G.R. No. 179751 - Mendoza vs. Spouses Garana

Case Summary (G.R. No. 179751)

Factual Background

The heirs of Manuel Uy Ek Liong filed a petition for specific performance with damages (Civil Case No. 93-176) to compel the owners to sell the properties covered by several Torrens titles, including TCT Nos. T-72027, T-72028, T-72029, T-72030, T-72031, T-72032, and T-72033. On October 6, 1993, after paying required fees, the notice of lis pendens was entered at 1:30 p.m. in the Register of Deeds’ primary entry book or day book as Entry No. 56142 in Volume VI, page 241. The registrar at the time, Atty. Alberto P. Marquez, also wrote letters to the title owners requesting surrender of the owner’s duplicate certificates for annotation.

The notice was annotated on all affected titles except TCT No. T-72029. The Court found that the original of TCT No. T-72029 was missing from the Register of Deeds’ vault when the annotation should have been made, and that Leovina Jalbuena, the registered owner, did not surrender her duplicate copy for annotation. In addition, the Court explained that the original was actually in the custody of a clerk, Carmelina Rodriguez, who later forgot to complete the annotation after processing another transaction involving the title.

Even before the notice of lis pendens was sought, Belen Uy caused the annotation of an adverse claim on the same titles on August 16, 1993. However, that adverse claim was later cancelled on October 4, 1994 through an affidavit executed by Bienaflor C. Umali.

Sale to Spouses Garana and the Mortgage

In 1994, the Spouses Garana began inquiries regarding the Jalbuena property for a possible purchase. They learned that the property was then subject to Belen Uy’s adverse claim. After discovering that the adverse claim had been cancelled on October 4, 1994, the Spouses Garana proceeded to buy the property on November 7, 1994 from Jalbuena. Pursuant to the sale, the Register of Deeds cancelled TCT No. T-72029 and issued TCT No. T-77739 in the names of the Spouses Garana. Because the notice of lis pendens from October 6, 1993 did not appear in the cancelled title, it was likewise not reflected in the new title.

The spouses subsequently mortgaged the subject property to Far East Bank & Trust Co., Inc. as security for their loan.

Movements After Discovery and the Petition to Annotate

After the heirs of Manuel Uy learned that Jalbuena had sold the subject land to the Spouses Garana and that a new title had issued without indicating the notice of lis pendens, they notified the Register of Deeds of the omission and asked that the notice be annotated on the Garana title.

To remedy the oversight, the Register of Deeds, through Atty. Marquez and later through petitioner Herminia Mendoza, filed a petition in the trial court seeking authority to annotate the notice of lis pendens on TCT No. T-77739.

The Spouses Garana and the bank opposed the petition. They argued that the annotation was too late and would prejudice them. The spouses also claimed protection as innocent purchasers for value because they relied on the clean title issued to them. The bank likewise argued that when the land was mortgaged to it, there was no indication that it was subject to pending litigation.

Trial Court Proceedings

The trial court granted the petition and ordered the annotation of the notice of lis pendens on TCT No. T-77739. The ruling prompted the Spouses Garana and the bank to file an appeal with the CA.

The Parties' Contentions in the CA and the Petition

In their appeal, the Spouses Garana and BPI invoked the logic that, under the Torrens system, third persons may rely on the face of the certificate of title. They contended that because the notice of lis pendens was not annotated on the physical title, it could not bind them.

In the Supreme Court, petitioner admitted the omission of the Register of Deeds and its oversight in allowing the cancellation of TCT No. T-72029 and the issuance of a new one without reflecting the lis pendens. Petitioner nevertheless argued that the lis pendens had already been validly registered when it was entered in the Register of Deeds’ primary entry book or day book. Petitioner invoked Levin v. Bass to argue that in involuntary registrations such as notice of lis pendens, entry in the day book already provides notice to all persons.

Petitioner further argued that the spouses were not innocent purchasers for value, because before buying, they already knew of Belen Uy’s earlier adverse claim and proceeded to purchase only after it was cancelled.

Ruling of the Court of Appeals

The CA granted the appeal. It emphasized that the subject land was under the Torrens system and that persons dealing with registered land should be able to safely rely on the correctness of the certificate of title. The CA ruled that requiring searches beyond the certificate would erode the indefeasibility that Torrens titles are meant to protect.

Relying on these principles, the CA found the Spouses Garana to be innocent purchasers for value. The CA held that they relied on the clean title of Jalbuena at the time of purchase. Since the notice of lis pendens was not annotated on that title, the spouses had no way of knowing about the pending litigation of the heirs of Manuel Uy. It further ruled that recording of the notice in the Register of Deeds’ primary entry book did not operate as notice to third persons who dealt with the land.

Legal Basis and Reasoning of the Supreme Court

The Court granted the petition and reversed the CA. It explained that the issue had been addressed in earlier decisions addressing the effect of encumbrances recorded in the Register of Deeds’ primary entry book or day book but not annotated on the certificate of title.

The Court traced the doctrinal roots to Villasor v. Camon (1951) and Levin v. Bass (1952), and it reiterated the distinction between voluntary instruments and involuntary instruments under Act No. 496. In the case of voluntary instruments such as sales, mortgages, or leases, the owner’s production of the owner’s duplicate certificate was deemed necessary for registration. In contrast, for involuntary instruments such as attachment, liens, and notice of lis pendens, the Court held that the law did not require the owner’s duplicate certificate or even annotation on the physical title. The mere recording of the involuntary instrument in the primary entry book or day book was considered sufficient to bind the registered land and affect third persons dealing with it.

Applying this framework, the Court treated notice of lis pendens as an involuntary encumbrance and held that, under the continuing force of the doctrine under PD No. 1529, the primary entry book entry amounted to valid registration. The Court relied on Sections 52, 53, and 56 of PD No. 1529, which corresponded to the earlier provisions under Act No. 496, and it stressed that constructive notice arises upon entry, filing, or registration in the Register of Deeds office. It further explained that while voluntary instruments require the presentation of the owner’s duplicate to complete registration, involuntary instruments do not.

The Court also reviewed later cases that reiterated the doctrine. It noted that in Caviles v. Bautista, the Court acknowledged that buyers could not be charged with bad faith where the certificate of title contained no annotation of an involuntary notice of attachment, and it held that the duty to annotate lies with the Register of Deeds rather than with the registrant. In Armed Forces and Police Mutual Benefit Association v. Santiago, the Court preferred an earlier registered attachment over a subsequent sale, reasoning that the notation in the book of entry produces all the effects given by law to registration or inscription. In Saberon v. Ventanilla, the Court again applied Caviles and reiterated that the first to register his instrument has a superior right where entry in the primary entry book or day book precedes the registration of the sale, and that neither the registrant nor the buyer could be considered in bad faith merely because the encumbrance was not annotated on the title.

The Court acknowledged that, unlike the vendees in Caviles and Saberon, the Spouses Garana had not acted entirely in good faith. It found a factual basis for this conclusion upon examining TCT No. T-72029 and the adverse claim annotation.

The Court pointed out that before the heirs sought the registration of their notice of lis pendens on October 6, 1993, they had already annotated an adverse claim on August 16, 1993. That adverse claim was cancelled on October 4, 1994 through a different person, namely Bienaflor C. Umali. The Court considered this sequence to be a matter that should have prompted the spouses to inquire further before purchasing. It invoked Casimiro Development Corporation v. Mateo to articulate that the presence of facts that arouse suspicion obliges the vendee to look beyond the four corners of the certificate of title.

The Court further found that the Spouses Garana knew of the adverse claim already on August 16, 1993, and it noted that they did not rebut the allegation that after it was cancelled on October 4, 1994, they purchased the property shortly thereafter on November 7, 1994. The Court emphasized that they did not conduct further verification with Jalbuena or with the person who allegedly handled the cancellation. Their failure to check undercut their claim of innocence.

As to BPI, the Court also held that it should have exercised a higher degree of diligence. It reasoned that BPI dealt with TCT No. T-77739 and its antecedent title TCT No. T-72029. If BPI had conducted proper due diligence, it could have discovered that the adverse claim was cancelled by a different person. The Court stated that this irregularity should have been readily noticeable because under Section 70 of PD No. 1529, an adverse claim may be cancelled only at the instance of the trial court or the claimant.

On these premises, the Court ruled that the notice of l

Case Syllabus (G.R. No. 179751)

The case involved a petition for review on certiorari that assailed a Court of Appeals ruling which annulled a Regional Trial Court order directing the annotation of a notice of lis pendens on the transferees’ Transfer Certificate Title (TCT) under the Torrens System.
The dispute centered on whether the entry of a notice of lis pendens in the Register of Deeds’ primary entry book or day book served as notice to third persons even if the notice was not annotated on the physical certificate of title.
The Supreme Court granted the petition, reversed the CA, and ordered the Register of Deeds of Lucena City to annotate the notice of lis pendens on the Spouses’ subsequent title.

Parties and Procedural Posture

Petitioner was Herminina L. Mendoza, in her capacity as OIC of the Register of Deeds of Lucena City.
Respondents were the Spouses Armando and Angela Garana and Far East Bank & Trust Co., Inc. (now identified in the text as Bank of the Philippine Islands or BPI).
The CA decision of February 14, 2007 and CA resolution of September 11, 2007 annulled an RTC order dated October 10, 2000.
The RTC had ordered the annotation of the notice of lis pendens on TCT No. T-77739, which was registered in the names of the Spouses Garana.
The CA held that the Spouses and BPI could rely on the clean Torrens title because the lis pendens was not annotated on the specific certificate used by third persons.
The Supreme Court reviewed the matter via petition for review on certiorari and resolved the specific notice issue based on prior jurisprudence and the statutory framework.

Key Factual Antecedents

On October 6, 1993, the heirs of Manuel Uy Ek Liong, represented by Belen Uy, sought registration of a notice of lis pendens with the Register of Deeds of Lucena City.
The notice was intended to bind multiple titles, including TCT No. T-72029, which later became the subject land.
The notice was entered at 1:30 pm on the same date as Entry No. 56142 in Volume VI, page 241 of the primary entry book or day book.
The then registrar, Atty. Alberto P. Marquez, wrote letters to the owners requesting surrender of their owner’s duplicate copies for annotation.
Jalbuena, the registered owner of TCT No. T-72029, did not surrender her duplicate copy for annotation.
Separately, Belen Uy had already caused the annotation of an adverse claim on all titles on August 16, 1993, but it was later cancelled on October 4, 1994.
The Register of Deeds annotated the notice of lis pendens on all affected titles except TCT No. T-72029 because the original of that title was missing from the vault at the time.
The record showed that the original title of TCT No. T-72029 was in the custody of Carmelina Rodriguez, a clerk, who later forgot to process the lis pendens annotation after handling another transaction.
By 1994, the Spouses Garana began inquiries to possibly purchase the Jalbuena property and learned of the earlier adverse claim annotated by Belen Uy.
After learning that the adverse claim had been cancelled on October 4, 1994, the Spouses purchased the subject land from Jalbuena on November 7, 1994.
Pursuant to the sale, the Register of Deeds cancelled TCT No. T-72029 and issued TCT No. T-77739 to the Spouses Garana, and the cancelled title did not reflect the lis pendens.
The Spouses subsequently mortgaged the property to Far East Bank & Trust Co., Inc. (BPI) as security for their loan.
After discovering the omission, the heirs of Manuel Uy asked for annotation of the notice of lis pendens on the Spouses’ new title.
To remedy the omission, the Register of Deeds, through the substituted petitioner, filed a petition with the trial court to authorize annotation on TCT No. T-77739.

Competing Positions of Parties

The RTC and petitioner treated the omission as an oversight that should not defeat the binding effect of an involuntary encumbrance already entered in the primary entry book.
The Spouses Garana argued that annotation was too late, would prejudice them, and that their reliance on the clean Torrens title supported their status as innocent purchasers for value.
BPI argued that when it received the mortgage, there was no indication on the title that it was affected by pending litigation.
The petitioner admitted Register of Deeds’ omissions, including the failure to annotate the lis pendens on the cancelled title and the issuance of a new title without reflecting it.
The petitioner nevertheless argued that the entry in the primary entry book already amounted to valid registration and constituted notice to all persons.
To support its position, petitioner invoked Levin v. Bass to argue that for involuntary instruments like a notice of lis pendens, entry in the day book sufficed as notice.
The petitioner also argued that the Spouses were not innocent purchasers for value because they allegedly knew of prior adverse claim circumstances before purchase.
The petitioner highlighted the Spouses’ knowledge of the earlier adverse claim and the pattern of irregularities surrounding the title, which should have prompted further inquiry.

Issues Presented

The main issue was whether the entry of a notice of lis pendens in the Register of Deeds’ primary entry book or day book served as notice to third persons despite the absence of annotation on the physical certificate of title.
A secondary factual and legal issue was whether the Spouses Garana and BPI could invoke innocent purchaser and/or indefeasibility of title defenses given the circumstances described in the record.

Statutory Framework Applied

The Court evaluated the effect of entry and annotation by reference to Act No. 496, particularly Section 51, Section 55, and Section 56.
Act No. 496, Section 51 provided that conveyances, mortgages, leases, liens, attachments, orders, decrees, instruments, or entries affecting registered land, if registered, filed, or entered in the office of the Register of Deeds, would be notice to all persons from the time of registering, filing, or entering.
Act No. 496, Section 55 imposed an additional requirement for voluntary instruments by requiring presentation of the owner’s duplicate certificate, except in cases expressly provided or upon court order.
Act No. 496, Section