at any time prior to the entry of a new
certificate the registered owner may pursue all his lawful remedies to impeach or annul
proceedings under execution or to enforce liens of any description.

Section 75 of PD 1529 provides:


Sec. 75. Application for new certificate upon expiration of redemption
period.Upon the expiration of the time, if any, allowed by law for redemption after the
registered land has been sold on execution, or taken or sold for the enforcement of a
lien of any description, except a mortgage lien, the purchaser at such sale or anyone
claiming under him may petition the court for the entry of a new certificate to him.

Before the entry of a new certificate of title, the registered owner may pursue
all legal and equitable remedies to impeach or annul such proceedings.

It is clear that PD 1529 provides the solution to respondents quandary. The reasons behind the
law make a lot of sense; it provides due process to a registered landowner (in this case the petitioner)
and prevents the fraudulent or mistaken conveyance of land, the value of which may exceed the
judgment obligation. Petitioner contends that only his interest in the subject lots, and not that of his
wife who was not a party to the suit, should have been subjected to execution, and he should have had
the opportunity to prove as much.

While we certainly will not condone any attempt by petitioner to frustrate the ends of justice
the only way to describe his refusal to surrender his owners duplicates of the certificates of title despite
the final and executory judgment against him respondent, on the other hand, cannot simply disregard
proper procedure for the issuance to it of new certificates of title. There was a law on the matter and
respondent should have followed it.

In any event, respondent can still file the proper petition with the cadastral court for the
issuance of new titles in its name.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in
CA-G.R. CV No. 53085 is hereby REVERSED. The order of the Regional Trial Court of Bacolod City
ordering the Register of Deeds of Bago City to issue new certificates of title in favor of respondent
is ANULLED.

REYES v TANG SOAT ING and ANDO SY

The controversy arose from a complaint for Enforcement of Easement and Damages with Prayer for
Preliminary Injunction and Restraining Order filed by MFR Farms, Inc. (MFR) against respondents.

- MFR complained of respondents commercial and industrial use of their property, and sought
the enforcement of the encumbrance contained in their title.
- MFR likewise asked for the payment of damages suffered by its pig farm resulting from
respondents illegal use of their property.
- RTC granted MFRs complaint.
- CA affirmed with modification the ruling of the RTC: the Court of Appeals reduced the rate
of interest to six percent (6%) and deleted the award of exemplary damages and attorneys
fees.[4]
- MFR and respondents filed separate appeals by certiorari[5] to this Court questioning the
appellate courts ruling. Unfortunately for the parties, we dismissed both appeals for late
payment of legal fees and late filing of the petition.[6] The decision of the Court of Appeals
became final and executory, and was recorded in the Book of Entries of Judgment.[7]
- Upon motion of MFR, the RTC issued a Writ of Execution.
- Sheriff Legaspi submitted a Sheriffs Report manifesting:

That on October 2, 1998[,] the undersigned was in receipt of the Writ of Execution issued
by Hon. Danilo A. Manalastas for service thereof;

That on October 9, 1998[,] the undersigned served copy of the Writ of Execution and
copy of the Notice dated October 9, 1998 to [respondent] Tang Soat Ing giving him five
(5) days to comply [with] his obligations under the Writ of Execution, thru Rodolfo
Mendez, caretaker of the [respondents], at Tungkong Mangga, San Jose del Monte,
Bulacan. The undersigned inquired from the said caretaker about the personal properties
of Tang Soat Ing but he was told that Tang Soat Ing has no more properties and the
factory located in the compound is being leased to other people;

That on December 10, 1998[,] the undersigned went back to Tang Soat Ing at Tungkong
Mangga, Sa Jose del Monte, Bulacan but said person was not there and also Rodolfo
Mendez was not around because he was in Manila;

That on December 28, 1998[,] the undersigned went back to Tungkong Mangga, San
Jose del Monte, Bulacan and talked to the caretaker[,] Rodolfo Mendez[,] and asked him
what happened to the papers he gave to [respondent] Tang Soat Ing. The caretaker said
that [respondent Tang Soat Ing] called his lawyer and informed [the latter] about the
papers he received. The caretaker also told the undersigned that he [did] not know
what the lawyer said.[10]

- Sheriff Legaspi presented the Writ of Execution and the Notice of Levy on Execution of
Real Property to the Register of Deeds of Bulacan Province. The notice was inscribed on
the TCT. Sheriff issued a Notice of Sale on Execution of Real Property and posted in several
bulletin boards of the municipal halls of Bulacan. The Notice of Sale was published three
times in the Times Newsweekly.
- At the public auction, MFR was declared as the highest bidder. On even date, Sheriff Legaspi
issued a Certificate of Sale[16] which was registered with the Register of Deeds of Bulacan
Province.
- After more than five (5) years, with respondents failing to exercise their right of redemption,
MFR filed a Motion[17]asking the RTC to issue an order directing the Register of Deeds of
Bulacan Province to cancel TCT No. T-198753 in the name of respondents, and issue a new
certificate of title in the name of MFR.
- RTC denied the Motion holding that a mere motion is not sufficient for the cancellation of a
certificate of title. The RTC ruled that under Section 107[18] of Presidential Decree No. 1529,
the Property Registration Decree, a petition and a hearing are required for the issuance of
a new certificate of title.
- MFR filed a Petition[19] in the same case, under the same docket number before the same
execution court. In this new petition, MFR impleaded the Register of Deeds as additional
defendant and prayed for the same reliefs as those prayed for in their previous motion with
an additional prayer for the issuance of an order directing respondents to immediately
surrender the Owners Duplicate Copy.
- On three separate occasions, respondents received a copy of the Petition.[20] Respondents
failed to file an Answer or any responsive pleading to MFRs Petition. Consequently, MFR
moved to declare respondents in default.
- The RTC granted MFRs Motion to Declare Respondents in Default: thereafter, MFR
presented evidence ex-parte.
- During presentation of evidence ex-parte, MFR filed a Motion for Substitution of Party
Petitioner attaching thereto a Deed of Transfer of Interest declaring petitioner Ruben C.
Reyes (Reyes) acquisition of MFRs rights over the subject property. RTC issued Order.
- Copies of the Order were separately served on Atty. Sumawang, Atty. Anacleto Diaz (Reyes
counsel) and the Register of Deeds of Bulacan Province. Service thereof to respondents
counsel was returned and rendered impossible. Apparently, Atty. Sumawang had already
died in December 2005.[23]
- Reyes filed another Motion praying that the Register of Deeds of Bulacan Province be
directed to cancel TCT No. T-198753 in the name of respondents and to issue a new one in
his (Reyes) name.
- Respondents, through their new counsel, filed the previously adverted to Opposition and
Motion,[24] opposing Reyes motion and moving to declare void the sale of the subject
property. RTC denied this. The RTC ruled that, Section 107 of PD 1529 does not
categorically state that the petition x x x should be in the form of a separate, distinct and
original action to be filed in another court, as otherwise it will create a situation in which
the final judgment of a court, and its enforcement, may be subject to a review of, or even
reversal by another court of co-equal jurisdiction.[25] As regards the motion to declare void
the execution sale of the subject property covered by TCT No. T-198753, the RTC noted that
there was substantial compliance with the requirements of [Section 15, Rule 39 of the
Rules of Court evidenced] in the Sheriffs Report dated January 4, 1999, as well as the
publication and posting requirements, extant in the records of this case. [26] In conclusion,
the RTC ruled that respondents are estopped from questioning the proceedings, after
keeping silent thereon for a long time, despite notice thereof. Motion for reconsideration
was denied.

- Gaining no reprieve from the RTC, respondents filed a petition for certiorari before the Court
of Appeals seeking to: (1) nullify the trial courts twin Orders dated July 17, 2006 and October
20, 2006, respectively; and (2) declare void the execution proceedings relating to the sale of
the subject property and the cancellation of TCT No. T-198753. CA granted. Motion for
reconsideration was denied.

The principal issues

1. Whether the execution sale of the subject property covered by TCT No. T-198753 is void; NO

2. Proceeding from the validity of the execution sale and the consolidation of Reyes ownership over
the subject property, whether Section 107 of Presidential Decree No. 1529 contemplates the filing of a
separate cadastral case before the RTC acting as a land registration court. YES

The petition is partially impressed with merit.

1. In declaring void the execution sale, the appellate court noted that petitioner did not strictly
comply with the requirements of Section 15, Rule 39 of the Rules of Court. The Court of
Appeals relied on our holding in Villaceran v. Beltejar,[28] an administrative case finding therein
respondent Sheriff guilty of simple neglect of duty for failure to strictly comply with the rules
on execution sale. The Court of Appeals ruled that the deficiencies in the notice of execution
sale were substantial and of such nature as to prevent the court from applying the
presumption of regularity in the performance of official functions by Sheriff Legaspi at the time
of the execution sale. On this score, the Court of Appeals pointed out that it was incumbent
upon Reyes part to prove that the requirements of the law on execution sale have been fully
complied with. WRONG
We disagree.

Contrary to the Court of Appeals holding, the burden of evidence to prove lack of compliance with
Section 15, Rule 39 of the Rules of Court rests on the party claiming lack thereof i.e., respondents.

- In Venzon v. Spouses Juan,[29] we declared that the judgment debtor, as herein respondents,
alleging lack of compliance with the posting and publication requirements of the auction
sale in accordance with the rules, is behooved to prove such allegation. We held, thus:

x x x. Whoever asserts a right dependent for its existence upon a negative, must
establish the truth of the negative by a preponderance of the evidence. This must be
the rule, or it must follow that rights, of which a negative forms an essential element,
may be enforced without proof. Thus, whenever the [partys] right depends upon the
truth of a negative, upon him is cast the onus probandi, except in cases where the
matter is peculiarly within the knowledge of the adverse party.

Respondents made no attempt to meet this burden of evidence, simply maintaining lack of
notice of the entire proceedings (execution and issuance of a new title over the subject
property) before the trial court.
- We cannot subscribe to respondents belated posturing. The disputable presumption that
official duty has been regularly performed was not overcome by respondents. [31] The
documents on record lead us to the inevitable conclusion that respondents had
constructive, if not actual, notice of the execution proceedings from the issuance of the
Writ of Execution, the levy on the subject property,[32] its subjection to execution sale, up
to and until the proceedings in the RTC relating to the issuance of a new certificate of title
over the subject property.

There was substantial compliance with Section 15, Rule 39 of the Rules of Court: the
documents in support thereof, i.e., the Certificate of Posting issued by Sheriff Legaspi and the
Affidavit of Publication executed by the publisher of The Times Newsweekly, appear to be in
order.[33] In this case, the purpose of giving notice through posting and publication under Section
15(c) of the same ruleto let the public know of the sale to the end that the best price or a better
bid may be made possible to minimize prejudice to the judgment debtorwas realized.

Another thing militates against respondents claim of lack of knowledge of the encumbrance on
their property were the separate registrations of: (1) the Notice of Levy on TCT No. T-198753;
(2) the Certificate of Sale. In this jurisdiction, we adhere to the doctrine that registration in a
public registry works as constructive notice to the whole world as what Section 51 of Act No.
496, as amended by Section 52 of Presidential Decree No. 1529 provides.

- And, quite undeniably, respondents had constructive notice that their property is subject of
execution proceedings arising from their judgment debt and in danger of forfeiture to their
judgment creditor.
- Respondents consistently flouted the judgment in Civil Case No. 1245-M which became final
and executor. At the very least, respondents attack on the validity of the execution
proceedings, culminating in the execution sale of the subject property, is barred by laches.

The records bear out that as of October 9, 1998, and on two occasions thereafter, December
10 & 28, 1998, Sheriff Legaspi served a copy of the Writ of Execution on respondents, and followed up
thereon. With no action forthcoming from respondents, who are ostensibly evading payment of their
judgment debt, the Sheriff correctly levied on the subject property. For more than five (5) years from the
execution sale thereof, with respondents not exercising their right of redemption, up to the filing of a
Motion, and subsequently, a Petition for the issuance of a new certificate of title over the property in
Reyes name, respondents made no effort to settle their judgment debt, much less, to ascertain the status
of the execution proceedings against them and the levy on, and consequent sale of, their property. Truly
significant is the fact that eight (8) years had lapsed, from the time respondents received a copy of the
Writ of Execution in October 1998 until they, through their new counsel, filed the Opposition and Motion
in May 2006, before respondents were prodded into action.

- The death of their counsel, Atty. Sumawang, and their engagement of a new one, does not
minimize the hard fact that respondents had notice of, not only the execution
proceedings, but also, the proceedings on the issuance of a new title over the subject
property. Yet, respondents did not act on any of these notices which were duly received by
Atty. Sumawang. Respondents Motion to nullify the execution proceedings, from the levy on
the subject property and sale thereof, is an afterthought, a last-ditch effort to evade
payment of their judgment debt. Their claim of ignorance of the execution proceedings flies
in the face of the documents on record. This bare-faced claim cannot trump the disputable
presumption that a person takes ordinary care of his concerns.[38] Consequently,
respondents are estopped and barred from assailing the execution proceedings before the
RTC.

Time and again, we have held that once a judgment becomes final and executory, the
prevailing party should not be denied the fruits of his victory by some subterfuge devised by
the losing party.[39]
- The Court of Appeals reliance on Villaceran v. Beltejar[42] is misplaced. Villaceran is an
administrative case finding the Sheriff guilty of simple neglect of duty for failure to strictly
comply with the rules on execution sale. We held therein that there was no substantial
complianceby the Sheriff with Section 15(c), Rule 39 of the Rules of Court.
- The facts of this case demonstrate respondents stubborn refusal to comply with the
judgment against them by claiming lack of notice of the execution proceedings. On the
whole, respondents silence and inaction for eight (8) years from the time the subject
property was validly levied upon by the RTC, bars them from claiming invalidity of the
execution proceedings.

2. Notwithstanding the validity of the execution sale and Reyes consolidation of ownership over
the subject property upon the lapse of the redemption period, we hold that Section 107 of
Presidential Decree No. 1529 contemplates the filing of a separate and original action before
the RTC, acting as a land registration court.

- Reyes argues that to require him to file his petition in another court would unduly divest the
RTC of its jurisdiction to enforce its final and executory decision.
- Reyes invokes our ruling in Natalia Realty, Inc. v. Court of Appeals[44] where we declared that
jurisdiction of the court to execute its judgment continues even after the judgment has
become final for the purpose of enforcement of judgment.[45]

Reyes reasoning is off tangent. Natalia is inapplicable because the execution proceedings in
this case have been completed and was terminated upon the execution sale of the subject
property. Reyes already consolidated ownership over the subject property; as owner, he has a
right to have the same registered in his name. This transfer of title to the subject property in
Reyes name is no longer part of the execution proceedings: the fact of levy and sale
constitutes execution, not so is the action for the issuance of a new title.[46] Indeed, the
subsequent filing of a separate and original action for the titling of the subject property in Reyes
name, no longer involves the execution of the judgment in Civil Case No. 1245-M.

Section 107 of the Property Registration Decree falls under PETITIONS AND ACTIONS AFTER
ORIGINAL REGISTRATION, Chapter X thereof. The provision reads:

SECTION 107. Surrender of withhold duplicate certificates. Where it is necessary to issue


a new certificate of title pursuant to any involuntary instrument which divests the title
of the registered owner against his consent or where a voluntary instrument cannot be
registered by reason of the refusal or failure of the holder to surrender the owner's
duplicate certificate of title, the party in interest may file a petition in court to compel
surrender of the same to the Register of Deeds. The court, after hearing, may order the
registered owner or any person withholding the duplicate certificate to surrender the
same, and direct the entry of a new certificate or memorandum upon such surrender. If
the person withholding the duplicate certificate is not amenable to the process of the
court, or if not any reason the outstanding owner's duplicate certificate cannot be
delivered, the court may order the annulment of the same as well as the issuance of a
new certificate of title in lieu thereof. Such new certificate and all duplicates thereof
shall contain a memorandum of the annulment of the outstanding duplicate.

That a succeeding registration of property in anothers name, after its original registration,
contemplates a separate original action is reinforced by our ruling in Padilla v. Philippine Producers
Cooperative Marketing Association, Inc.[47]
Plainly, Reyes must institute a separate cadastral action initiated via petition.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals in CA G.R. SP No.
96913 annulling and setting aside the Orders dated July 17, 2006 and October 20, 2006 issued by the
Regional Trial Court, Branch 7, Malolos, Bulacan in Civil Case No. 1245-M is MODIFIED:

1. The public auction sale of the subject property covered by TCT No. T-198753 on July 19, 1999 is
declared VALID;

2. The Certificate of Sale issued by Sheriff Leovino Legaspi on July 19, 1999 in favor of MFR
Farms, Inc. (substituted by petitioner Ruben C. Reyes) covering the parcel of land embraced in Transfer
Certificate of Title No. T-198753 is likewise declared VALID; and

3. The Petition[49] dated October 29, 2004 filed by MFR Farms, Inc. (substituted by Ruben C.
Reyes) is DISMISSED without prejudice to re-filing as a separate original action pursuant to Section 107
of Presidential Decree No. 1529.

[G.R. No. 136283. February 29, 2000]

VIEWMASTER CONSTRUCTION CORPORATION, petitioner, vs. HON. REYNALDO Y. MAULIT in his


official capacity as administrator of the Land Registration Authority; and EDGARDO CASTRO, acting
register of deeds of Las Pias, Metro Manila; respondents.

DECISION

PANGANIBAN, J.:

A notice of lis pendens may be registered when an action or a proceeding directly affects the title to the
land or the buildings thereon; or the possession, the use or the occupation thereof. Hence, the
registration of such notice should be allowed if the litigation involves the enforcement of an agreement
for the co-development of a parcel of land. h Y

Statement of the Case

Before us is a Petition for Review on Certiorari[1] assailing the February 27, 1998 Decision[2] of the Court
of Appeals (CA)[3] in CA- GR SP No. 39649 and its November 12, 1998 Resolution[4] denying
reconsideration. The assailed Decision affirmed the Resolution[5] of the Land Registration Authority
(LRA) in Consulta No. 2381, which ruled as follows:
"PREMISES CONSIDERED, this Authority is of the considered view and so holds that the
Notice of Lis Pendens subject of this consulta is not registrable."[6]

The Facts

From the CA:

Subject: Las Pias property registered in the name of Peltan Development Inc. (now State
Properties Corporation) located in Barrio Tindig na Manga, Las Pias, Rizal.
The Chiong/Roxas family collectively owns and controls State Investment Trust, Inc. (formerly
State Investment House, Inc.) and is the major shareholder of the following corporations,
namely: State Land Investment Corporation, Philippine Development and Industrial Corporation
and Stronghold Realty Development.
Said family decided to give control and ownership over the said corporations to only one
member of the family, through the process of bidding among the family members/stockholders
of the said companies. It was agreed that the bidder who acquires 51% or more of the said
companies shall be deemed the winner.
Defendant Allen Roxas, one of the stockholders of State Investment Trust, Inc. applied for a loan
with First Metro Investment, Inc. (First Metro for brevity) in the amount of P36,500,000.00 in
order to participate in the bidding. Es msc
First Metro granted Allen Roxas' loan application without collateral provided, however, that he
procure a guarantor/surety/solidary co-debtor to secure the payment of the said loan.
Petitioner Viewmaster agreed to act as guarantor for the aforementioned loan in consideration
for its participation in a Joint Venture Project to co-develop the real estate assets of State
Investment Trust, Inc.
After a series of negotiations, petitioner Viewmaster and defendant Allen Roxas agreed that
should the latter prevail and win in the bidding, he shall sell to petitioner fifty percent (50%) of
the total eventual acquisitions of shares of stock in the State Investment Trust, Inc., at a
purchase price equivalent to the successful bid price per share plus an additiona1 ten percent
(10%) per share.
As a result of the loans granted by First Metro in consideration of and upon the guaranty of
petitioner Viewmaster, defendant Allen Roxas, eventually gained control and ownership of
State Investment Trust, Inc.
However, notwithstanding the lapse of two (2) years since defendant Allen Roxas became the
controlling stockholder of State Investment Trust, Inc., he failed to take the necessary action to
implement the Joint Venture Project with petitioner Viewmaster to co-develop the subject
properties.
Thus, petitioner's counsel wrote defendant Allen Roxas, reiterating petitioner's demand to
comply with the agreement to co-develop the Las Pias Property and to set in operation all the
necessary steps towards the realization of the said project.
Petitioner Viewmaster filed a Complaint for Specific Performance, Enforcement of Implied
Trust and Damages against State Investment Trust, Inc. Northeast Land Development, Inc.,
State Properties Corporation (formerly Peltan Development, Inc.) and defendant Allen Roxas,
in his capacity as Vice-Chairman of State Investment Trust, Inc., and Chairman of Northeast Land
Development, Inc., State Properties Corporation.
Viewmaster filed a Notice of Lis Pendens with the Register of Deeds of Quezon City and Las
Pias for the annotation of a Notice of Lis Pendens on Transfer Certificate of Title No. (S-17992)
12473- A, registered in the name of Peltan Development, Inc. (now State Properties
Corporation).
- In a letter the respondent Register of Deeds of Las Pias denied the request for annotation of
the Notice of Lis Pendens on the following grounds:

1. the request for annotation and the complaint [do] not contain an adequate
description of the subject property;

2. petitioner's action only has an incidental effect on the property in question.

Petitioner filed an appeal to the respondent Land Registration Authority, which was docketed
as Consulta No. 2381.
Respondent Land Registration Authority issued the assailed Resolution holding that
petitioner's 'Notice of Lis Pendens' was not registrable."[7]

Ruling of the Court of Appeals

In affirming the ruling of the LRA, the Court of Appeals held that petitioner failed to adequately
describe the subject property in the Complaint and in the application for the registration of a notice
of lis pendens. The CA noted that while Transfer Certificate of Title No. (S-17992) 12473-A indicated six
parcels of land, petitioner's application mentioned only one parcel.

Moreover, the CA also ruled that a notice of lis pendens may be registered only when an action directly
affects the title to or possession of the real property. In the present case, the proceedings instituted by
petitioner affected the title or possession incidentally only, not directly.

Hence, this Petition.[8]

Issues

"I

Whether or not the petitioner failed to adequately describe the subject property in its
complaint and in the notice of lis pendens NO

II

Whether or not the Las Pias property is directly involved in Civil Case No. 65277."[9] YES

The Court's Ruling

The Petition is meritorious.

First Issue: Description of Property

Petitioner contends that the absence of the property's technical description in either the notice of lis
pendens or the Complaint is not a sufficient ground for rejecting its application, because a copy of TCT
No. (S-17992) 12473-A specifically describing the property was attached to and made an integral part of
both documents.

On the other hand, respondents argue that petitioner failed to provide an accurate description of the
Las Pias property, which was merely referred to as a "parcel of land."

The notice of lis pendens described the property as follows:

"A parcel of land situated in the Barrio of Tindig na Manga, Municipality of Las Pias,
Province of Rizal x x x containing an area of Seven Hundred Eighty Six Thousand One
Hundred Sixty Seven (786,167) square meters, more or less."

By itself, the above does not adequately describe the subject property, pursuant to Section 14 of Rule 13
of the Rules of Court and Section 76 of Presidential Decree (PD) No.1529. It does not distinguish the said
property from other properties similarly located in the Barrio of Tindig na Manga, Municipality of Las
Pias, Province of Rizal. Indeed, by the above description alone, it would be impossible to identify the
property.

In the paragraph directly preceding the description quoted above, however, petitioner specifically
stated that the property referred to in the notice of lis pendens was the same parcel of land covered
by TCT No. (S-17992) 12473-A:

"Please be notified that on 08 September 1995, the [p]laintiff in the above-entitled case
filed an action against the above-named [d]efendants for specific performance,
enforcement of an implied trust and damages, now pending in the Regional Trial Court
of Pasig, Branch 166, which action involves a parcel of land covered by Transfer
Certificate Title (TCT) No. (S-17992) 12473-A, registered in the name of Peltan
Development Incorporated which changed its corporate name to State Properties
Corporation, one of the [d]efendants in the aforesaid case. The said parcel of land is
more particu1arly described as follows: Ex sm

'A parcel of land situated in the Barrio of Tindig na Manga, Municipality


of Las Pias, Province of Rizal x x x containing an area of Seven Hundred
Eighty Six Thousand One Hundred Sixty Seven (786,167) square meters,
more or less.'

"Request is therefore made [for] your good office to record this notice of pendency of the
aforementioned action in TCT No. (S-17992) 12473-A for all legal purposes."[10]

As earlier noted, a copy of the TCT was attached to and made an integral part of both documents.
Consequently, the notice of lis pendens submitted for registration, taken as a whole, leaves no doubt
as to the identity of the property, the technical description of which appears on the attached TCT. We
stress that the main purpose of the requirement that the notice should contain a technical description
of the property is to ensure that the same can be distinguished and readily identified. In this case, we
agree with petitioner that there was substantial compliance with this requirement.

Second Issue: Property Directly Involved


In upholding the LRA, the Court of Appeals held that "the doctrine of lis pendens has no application to a
proceeding in which the only object sought is the recovery of [a] money judgment, though the title [to]
or right or possession [of] a property may be incidentally affected. It is thus essential that the property
be directly affected where the relief sought in the action or suit includes the recovery of possession, or
the enforcement [thereof], or an adjudication between the conflicting claims of title, possession or right
of possession to specific property, or requiring its transfer or sale."[11]

On the other hand, petitioner contends that the civil case subject of the notice of lis pendens directly
involved the land in question, because it prayed for the enforcement of a prior agreement between
herein petitioner and Defendant Allen Roxas to co-develop the latter's property. CORRECT

We agree with the petitioner. A notice of lis pendens, which literally means "pending suit," may involve
actions that deal not only with the title or possession of a property, but even with the use or occupation
thereof. Thus, Section 76 of PD 1529 reads: Jjjuris

"Sec. 76. Notice of lis pendens. -- No action to recover possession of real estate, or to
quiet title thereto, or to remove clouds upon the title thereof, or for partition, or other
proceedings of any kind in court directly affecting the title to land or the use or
occupation thereof or the buildings thereon, and no judgment, and no proceeding to
vacate or reverse any judgment, shall have any effect upon registered land as against
persons other than the parties thereto, unless a memorandum or notice stating the
institution of such action or proceeding and the court wherein the same is pending, as
well as the date of the institution thereof, together with a reference to the number of
the certificate of title, and an adequate description of the land affected and the
registered owner thereof, shall have been filed and registered."

In Magdalena Homeowners Association, Inc. v. Court of Appeals,[12] the Court did not confine the
availability of lis pendens to cases involving the title to or possession of real property.

In Villanueva v. Court of Appeals,[14] this Court further declared that the rule of lis pendens applied to
suits brought "to establish an equitable estate, interest, or right in specific real property or to enforce
any lien, charge, or encumbrance against it x x x

In the present case, petitioner's Complaint docketed as Civil Case No. 65277 clearly warrants the
registration of a notice of lis pendens. The Complaint prayed for the following reliefs: Scjj

"1. Render judgment ordering the Defendant Allen Roxas to sell fifty percent (50%) of
his shareholdings in Defendant State Investment to Plaintiff at the price equivalent to
the successful bid price per share plus an additional ten percent (10%) per share
and directing Defendants to co-develop with the Plaintiff the subject real properties;

2. Render judgment ordering the Defendant Allen Roxas to:

a. Pay the Plaintiff the amount of at least Twenty Million Pesos (P20,000,000.00) and/or
such other amounts as may be proven during the course of the trial, by way of actual
damages;
b. Pay the Plaintiff the amount of at least One Million Pesos (P1,000,000.00), by way of
moral damages;

c. Pay the Plaintiff the amount of at least One Million Pesos (P1,000,000.00), by way of
exemplary damages;

d. Pay the Plaintiff the amount of Two Hundred Fifty Thousand Pesos (P250,000.00) by
way of attorney's fees; and

e. Pay expenses of litigation and costs of suit."[15]

Undeniably, the prayer that Defendant Allen Roxas be ordered to sell 50 percent of his shareholdings
in State Investment does not directly involve title to the property and is therefore not a proper
subject of a notice of lis pendens. Neither do the various amounts of damages prayed for justify such
annotation.

We disagree, however, with the Court of Appeals and the respondents that the prayer for the co-
development of the land was merely incidental to the sale of shares of defendant company.

The Complaint shows that the loan obtained by Allen Roxas (one of the defendants in the civil case)
from First Metro was guaranteed by petitioner for two distinct considerations: (a) to enable it to
purchase 50 percent of the stocks that the said defendant may acquire in State Investment and (b) to
co-develop with the defendants the Quezon City and the Las Pias properties of the corporation. In
other words, the co-development of the said properties is a separate undertaking that did not arise from
petitioner's acquisition of the defendant's shares in the corporation. To repeat, the co-development is
not merely auxiliary or incidental to the purchase of the shares; it is a distinct consideration for
Viewmaster's guaranty.[16]

Hence, by virtue of the alleged agreement with Allen Roxas, petitioner has a direct -- not
merely incidental -- interest in the Las Pias property. Contrary to respondents' contention,[17] the action
involves not only the collection of a money judgment, but also the enforcement of petitioner's right to
co-develop and use the property.

The Court must stress that the purpose of lis pendens is (1) to protect the rights of the party causing the
registration thereof[18] and (2) to advise third persons who purchase or contract on the subject property
that they do so at their peril and subject to the result of the pending litigation.[19] One who deals with
property subject of a notice of lis pendens cannot acquire better rights than those of his predecessors-
in-interest.[20] In Tanchoco v. Aquino,[21]the Court held:

"x x x. _ The doctrine of lis pendens is founded upon reason of public policy and
necessity, the purpose of which is to keep the subject matter of the litigation within the
power of the court until the judgment or decree shall have been entered; otherwise, by
successive alienations pending the litigation, its judgment or decree shall be rendered
abortive and impossible of execution. Purchasers pendente lite of the property subject
of the litigation after the notice of lis pendens is inscribed in the Office of the Register of
Deeds are bound by the judgment against their predecessors. x x x."
Without a notice of lis pendens, a third party who acquires the property after relying only on the
Certificate of Title would be deemed a purchaser in good faith. Against such third party, the supposed
rights of petitioner cannot be enforced, because the former is not bound by the property owner's
undertakings not annotated in the TCT.[22] Kyle

Likewise, there exists the possibility that the res of the civil case would leave the control of the court
and render ineffectual a judgment therein. Indeed, according to petitioner, it was not even informed
when Allen Roxas exchanged the Quezon City property for shares of stock in Northeast Land
Development, Inc.[23] Hence, it maintains that there is a clear risk that the same thing would be done
with the Las Pias property.

In this light, the CA ruling left unprotected petitioner's claim of co-development over the Las Pias
property. Hence, until the conflicting rights and interests are threshed out in the civil case pending
before the RTC, it will be in the best interest of the parties and the public at large that a notice of the
suit be given to the whole world.

The Court is not here saying that petitioner is entitled to the reliefs prayed for in its Complaint pending
in the RTC. Verily, there is no requirement that the right to or the interest in the property subject of a lis
pendens be proven by the applicant. The Rule merely requires that an affirmative relief be claimed.[24] A
notation of lis pendens neither affects the merits of a case nor creates a right or a lien.[25] It merely
protects the applicant's rights, which will be determined during the trial.

WHEREFORE, the Petition is hereby GRANTED and the assailed Decision of the Court of
Appeals REVERSED and SET ASIDE. The Las Pias Register of Deeds is directed to cause the annotation
of lis pendens in TCT No. (S-17992) 12473-A. No costs.

THIRD DIVISION

[G.R. No. 148568. March 20, 2003]

ATLANTIC ERECTORS, INC., petitioner, vs. HERBAL COVE REALTY


CORPORATION, respondent.

DECISION
PANGANIBAN, J.:

The pendency of a simple collection suit arising from the alleged nonpayment of
construction services, materials, unrealized income and damages does not justify the
annotation of a notice of lis pendens on the title to a property where construction has
been done.
Statement of the Case

Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules
of Court, challenging the May 30, 2000 Decision[2] of the Court of Appeals (CA) in CA-
GR SP No. 56432. The dispositive portion of the Decision is reproduced as follows:

WHEREFORE, the petition is granted and the assailed November 4, 1998 and
October 22, 1999 orders annulled and set aside. The July 30, 1998 order of respondent
judge is reinstated granting the cancellation of the notices of lis pendens subject of
this petition.
[3]

In its July 21, 2001 Resolution,[4] the CA denied petitioners Motion for
Reconsideration.

The Facts

The factual antecedents of the case are summarized by the CA in this wise:

On June 20, 1996, [respondent] and [petitioner] entered into a Construction Contract
whereby the former agreed to construct four (4) units of [townhouses] designated as
16-A, 16-B, 17-A and 17-B and one (1) single detached unit for an original contract
price of P15,726,745.19 which was late[r] adjusted to P16,726,745.19 as a result of
additional works. The contract period is 180 days commencing [on] July 7, 1996 and
to terminate on January 7, 1997. [Petitioner] claimed that the said period was not
followed due to reasons attributable to [respondent], namely: suspension orders,
additional works, force majeure, and unjustifiable acts of omission or delay on the
part of said [respondent]. [Respondent], however, denied such claim and instead
pointed to [petitioner] as having exceeded the 180 day contract period aggravated by
defective workmanship and utilization of materials which are not in compliance with
specifications.

xxxxxxxxx

On November 21, 1997, [petitioner] filed a complaint for sum of money with damages
(Civil Case No. 97-2707) with the Regional Trial Court of Makati entitled Atlantic
Erectors, Incorporated vs. Herbal Cove Realty Corp. and Ernest C. Escal[e]r. This
case was raffled to Branch 137, x x x Judge Santiago J. Ranada presiding. In said
initiatory pleading, [petitioner] AEI asked for the following reliefs:

AFTER DUE NOTICE AND HEARING, to order x x x defendant to:


1. Pay plaintiff the sum of P4,854,229.94 for the unpaid construction services already
rendered;

2. To x x x pay plaintiff the sum of P1,595,551.00 for the construction materials,


equipment and tools of plaintiff held by defendant;

3. To x x x pay plaintiff the sum of P2,250,000.00 for the [loss] x x x of expected


income from the construction project;

4. [T]o x x x pay plaintiff the sum of P800,000.00 for the cost of income by way of
rental from the equipment of plaintiff held by defendants;

5. To x x x pay plaintiff the sum of P5,000,000.00 for moral damages;

6. To x x x pay plaintiff the sum of P5,000,000.00 for exemplary damages;

7. To x x x pay plaintiff the sum equivalent of 25% of the total money claim
plus P200,000.00 acceptance fee and P2,500.00 per court appearance;

8. To x x x pay the cost of suit.

On the same day of November 21, 1997, [petitioner] filed a notice of lis pendens for
annotation of the pendency of Civil Case No. 97-707 on titles TCTs nos. T-30228,
30229, 30230, 30231 and 30232. When the lots covered by said titles were
subsequently subdivided into 50 lots, the notices of lis pendens were carried over to
the titles of the subdivided lots, i.e., Transfer Certificate of Title Nos. T-36179 to T-
36226 and T-36245 to T-36246 of the Register of Deeds of Tagaytay City.

On January 30, 1998, [respondent] and x x x Ernest L. Escaler, filed a Motion to


Dismiss [petitioners] Complaint for lack of jurisdiction and for failure to state a cause
of action. They claimed [that] the Makati RTC has no jurisdiction over the subject
matter of the case because the parties Construction Contract contained a clause
requiring them to submit their dispute to arbitration.

xxxxxxxxx

On March 17, 1998, [RTC Judge Ranada] dismissed the Complaint as against
[respondent] for [petitioners] failure to comply with a condition precedent to the filing
of a court action which is the prior resort to arbitration and as against x x x Escaler for
failure of the Complaint to state a cause of action x x x.

[Petitioner] filed a Motion for Reconsideration of the March 17, 1998 dismissal
order. [Respondent] filed its Opposition thereto.
On April 24, 1998, [respondent] filed a Motion to Cancel Notice of Lis Pendens. It
argued that the notices of lis pendens are without basis because [petitioners] action is
a purely personal action to collect a sum of money and recover damages and x x x
does not directly affect title to, use or possession of real property.

In his July 30, 1998 Order, [Judge Ranada] granted [respondents] Motion to Cancel
Notice of Lis Pendens x x x:

[Petitioner] filed a Motion for Reconsideration of the aforesaid July 30, 1998 Order to
which [respondent] filed an Opposition.

In a November 4, 1998 Order, [Judge Ranada,] while finding no merit in the grounds
raised by [petitioner] in its Motion for Reconsideration, reversed his July 30, 1998
Order and reinstated the notices of lis pendens, as follows:

1. The Court finds no merit in plaintiffs contention that in dismissing the above-
entitled case for lack of jurisdiction, and at the same time granting defendant Herbal
Coves motion to cancel notice of lis pendens, the Court [took] an inconsistent
posture. The Rules provide that prior to the transmittal of the original record on
appeal, the court may issue orders for the protection and preservation of the rights of
the parties which do not involve any matter litigated by the appeal (3 rd par., Sec. 10,
Rule 41). Even as it declared itself without jurisdiction, this Court still has power to
act on incidents in this case, such as acting on motions for reconsideration, for
correction, for lifting of lis pendens, or approving appeals, etc.

As correctly argued by defendant Herbal Cove, a notice of lis pendens serves only as a
precautionary measure or warning to prospective buyers of a property that there is a
pending litigation involving the same.

The Court notes that when it issued the Order of 30 July 1998 lifting the notice of lis
pendens, there was as yet no appeal filed by plaintiff. Subsequently, on 10 September
1998, after a notice of appeal was filed by plaintiff on 4 September 1998, the Branch
Clerk of Court was ordered by the Court to elevate the entire records of the above-
entitled case to the Court of Appeals. It therefore results that the above-entitled case is
still pending. After a careful consideration of all matters relevant to the lis pendens,
the Court believes that justice will be better served by setting aside the Order of 30
July 1998.

On November 27, 1998, [respondent] filed a Motion for Reconsideration of the


November 4, 1998 Order arguing that allowing the notice of lis pendens to remain
annotated on the titles would defeat, not serve, the ends of justice and that equitable
considerations cannot be resorted to when there is an applicable provision of law.
xxxxxxxxx

On October 22, 1999, [Judge Ranada] issued an order denying [respondents] Motion
for Reconsideration of the November 4, 1998 Order for lack of sufficient merit. [5]

Thereafter, Respondent Herbal Cove filed with the CA a Petition for Certiorari.

Ruling of the Court of Appeals

Setting aside the Orders of the RTC dated November 4, 1998 and October 22,
1999, the CA reinstated the formers July 30, 1998 Order[6] granting Herbal Coves Motion
to Cancel the Notice of Lis Pendens. According to the appellate court, the re-annotation
of those notices was improper for want of any legal basis. It specifically cited Section 76
of Presidential Decree No. 1529 (the Property Registration Decree). The decree
provides that the registration of such notices is allowed only when court proceedings
directly affect the title to, or the use or the occupation of, the land or any building
thereon.
The CA opined that the Complaint filed by petitioner in Civil Case No. 97-2707 was
intended purely to collect a sum of money and to recover damages. The appellate court
ruled that the Complaint did not aver any ownership claim to the subject land or any
right of possession over the buildings constructed thereon. It further declared that
absent any claim on the title to the buildings or on the possession thereof, the notices
of lis pendens had no leg to stand on.
Likewise, the CA held that Judge Ranada should have maintained the notice
cancellations, which he had directed in his July 30, 1998 Order. Those notices were no
longer necessary to protect the rights of petitioner, inasmuch as it could have procured
protective relief from the Construction Industry Arbitral Commission (CIAC), where
provisional remedies were available. The CA also mentioned petitioners admission that
there was already a pending case before the CIAC, which in fact rendered a decision on
March 11, 1999.
The appellate court further explained that the re-annotation of the Notice of Lis
Pendens was no longer warranted after the court a quo had ruled that the latter had no
jurisdiction over the case. The former held that the rationale behind the principle of lis
pendens -- to keep the subject matter of the litigation within the power of the court until
the entry of final judgment -- was no longer applicable. The reason for such
inapplicability was that the Makati RTC already declared that it had no jurisdiction or
power over the subject matter of the case.
Finally, the CA opined that petitioners Complaint had not alleged or claimed, as
basis for the continued annotation of the Notice of Lis Pendens, the lien of contractors
and laborers under Article 2242 of the New Civil Code. Moreover, petitioner had not
even referred to any lien of whatever nature.Verily, the CA ruled that the failure to allege
and claim the contractors lien did not warrant the continued annotation on the property
titles of Respondent Herbal Cove.
Hence, this Petition.[7]

The Issues

Petitioner raises the following issues for our consideration:


I. Whether or not money claims representing cost of materials [for] and labor [on] the
houses constructed on a property [are] a proper lien for annotation of lis pendens on
the property title[.]
II. Whether or not the trial court[,] after having declared itself without jurisdiction to try
the case[,] may still decide on [the] substantial issue of the case.[8]

This Courts Ruling

The Petition has no merit.

First Issue:
Proper Basis for a
Notice of Lis Pendens

Petitioner avers that its money claim on the cost of labor and materials for the
townhouses it constructed on the respondents land is a proper lien that justifies the
annotation of a notice of lis pendens on the land titles. According to petitioner, the
money claim constitutes a lien that can be enforced to secure payment for the said
obligations. It argues that, to preserve the alleged improvement it had made on the
subject land, such annotation on the property titles of respondent is necessary.
On the other hand, Respondent Herbal Cove argues that the annotation is bereft of
any factual or legal basis, because petitioners Complaint[9] does not directly affect the title
to the property, or the use or the possession thereof. It also claims that petitioners
Complaint did not assert ownership of the property or any right to possess it. Moreover,
respondent attacks as baseless the annotation of the Notice of Lis Pendens through the
enforcement of a contractors lien under Article 2242 of the Civil Code. It points out that
the said provision applies only to cases in which there are several creditors carrying on
a legal action against an insolvent debtor.
As a general rule, the only instances in which a notice of lis pendens may be
availed of are as follows: (a) an action to recover possession of real estate; (b) an action
for partition; and (c) any other court proceedings that directly affect the title to the land
or the building thereon or the use or the occupation thereof.[10] Additionally, this Court
has held that resorting to lis pendens is not necessarily confined to cases that involve
title to or possession of real property. This annotation also applies to suits seeking to
establish a right to, or an equitable estate or interest in, a specific real property; or to
enforce a lien, a charge or an encumbrance against it.[11]
Apparently, petitioner proceeds on the premise that its money claim involves the
enforcement of a lien. Since the money claim is for the nonpayment of materials and
labor used in the construction of townhouses, the lien referred to would have to be that
provided under Article 2242 of the Civil Code. This provision describes a contractors
lien over an immovable property as follows:

Art. 2242. With reference to specific immovable property and real rights of the debtor,
the following claims, mortgages and liens shall be preferred, and shall constitute an
encumbrance on the immovable or real right:

xxxxxxxxx

(3) Claims of laborers, masons, mechanics and other workmen, as well as of


architects, engineers and contractors, engaged in the construction, reconstruction or
repair of buildings, canals or other works, upon said buildings, canals or other works;

(4) Claims of furnishers of materials used in the construction, reconstruction, or repair


of buildings, canals or other works, upon said buildings, canals or other works[.]
(Emphasis supplied)

However, a careful examination of petitioners Complaint, as well as the reliefs it


seeks, reveals that no such lien or interest over the property was ever alleged. The
Complaint merely asked for the payment of construction services and materials plus
damages, without mentioning -- much less asserting -- a lien or an encumbrance over
the property. Verily, it was a purely personal action and a simple collection case. It did
not contain any material averment of any enforceable right, interest or lien in connection
with the subject property.
As it is, petitioners money claim cannot be characterized as an action that involves
the enforcement of a lien or an encumbrance, one that would thus warrant the
annotation of the Notice of Lis Pendens. Indeed, the nature of an action is determined
by the allegations of the complaint.[12]
Even assuming that petitioner had sufficiently alleged such lien or encumbrance in
its Complaint, the annotation of the Notice of Lis Pendens would still be unjustified,
because a complaint for collection and damages is not the proper mode for the
enforcement of a contractors lien.
In J.L. Bernardo Construction v. Court of Appeals,[13] the Court explained the concept
of a contractors lien under Article 2242 of the Civil Code and the proper mode for its
enforcement as follows:
Articles 2241 and 2242 of the Civil Code enumerates certain credits which enjoy
preference with respect to specific personal or real property of the debtor.Specifically,
the contractors lien claimed by the petitioners is granted under the third paragraph
of Article 2242 which provides that the claims of contractors engaged in the
construction, reconstruction or repair of buildings or other works shall be preferred
with respect to the specific building or other immovable property constructed.

However, Article 2242 finds application when there is a concurrence of credits, i.e.,
when the same specific property of the debtor is subjected to the claims of several
creditors and the value of such property of the debtor is insufficient to pay in full all
the creditors. In such a situation, the question of preference will arise, that is, there
will be a need to determine which of the creditors will be paid ahead of the
others. Fundamental tenets of due process will dictate that this statutory lien should
then only be enforced in the context of some kind of a proceeding where the claims
of all the preferred creditors may be bindingly adjudicated, such as insolvency
proceedings. (Emphasis supplied)
[14]

Clearly then, neither Article 2242 of the Civil Code nor the enforcement of the lien
thereunder is applicable here, because petitioners Complaint failed to satisfy the
foregoing requirements. Nowhere does it show that respondents property was subject to
the claims of other creditors or was insufficient to pay for all concurring debts. Moreover,
the Complaint did not pertain to insolvency proceedings or to any other action in which
the adjudication of claims of preferred creditors could be ascertained.
Another factor negates the argument of petitioner that its money claim involves the
enforcement of a lien or the assertion of title to or possession of the subject
property: the fact that it filed its action with the RTC of Makati, which is undisputedly
bereft of any jurisdiction over respondents property in Tagaytay City. Certainly, actions
affecting title to or possession of real property or the assertion of any interest therein
should be commenced and tried in the proper court that has jurisdiction over the area,
where the real property involved or a portion thereof is situated.[15] If petitioner really
intended to assert its claim or enforce its supposed lien, interest or right over
respondents subject properties, it would have instituted the proper proceedings or filed
a real action with the RTC of Tagaytay City, which clearly had jurisdiction over those
properties.[16]
Narciso Pea, a leading authority on the subject of land titles and registration, gives
an explicit exposition on the inapplicability of the doctrine of lis pendens to certain
actions and proceedings that specifically include money claims. He explains in this wise:

By express provision of law, the doctrine of lis pendens does not apply to attachments,
levies of execution, or to proceedings for the probate of wills, or for administration of
the estate of deceased persons in the Court of First Instance. Also, it is held generally
that the doctrine of lis pendens has no application to a proceeding in which the only
object sought is the recovery of a money judgment, though the title or right of
possession to property be incidentally affected. It is essential that the property
be directly affected, as where the relief sought in the action or suit includes the
recovery of possession, or the enforcement of a lien, or an adjudication between
conflicting claims of title, possession, or the right of possession to specific property,
or requiring its transfer or sale (Emphasis supplied)
[17]

Pea adds that even if a party initially avails itself of a notice of lis pendens upon the
filing of a case in court, such notice is rendered nugatory if the case turns out to be a
purely personal action. We quote him as follows:

It may be possible also that the case when commenced may justify a resort to lis
pendens, but during the progress thereof, it develops to be purely a personal action for
damages or otherwise. In such event, the notice of lis pendens has become functus
officio. (Emphasis supplied)
[18]

Thus, when a complaint or an action is determined by the courts to be in personam,


the rationale for or purpose of the notice of lis pendens ceases to exist. To be sure, this
Court has expressly and categorically declared that the annotation of a notice of lis
pendens on titles to properties is not proper in cases wherein the proceedings instituted
are actions in personam.[19]

Second Issue:
Jurisdiction of the Trial Court

Petitioner argues that the RTC had no jurisdiction to issue the Order canceling the
Notice of Lis Pendens as well as the Order reinstating it.Supposedly, since both Orders
were issued by the trial court without jurisdiction, the annotation made by the Register of
Deeds of Tagaytay City must remain in force.
Petitioner avers that the trial court finally declared that the latter had no jurisdiction
over the case on July 27, 1998, in an Order denying the formers Motion for
Reconsideration of the March 17, 1998 Order dismissing the Complaint. Petitioner
insists that the subsequent July 30, 1998 Order cancelling the subject Notice of Lis
Pendens is void, because it was issued by a court that had no more jurisdiction over the
case.
Rule 41 of the 1997 Rules on Civil Procedure, which governs appeals from regional
trial courts, expressly provides that RTCs lose jurisdiction over a case when an appeal
is filed. The rule reads thus:

SEC. 9. Perfection of appeal; effect thereof. -- A partys appeal by notice of appeal is


deemed perfected as to him upon the filing of the notice of appeal in due time.

xxxxxxxxx
In appeals by notice of appeal, the court loses jurisdiction over the case upon the
perfection of the appeals filed in due time and the expiration of the time to appeal of
the other parties. (Emphasis supplied)

On the basis of the foregoing rule, the trial court lost jurisdiction over the case only
on August 31, 1998, when petitioner filed its Notice of Appeal.[20]Thus, any order issued
by the RTC prior to that date should be considered valid, because the court still had
jurisdiction over the case. Accordingly, it still had the authority or jurisdiction to issue the
July 30, 1998 Order canceling the Notice of Lis Pendens. On the other hand,
the November 4, 1998 Order that set aside the July 30, 1998 Order and reinstated that
Notice should be considered without force and effect, because it was issued by the trial
court after it had already lost jurisdiction.
In any case, even if we were to adopt petitioners theory that both the July 30, 1998
and the November 4, 1998 Orders were void for having been issued without jurisdiction,
the annotation is still improper for lack of factual and legal bases.
As discussed previously, erroneously misplaced is the reliance of petitioner on the
premise that its money claim is an action for the enforcement of a contractors
lien. Verily, the annotation of the Notice of Lis Pendens on the subject property titles
should not have been made in the first place. The Complaint filed before the Makati
RTC -- for the collection of a sum of money and for damages -- did not provide sufficient
legal basis for such annotation.
Finally, petitioner vehemently insists that the trial court had no jurisdiction to cancel
the Notice. Yet, the former filed before the CA an appeal, docketed as CA-GR CV No.
65647,[21] questioning the RTCs dismissal of the Complaint for lack of
jurisdiction. Moreover, it must be remembered that it was petitioner which had initially
invoked the jurisdiction of the trial court when the former sought a judgment for the
recovery of money and damages against respondent. Yet again, it was also petitioner
which assailed that same jurisdiction for issuing an order unfavorable to the formers
cause. Indeed, parties cannot invoke the jurisdiction of a court to secure affirmative
relief, then repudiate or question that same jurisdiction after obtaining or failing to obtain
such relief.[22]
WHEREFORE, the Petition is hereby DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189477 February 26, 2014

HOMEOWNERS SAVINGS AND LOAN BANK, Petitioner-Appellant,


vs.
ASUNCION P. FELONIA and LYDIA C. DE GUZMAN, represented by MARIBEL
FRIAS, Respondents-Appellees.
MARIE MICHELLE P. DELGADO, REGISTER OF DEEDS OF LAS PINAS CITY and
RHANDOLFO B. AMANSEC, in his capacity as Clerk of Court Ex-Officio Sheriff, Office of the
Clerk of Court, Las Pias City,Respondents-Defendants.

DECISION

PEREZ, J.:

Assailed in this Petition for Review on Certiorari is the Decision1 and Resolution2 of the Court of
Appeals (CA), in CA-G.R. CV No. 87540, which affirmed with modifications, the Decision3 of the
Regional Trial Court (RTC), reinstating the title of respondents Asuncion Felonia (Felonia) and Lydia
de Guzman (De Guzman) and cancelling the title of Marie Michelle Delgado (Delgado).

The facts as culled from the records are as follows:

Felonia and De Guzman were the registered owners of a parcel of land consisting of 532 square
meters with a five-bedroom house, covered by Transfer of Certificate of Title (TCT) No. T-402 issued
by the register of deeds of Las Pias City.

Sometime in June 1990, Felonia and De Guzman mortgaged the property to Delgado to secure the
loan in the amount of 1,655,000.00. However, instead of a real estate mortgage, the parties
executed a Deed of Absolute Sale with an Option to Repurchase.4

On 20 December 1991, Felonia and De Guzman filed an action for Reformation of Contract
(Reformation case), docketed as Civil Case No. 91-59654, before the RTC of Manila. On the
findings that it is "very apparent that the transaction had between the parties is one of a mortgage
and not a deed of sale with right to repurchase,"5 the RTC, on 21 March 1995 rendered a judgment
favorable to Felonia and De Guzman. Thus:

WHEREFORE, judgment is hereby rendered directing the [Felonia and De Guzman] and the
[Delgado] to execute a deed of mortgage over the property in question taking into account the
payments made and the imposition of the legal interests on the principal loan.

On the other hand, the counterclaim is hereby dismissed for lack of merit.

No pronouncements as to attorneys fees and damages in both instances as the parties must bear
their respective expenses incident to this suit.6
Aggrieved, Delgado elevated the case to the CA where it was docketed as CA-G.R. CV No. 49317.
The CA affirmed the trial court decision. On 16 October 2000, the CA decision became final and
executory.7

Inspite of the pendency of the Reformation case in which she was the defendant, Delgado filed a
"Petition for Consolidation of Ownership of Property Sold with an Option to Repurchase and
Issuance of a New Certificate of Title" (Consolidation case) in the RTC of Las Pias, on 20 June
1994.8 After an ex-parte hearing, the RTC ordered the issuance of a new title under Delgados name,
thus:

WHEREFORE, judgment is rendered-

1. Declaring [DELGADO] as absolute owner of the subject parcel of land covered by Transfer
Certificate of Title No. T-402 of the Register of Deeds of Las Pias, Metro Manila;

2. Ordering the Register of Deeds of Las Pias, Metro Manila to cancel Transfer Certificate
of Title No. T-402 and issue in lieu thereof a new certificate of title and owners duplicate
copy thereof in the name of [DELGADO].9

By virtue of the RTC decision, Delgado transferred the title to her name. Hence, TCT No. T-402,
registered in the names of Felonia and De Guzman, was canceled and TCT No. 44848 in the name
of Delgado, was issued.

Aggrieved, Felonia and De Guzman elevated the case to the CA through a Petition for Annulment of
Judgment.10

Meanwhile, on 2 June 1995, Delgado mortgaged the subject property to Homeowners Savings and
Loan Bank (HSLB) using her newly registered title. Three (3) days later, or on 5 June 1995, HSLB
caused the annotation of the mortgage.

On 14 September 1995, Felonia and De Guzman caused the annotation of a Notice of Lis Pendens
on Delgados title, TCT No. 44848. The Notice states:

Entry No. 8219/T-44848 NOTICE OF LIS PENDENS filed by Atty. Humberto A. Jambora,
Counsel for the Plaintiff, that a case been commenced in the RTC, Branch 38, Manila, entitled
ASUNCION P. FELONIA and LYDIA DE GUZMAN thru VERONICA P. BELMONTE, as Atty-in-fact
(Plaintiffs) v.s. MARIE MICHELLE DELGADO defendant in Civil Case No. 91-59654 for Reformation
of Instrument.

Copy on file in this Registry.

Date of Instrument Sept. 11, 1995

Date of Inscription Sept. 14, 1995 at 9:55 a.m.11

On 20 November1997, HSLB foreclosed the subject property and later consolidated ownership in its
favor, causing the issuance of a new title in its name, TCT No. 64668.

On 27 October 2000, the CA annulled and set aside the decision of the RTC, Las Pias City in the
Consolidation case. The decision of the CA, declaring Felonia and De Guzman as the absolute
owners of the subject property and ordering the cancellation of Delgados title, became final and
executory on 1 December 2000.12 Thus:

WHEREFORE, the petition is GRANTED and the subject judgment of the court a quo is ANNULLED
and SET ASIDE.13

On 29 April 2003, Felonia and De Guzman, represented by Maribel Frias (Frias), claiming to be the
absolute owners of the subject property, instituted the instant complaint against Delgado, HSLB,
Register of Deeds of Las Pias City and Rhandolfo B. Amansec before the RTC of Las Pias City
for Nullity of Mortgage and Foreclosure Sale, Annulment of Titles of Delgado and HSLB, and finally,
Reconveyance of Possession and Ownership of the subject property in their favor.

As defendant, HSLB asserted that Felonia and De Guzman are barred from laches as they had slept
on their rights to timely annotate, by way of Notice of Lis Pendens, the pendency of the Reformation
case. HSLB also claimed that it should not be bound by the decisions of the CA in the Reformation
and Consolidation cases because it was not a party therein.

Finally, HSLB asserted that it was a mortgagee in good faith because the mortgage between
Delgado and HSLB was annotated on the title on 5 June 1995, whereas the Notice of Lis Pendens
was annotated only on 14 September 1995.

After trial, the RTC ruled in favor of Felonia and De Guzman as the absolute owners of the subject
property. The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, the Court hereby finds for the [Felonia and De Guzman] with
references to the decision of the Court of Appeals in CA-G.R. CV No. 49317 and CA-G.R. SP No.
43711 as THESE TWO DECISIONS CANNOT BE IGNORED and against [Delgado] and [HSLB],
Register of Deeds of Las Pias City ordering the (sic) as follows:

1. The Register of Deeds of Las Pias City to cancel Transfer Certificate of Title Nos. 44848
and T-64668 as null and void and reinstating Transfer Certificate of Title No. T-402 which
shall contain a memorandum of the fact and shall in all respect be entitled to like faith and
credit as the original certificate of title and shall, thereafter be regarded as such for all intents
and purposes under the law;

2. Declaring the Mortgage Sheriffs Sale and the Certificate of Sale issued in favor of HSLB
null and void, without prejudice to whatever rights the said Bank may have against [Delgado];

3. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH500,000.00 for
compensatory damages;

4. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH500,000.00 for
exemplary damages;

5. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH500,000.00 for
moral damages;

6. Ordering [Delgado] to pay 20% of the total obligations as and by way of attorneys fees;

7. Ordering [Delgado] to pay cost of suit.14


On appeal, the CA affirmed with modifications the trial court decision. The dispositive portion of the
appealed Decision reads:

WHEREFORE, in the light of the foregoing, the decision appealed from is AFFIRMED with the
MODIFICATIONS that the awards of actual damages and attorneys fees are DELETED, moral and
exemplary damages are REDUCED to 50,000.00 each, and Delgado is ordered to pay the
appellees 25,000.00 as nominal damages.15

Hence, this petition.

Notably, HSLB does not question the affirmance by the CA of the trial courts ruling that TCT No.
44848, the certificate of title of its mortgagor-vendor, and TCT No. 64668, the certificate of title that
was secured by virtue of the Sheriffs sale in its favor, should be cancelled "as null and void" and that
TCT No. T-402 in the name of Felonia and De Guzman should be reinstated.

Recognizing the validity of TCT No. T-402 restored in the name of Felonia and De Guzman,
petitioners pray that the decision of the CA be modified "to the effect that the mortgage lien in favor
of petitioner HSLB annotated as entry No. 4708-12 on TCT No. 44848 be [ordered] carried over on
TCT No. T-402 after it is reinstated in the name of [Felonia and De Guzman]."16

Proceeding from the ruling of the CA that it is a mortgagee in good faith, HSLB argues that a denial
of its prayer would run counter to jurisprudence giving protection to a mortgagee in good faith by
reason of public policy.

We cannot grant the prayer of petitioner. The priorly registered mortgage lien of HSLB is now
worthless.

Arguably, HSLB was initially a mortgagee in good faith. In Bank of Commerce v. San Pablo, Jr.,17 the
doctrine of mortgagee in good faith was explained:

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising
there from are given effect by reason of public policy. This is the doctrine of "the mortgagee in good
faith" based on the rule that all persons dealing with property covered by the Torrens Certificates of
Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title.
The public interest in upholding indefeasibility of a certificate of title, as evidence of lawful ownership
of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied
upon what appears on the face of the certificate of title.

When the property was mortgaged to HSLB, the registered owner of the subject property was
Delgado who had in her name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face
of Delgados title. The records indicate that Delgado was at the time of the mortgage in possession
of the subject property and Delgados title did not contain any annotation that would arouse HSLBs
suspicion. HSLB, as a mortgagee, had a right to rely in good faith on Delgados title, and in the
absence of any sign that might arouse suspicion, HSLB had no obligation to undertake further
investigation. As held by this Court in Cebu International Finance Corp. v.

CA:18

The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of
title of the mortgagor of the property given as security and in the absence of any sign that might
arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor
is not the rightful owner of, or does not have a valid title to, the mortgaged property, the mortgagee
or transferee in good faith is nonetheless entitled to protection.

However, the rights of the parties to the present case are defined not by the determination of
whether or not HSLB is a mortgagee in good faith, but of whether or not HSLB is a purchaser in
good faith. And, HSLB is not such a purchaser.

A purchaser in good faith is defined as one who buys a property without notice that some other
person has a right to, or interest in, the property and pays full and fair price at the time of purchase
or before he has notice of the claim or interest of other persons in the property.19

When a prospective buyer is faced with facts and circumstances as to arouse his suspicion, he must
take precautionary steps to qualify as a purchaser in good faith. In Spouses Mathay v. CA,20 we
determined the duty of a prospective buyer:

Although it is a recognized principle that a person dealing on a registered land need not go beyond
its certificate of title, it is also a firmly settled rule that where there are circumstances which would
put a party on guard and prompt him to investigate or inspect the property being sold to him, such as
the presence of occupants/tenants thereon, it is of course, expected from the purchaser of a valued
piece of land to inquire first into the status or nature of possession of the occupants, i.e., whether or
not the occupants possess the land en concepto de dueo, in the concept of the owner. As is the
common practice in the real estate industry, an ocular inspection of the premises involved is a
safeguard a cautious and prudent purchaser usually takes. Should he find out that the land he
intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual
possession, it would then be incumbent upon the purchaser to verify the extent of the occupants
possessory rights. The failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would thereby preclude him from claiming or invoking the rights of a
purchaser in good faith.

In the case at bar, HSLB utterly failed to take the necessary precautions. At the time the subject
1wphi1

property was mortgaged, there was yet no annotated Notice of Lis Pendens. However, at the time
HSLB purchased the subject property, the Notice of Lis Pendens was already annotated on the title.21

Lis pendens is a Latin term which literally means, "a pending suit or a pending litigation" while a
notice of lis pendens is an announcement to the whole world that a real property is in litigation,
serving as a warning that anyone who acquires an interest over the property does so at his/her own
risk, or that he/she gambles on the result of the litigation over the property.22 It is a warning to
prospective buyers to take precautions and investigate the pending litigation.

The purpose of a notice of lis pendens is to protect the rights of the registrant while the case is
pending resolution or decision. With the notice of lis pendens duly recorded and remaining
uncancelled, the registrant could rest secure that he/she will not lose the property or any part thereof
during litigation.

The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of
which is to keep the subject matter of the litigation within the Courts jurisdiction until the judgment or
the decree have been entered; otherwise, by successive alienations pending the litigation, its
judgment or decree shall be rendered abortive and impossible of execution.23

Indeed, at the time HSLB bought the subject property, HSLB had actual knowledge of the annotated
Notice of Lis Pendens. Instead of heeding the same, HSLB continued with the purchase knowing the
legal repercussions a notice of lis pendens entails. HSLB took upon itself the risk that the Notice of
Lis Pendens leads to. As correctly found by the CA, "the notice of lis pendens was annotated on 14
1w phi 1

September 1995, whereas the foreclosure sale, where the appellant was declared as the highest
bidder, took place sometime in 1997. There is no doubt that at the time appellant purchased the
subject property, it was aware of the pending litigation concerning the same property and thus, the
title issued in its favor was subject to the outcome of said litigation."24

This ruling is in accord with Rehabilitation Finance Corp. v. Morales,25 which underscored the
significance of a lis pendens, then defined in Sec. 24, Rule 7 now Sec. 14 of Rule 13 in relation to a
mortgage priorly annotated on the title covering the property. Thus:

The notice of lis pendens in question was annotated on the back of the certificate of title as a
necessary incident of the civil action to recover the ownership of the property affected by it. The
mortgage executed in favor of petitioner corporation was annotated on the same title prior to the
annotation of the notice of lis pendens; but when petitioner bought the property as the highest bidder
at the auction sale made as an aftermath of the foreclosure of the mortgage, the title already bore
the notice of lis pendens. Held: While the notice of lis pendens cannot affect petitioners right as
mortgagee, because the same was annotated subsequent to the mortgage, yet the said notice
affects its right as purchaser because notice of lis pendens simply means that a certain property is
involved in a litigation and serves as a notice to the whole world that one who buys the same does
so at his own risk.26

The subject of the lis pendens on the title of HSLBs vendor, Delgado, is the "Reformation case" filed
against Delgado by the herein respondents. The case was decided with finality by the CA in favor of
herein respondents. The contract of sale in favor of Delgado was ordered reformed into a contract of
mortgage. By final decision of the CA, HSLBs vendor, Delgado, is not the property owner but only a
mortgagee. As it turned out, Delgado could not have constituted a valid mortgage on the property.
That the mortgagor be the absolute owner of the thing mortgaged is an essential requisite of a
contract of mortgage. Article 2085 (2) of the Civil Code specifically says so:

Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

xxxx

(2) That the pledgor or mortagagor be the absolute owner of the thing pledged or mortgaged.

Succinctly, for a valid mortgage to exist, ownership of the property is an essential requisite.27

Reyes v. De Leon28 cited the case of Philippine National Bank v. Rocha29 where it was pronounced
that "a mortgage of real property executed by one who is not an owner thereof at the time of the
execution of the mortgage is without legal existence." Such that, according to DBP v. Prudential
Bank,30 there being no valid mortgage, there could also be no valid foreclosure or valid auction sale.

We go back to Bank of Commerce v. San Pablo, Jr.31 where the doctrine of mortgagee in good faith,
upon which petitioner relies, was clarified as "based on the rule that all persons dealing with property
covered by the Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond
what appears on the face of the title. In turn, the rule is based on "x x x public interest in upholding
the indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any
encumbrance thereon."32

Insofar as the HSLB is concerned, there is no longer any public interest in upholding the
indefeasibility of the certificate of title of its mortgagor, Delgado. Such title has been nullified in a
decision that had become final and executory. Its own title, derived from the foreclosure of Delgado's
mortgage in its favor, has likewise been nullified in the very same decision that restored the
certificate of title in respondents' name. There is absolutely no reason that can support the prayer of
HSLB to have its mortgage lien carried over and into the restored certificate of title of respondents.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
87540 is AFFIRMED.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 168655 July 2, 2010

J. CASIM CONSTRUCTION SUPPLIES, INC., Petitioner,


vs.
REGISTRAR OF DEEDS OF LAS PIAS, Respondent.
INTESTATE ESTATE OF BRUNEO F. CASIM, (Purported) Intervenor.

DECISION

PERALTA, J.:

This is a petition for review under Rule 45 of the Rules of Court, taken directly on a pure question of
law from the April 14, 2005 Resolution1 and June 24, 2005 Order2 issued by the Regional Trial Court
(RTC) of Las Pias City, Branch 253 in Civil Case No. LP-04-00713 one for cancellation of notice
of lis pendens. The assailed Resolution dismissed for lack of jurisdiction the petition filed by J. Casim
Construction Supplies Inc. for cancellation of notice of lis pendens annotated on its certificate of title,
whereas the assailed Order denied reconsideration.

The facts follow.

Petitioner, represented herein by Rogelio C. Casim, is a duly organized domestic corporation4 in


whose name Transfer Certificate of Title (TCT) No. 49936,5 covering a 10,715-square meter land
was registered. Sometime in 1982, petitioner acquired the covered property by virtue of a Deed of
Absolute Sale6 and as a result the mother title, TCT No. 30459 was cancelled and TCT No. 49936
was issued in its stead.7

On March 22, 2004, petitioner filed with the RTC of Las Pias City, Branch 253 an original petition
for the cancellation of the notice of lis pendens, as well as of all the other entries of involuntary
encumbrances annotated on the original copy of TCT No. 49936. Invoking the inherent power of the
trial court to grant relief according to the petition, petitioner prayed that the notice of lis pendens as
well as all the other annotations on the said title be cancelled. Petitioner claimed that its owner's
duplicate copy of the TCT was clean at the time of its delivery and that it was surprised to learn later
on that the original copy of its TCT, on file with the Register of Deeds, contained several entries
which all signified that the covered property had been subjected to various claims. The subject
notice of lis pendens is one of such entries.8 The notations appearing on the title's memorandum of
encumbrances are as follows:

Entry No. 81-8334/T-30459 - ADVERSE CLAIM - In an affidavit duly subscribed and sworn to,
BRUNO F. CASIM claims, among other things, that he has the right and interest over the property
described herein in accordance with Doc. No. 336; Page No. 69; Book No. 1; s. of 1981 of Not. Pub.
of Makati, M.M., Romarie G. Villonco, dated August 4, 1981.

Date of inscription - Aug. 5, 1981 - 2:55 p.m.

(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds

Entry No. 82-4676/T-49936 - CANCELLATION OF ADVERSE CLAIM inscribed hereon under Entry
No. 81-8334/T-30459 in accordance with Doc. No. 247; Page 50; Book No. CXLI; s. of 1982 of Not.
Pub. of Pasay City, M.M., Julian G. Tubig, dated April 21, 1982.

Date of inscription - April 21, 1982 - 8:40 a.m.

(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds

Entry No. 82-4678/T-49936 - AFFIDAVIT - In accordance with the affidavit duly executed by the
herein registered owners, this title is hereby cancelled and in lieu thereof TCT No. 49936/T-228 has
been issued in accordance with Doc. No. 249; Page No. 80; Book No. CXLI; s. of 1982 of Not. Pub.
of Pasay City, M.M., Julian G. Tubig, dated April 21, 1982.

Date of inscription - April 21, 1982 - 8:44 a.m.

(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds

Entry No. 81-12423/T-30459 - NOTICE OF LIS PENDENS: By virtue of the notice of Lis Pendens
presented and filed by CESAR P. MANALAYSAY, counsel for the plaintiff, notice is hereby given
that a petition for review has been commenced and now pending in the Court of First Instance of
Rizal, Branch XXIX, Pasay, M.M, in Civil Case No. LP-9438-P, BRUNEO F. CASIM, Plaintiff, vs.
SPS. JESUS A. CASIM & MARGARITA CHAVEZ and Sps. Urbano Nobleza and Cristita J. Nobleza,
and Filomena C. Antonio, Defendants, involving the property described herein.

Date of the instrument - Sept. 17, 1981

Date of the inscription - Sept. 18, 1981 - 3:55 p.m.

(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds9

To justify the cancellation, petitioner alleged that the notice of lis pendens, in particular, was a
forgery judging from the inconsistencies in the inscriber's signature as well as from the fact that the
notice was entered non-chronologically, that is, the date thereof is much earlier than that of the
preceding entry. In this regard, it noted the lack of any transaction record on file with the Register of
Deeds that would support the notice of lis pendens annotation.10

Petitioner also stated that while Section 59 of Presidential Decree (P.D.) No. 1529 requires the
carry-over of subsisting encumbrances in the new issuances of TCTs, petitioner's duplicate copy of
the title did not contain any such carry-over, which means that it was an innocent purchaser for
value, especially since it was never a party to the civil case referred to in the notice of lis pendens.
Lastly, it alludes to the indefeasibility of its title despite the fact that the mother title, TCT No. 30459,
might have suffered from certain defects and constraints.11

The Intestate Estate of Bruneo F. Casim, representing Bruneo F. Casim, intervened in the instant
case and filed a Comment/Opposition12 in which it maintained that the RTC of Las Pias did not
have jurisdiction over the present action, because the matter of canceling a notice of lis pendens lies
within the jurisdiction of the court before which the main action referred to in the notice is pending. In
this regard, it emphasized that the case referred to in the said notice had already attained finality as
the Supreme Court had issued an entry of judgment therein and that the RTC of Makati City had
ordered execution in that case.13 It cited the lack of legal basis for the petition in that nothing in the
allegations hints at any of the legal grounds for the cancellation of notice of lis pendens.14 And, as
opposed to petitioner's claim that there was no carry-over of encumbrances made in TCT No. 49936
from the mother title TCT No. 30459, the latter would show that it also had the same inscriptions as
those found in TCT No. 49936 only that they were entered in the original copy on file with the
Register of Deeds. Also, as per Certification15 issued by the Register of Deeds, petitioner's claim of
lack of transaction record could not stand, because the said certification stated merely that the
corresponding transaction record could no longer be retrieved and might, therefore, be considered
as either lost or destroyed.

On April 14, 2005, the trial court, ruling that it did not have jurisdiction over the action, resolved to
dismiss the petition and declared that the action must have been filed before the same court and in
the same action in relation to which the annotation of the notice of lis pendens had been sought.
Anent the allegation that the entries in the TCT were forged, the trial court pointed out that not only
did petitioner resort to the wrong forum to determine the existence of forgery, but also that forgery
could not be presumed merely from the alleged non-chronological entries in the TCT but instead
must be positively proved. In this connection, the trial court noted petitioner's failure to name exactly
who had committed the forgery, as well as the lack of evidence on which the allegation could be
based.16The petition was disposed of as follows:

IN VIEW OF THE FOREGOING, the instant petition is hereby DISMISSED.

SO ORDERED.17

Petitioner moved for reconsideration,18 but it was denied in the trial court's June 24, 2005 Order.19

Now, raising the purely legal question of whether the RTC of Las Pias City, Branch 253 has
jurisdiction in an original action to cancel the notice of lis pendens annotated on the subject title as
an incident in a previous case, petitioner, in this present petition, ascribes error to the trial court in
dismissing its petition for cancellation. An action for cancellation of notice of lis pendens, petitioner
believes, is not always ancillary to an existing main action because a trial court has the inherent
power to cause such cancellation, especially in this case that petitioner was never a party to the
litigation to which the notice of lis pendens relates.20 Petitioner further posits that the trial court has
committed an error in declining to rule on the allegation of forgery, especially since there is no
transaction record on file with the Register of Deeds relative to said entries. It likewise points out that
granting the notice of lis pendens has been properly annotated on the title, the fact that its owner's
duplicate title is clean suggests that it was never a party to the civil case referred to in the
notice.21 Finally, petitioner posits that TCT No. 49936 is indefeasible and holds it free from any liens
and encumbrances which its mother title, TCT No. 30459, might have suffered.22

The Intestate Estate of Bruneo F. Casim (intervenor), in its Comment on the present petition,
reiterates that the court a quo does not have jurisdiction to order the cancellation of the subject
notice of lis pendens because it is only the court exercising jurisdiction over the property which may
order the same that is, the court having jurisdiction over the main action in relation to which the
registration of the notice has been sought. Also, it notes that even on the assumption that the trial
court had such jurisdiction, the petition for cancellation still has no legal basis as petitioner failed to
establish the grounds therefor. Also, the subject notice of lis pendens was validly carried over to TCT
No. 49936 from the mother title, TCT No. 30459.

In its Reply,23 petitioner, in a semantic slur, dealt primarily with the supposed inconsistencies in
intervenor's arguments. Yet the core of its contention is that the non-chronological annotation of the
notice stands to be the best evidence of forgery. From this, it advances the notion that forgery of the
notice of lis pendens suffices as a ground for the cancellation thereof which may be availed of in an
independent action by the aggrieved party.

The petition is utterly unmeritorious.

Lis pendens which literally means pending suit refers to the jurisdiction, power or control which
a court acquires over the property involved in a suit, pending the continuance of the action, and until
final judgment.24Founded upon public policy and necessity, lis pendens is intended to keep the
properties in litigation within the power of the court until the litigation is terminated, and to prevent
the defeat of the judgment or decree by subsequent alienation.25 Its notice is an announcement to
the whole world that a particular property is in litigation and serves as a warning that one who
acquires an interest over said property does so at his own risk, or that he gambles on the result of
the litigation over said property.26

A notice of lis pendens, once duly registered, may be cancelled by the trial court before which the
action involving the property is pending. This power is said to be inherent in the trial court and is
exercised only under express provisions of law.27 Accordingly, Section 14, Rule 13 of the 1997 Rules
of Civil Procedure authorizes the trial court to cancel a notice of lis pendens where it is properly
shown that the purpose of its annotation is for molesting the adverse party, or that it is not necessary
to protect the rights of the party who caused it to be annotated. Be that as it may, the power to
cancel a notice of lis pendens is exercised only under exceptional circumstances, such as: where
such circumstances are imputable to the party who caused the annotation; where the litigation was
unduly prolonged to the prejudice of the other party because of several continuances procured by
petitioner; where the case which is the basis for the lis pendens notation was dismissed for non
prosequitur on the part of the plaintiff; or where judgment was rendered against the party who
caused such a notation. In such instances, said notice is deemed ipso facto cancelled.28

In theorizing that the RTC of Las Pias City, Branch 253 has the inherent power to cancel the notice
of lis pendens that was incidentally registered in relation to Civil Case No. 2137, a case which had
been decided by the RTC of Makati City, Branch 62 and affirmed by the Supreme Court on appeal,
petitioner advocates that the cancellation of such a notice is not always ancillary to a main action.

The argument fails.

From the available records, it appears that the subject notice of lis pendens had been recorded at
the instance of Bruneo F. Casim (Bruneo) in relation to Civil Case No. 213729 one for annulment of
sale and recovery of real property which he filed before the RTC of Makati City, Branch 62 against
the spouses Jesus and Margarita Casim, predecessors-in-interest and stockholders of petitioner
corporation. That case involved the property subject of the present case, then covered by TCT No.
30459. At the close of the trial on the merits therein, the RTC of Makati rendered a decision adverse
to Bruneo and dismissed the complaint for lack of merit.30 Aggrieved, Bruneo lodged an appeal with
the Court of Appeals, docketed as CA-G.R. CV No. 54204, which reversed and set aside the trial
court's decision.31 Expectedly, the spouses Jesus and Margarita Casim elevated the case to the
Supreme Court, docketed as G.R. No. 151957, but their appeal was dismissed for being filed out of
time.32

A necessary incident of registering a notice of lis pendens is that the property covered thereby is
effectively placed, until the litigation attains finality, under the power and control of the court having
jurisdiction over the case to which the notice relates.33 In this sense, parties dealing with the given
property are charged with the knowledge of the existence of the action and are deemed to take the
property subject to the outcome of the litigation.34 It is also in this sense that the power possessed by
a trial court to cancel the notice of lis pendens is said to be inherent as the same is merely ancillary
to the main action.351avvphi1

Thus, in Vda. de Kilayko v. Judge Tengco,36 Heirs of Maria Marasigan v. Intermediate Appellate
Court37 and Tanchoco v. Aquino,38 it was held that the precautionary notice of lis pendens may be
ordered cancelled at any time by the court having jurisdiction over the main action inasmuch as the
same is merely an incident to the said action. The pronouncement in Heirs of Eugenio Lopez, Sr. v.
Enriquez, citing Magdalena Homeowners Association, Inc. v. Court of Appeals,39 is equally
instructive

The notice of lis pendens x x x is ordinarily recorded without the intervention of the court where the
action is pending. The notice is but an incident in an action, an extrajudicial one, to be sure. It does
not affect the merits thereof. It is intended merely to constructively advise, or warn, all people who
deal with the property that they so deal with it at their own risk, and whatever rights they may acquire
in the property in any voluntary transaction are subject to the results of the action, and may well be
inferior and subordinate to those which may be finally determined and laid down therein. The
cancellation of such a precautionary notice is therefore also a mere incident in the action, and may
be ordered by the Court having jurisdiction of it at any given time. x x x40

Clearly, the action for cancellation of the notice of lis pendens in this case must have been filed not
before the court a quo via an original action but rather, before the RTC of Makati City, Branch 62 as
an incident of the annulment case in relation to which its registration was sought. Thus, it is the latter
court that has jurisdiction over the main case referred to in the notice and it is that same court which
exercises power and control over the real property subject of the notice.

But even so, the petition could no longer be expected to pursue before the proper forum inasmuch
as the decision rendered in the annulment case has already attained finality before both the Court of
Appeals and the Supreme Court on the appellate level, unless of course there exists substantial and
genuine claims against the parties relative to the main case subject of the notice of lis
pendens.41 There is none in this case. It is thus well to note that the precautionary notice that has
been registered relative to the annulment case then pending before the RTC of Makati City, Branch
62 has served its purpose. With the finality of the decision therein on appeal, the notice has already
been rendered functus officio. The rights of the parties, as well as of their successors-in-interest,
petitioner included, in relation to the subject property, are hence to be decided according the said
final decision.

To be sure, petitioner is not altogether precluded from pursuing a specific remedy, only that the
suitable course of action legally available is not judicial but rather administrative. Section 77 of P.D.
No. 1529 provides the appropriate measure to have a notice of lis pendens cancelled out from the
title, that is by presenting to the Register of Deeds, after finality of the judgment rendered in the main
action, a certificate executed by the clerk of court before which the main action was pending to the
effect that the case has already been finally decided by the court, stating the manner of the disposal
thereof. Section 77 materially states:
SEC. 77. Cancellation of lis pendens. - Before final judgment, a notice of lis pendens may be
cancelled upon order of the court, after proper showing that the notice is for the purpose of molesting
the adverse party, or that it is not necessary to protect the rights of the party who caused it to be
registered. It may also be cancelled by the Register of Deeds upon verified petition of the party who
caused the registration thereof.

At any time after final judgment in favor of the defendant, or other disposition of the action such as to
terminate finally all rights of the plaintiff in and to the land and/or buildings involved, in any case in
which a memorandum or notice of lis pendens has been registered as provided in the preceding
section, the notice of lis pendens shall be deemed cancelled upon the registration of a certificate of
the clerk of court in which the action or proceeding was pending stating the manner of disposal
thereof. 42

Lastly, petitioner tends to make an issue out of the fact that while the original TCT on file with the
Register of Deeds does contain the annotations and notice referred to in this petition, its owner's
duplicate copy of the title nevertheless does not reflect the same non-chronological inscriptions.
From this, petitioner submits its puerile argument that the said annotations appearing on the original
copy of the TCT are all a forgery, and goes on to assert the indefeasibility of its Torrens title as well
as its supposed status as an innocent purchaser for value in good faith. Yet we decline to rule on
these assumptions principally because they raise matters that call for factual determination which
certainly are beyond the competence of the Court to dispose of in this petition.

All told, we find that the RTC of Las Pias City, Branch 253 has committed no reversible error in
issuing the assailed Resolution and Order dismissing for lack of jurisdiction the petition for
cancellation of notice of lis pendens filed by petitioner, and in denying reconsideration.

WHEREFORE, the petition is DENIED. The April 14, 2005 Resolution and the June 24, 2005 Order
issued by the Regional Trial Court of Las Pias City, Branch 253, in Civil Case No. LP-04-0071, are
hereby AFFIRMED.

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