Imprudent action - A Law Each Day (Keeps Trouble Away)

A notice of lis pendens on the title of a property means that said property is under litigation. So any person interested in buying said property is duly warned that something is wrong with the title. But if the notice has already been cancelled does it mean that there is nothing wrong with the title anymore? Can the buyer thereof say that they are purchasers in good faith if it turns out that the title is still flawed? These are answered in this case of the heirs of Manuel and Lina.

The land involved in this case was originally titled in the name of Manuel and Lina who mortgaged it with a Rural Bank. Since they failed to pay their loan the bank foreclosed the property and came out as the highest bidder. Without the knowledge of the heirs of Manuel and Lina, led by Diego who had inherited the property, the bank assigned their rights over the property to the spouses Alma and Rudy.

Diego and his siblings thus filed a petition in court praying that they be allowed to exercise their right of redemption over the subject property and caused the annotation of lis pendens on the Transfer Certificate of Title covering the subject property. This notice of lis pendens was carried over to the TCT subsequently issued in the name of Alma and Rudy. The latter then filed an omnibus motion to dismiss Diego et. al.'s petition and strike out the lis pendens. This was granted by the Court. So the lis pendens was cancelled by the Register of Deeds barely four days after it was ordered by the trial court.

Diego et. al. appealed this order of the trial court to the Court of Appeals. The Court of Appeals thereafter set aside the said order of the trial court and remanded the case to the same trial court for further proceedings.

After further proceedings, the trial court rendered a decision in favor of Diego et. al. ordering Alma and Rudy to render a true and correct accounting of the financial obligations of Diego et. al. as heirs of Manuel and Lina; and to allow Diego et. al. to exercise their right of redemption of the parcel of land.

After the said decision had become final, the trial court issued a writ of execution of said judgment. The execution was, however, returned unsatisfied because it turned out that the property was already transferred and sold by Alma and Rudy to Teresa and Dante. In fact a new Title has already been issued in the name of Dante and Teresa.

Diego et. al. thus requested that an alias writ of execution be directed against Dante and Teresa as transferees of said property. They claimed that Teresa and Dante acquired the property while their case was still pending. Teresa and Dante on the other hand contended that they were buyers in good faith. They said they acquired the property when the lis pendens was already cancelled. So they need not inquire beyond the face of the title. Were they correct?

No. From the attendant circumstances, it is crystal clear that an examination of the Certificate of Title and the annotations therein would disclose that a civil action has been filed in the trial court involving the property described in the title. Although the notice of lis pendens was cancelled pursuant to the order of the trial court dismissing the civil action, the cancellation effected after barely four days was premature because the court order was not yet final as Diego et. al. still had a remaining period of 11 days to appeal the order. In fact a mere inquiry with the trial court which issued the order of dismissal and the cancellation of the lis pendens would reveal that Diego et. al. timely appealed the dismissal to the Court of Appeals.

While a person dealing with registered land has a right to rely on the Title without need of inquiring further, such rule cannot apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. If circumstances exist that require a prudent man to investigate and he does not, he is deemed to have acted in bad faith.

Having purchased the registered land with full notice of the fact that it is in litigation, Teresa and Dante stand in the place of the vendor (Alma and Rudy) and their title is subject to the results of the pending litigation. So the writ of execution may be issued against them (Voluntad et. al. vs. Dizon et. al. G.R. No. 132294 Aug. 26, 1999)

Atty. Sison's e-mail address is: [email protected].