11/21/2016 G.R. No.

114299

PHILIPPINEJURISPRUDENCEFULLTEXT
TheLawphilProjectArellanoLawFoundation
G.R.No.114299September24,1999
TRADERSROYALBANKvs.COURTOFAPPEALS,ETAL.

RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.114299September24,1999

TRADERSROYALBANK,petitioner,
vs.
HON. COURT OF APPEALS, PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all surnamed CAPAY and
RAMONA.GONZALES,respondents.

G.R.No.118862September24,1999

PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all surnamed CAPAY, and RAMON A. GONZALES,
petitioners,
vs.
SPS. HONORATO D. SANTOS and MARIA CRISTINA S. SANTOS, SPS. CECILIO L. PE and JOSEFINA L. PE, FLORA LARON
WESCOMBE, SPS. TELESFORO P. ALFELOR II and LIZA R. ALFELOR, SPS. DEAN RODERICK FERNANDO and LAARNI
MAGDAMO FERNANDO, REMEDIOS OCA, DEVELOPMENT BANK OF THE PHILIPPINES and TRADERS ROYAL BANK,
respondents.

KAPUNAN,J.:

ThepresentcontroversyhasitsrootsinamortgageexecutedbythespousesMaximoandPatriaCapayinfavorofTradersRoyalBank
(TRB)pursuanttoaloanextendedbythelattertotheformer.Themortgagecoveredseveralproperties,includingaparcelofland,the
subjectofthepresent
dispute. 1 The loan became due on January 8, 1964 and the same having remained unpaid, TRB instituted extrajudicial
foreclosureproceedingsuponthemortgagedproperty.
To prevent the property's sale by public auction, the Capays, on September 22, 1966, filed a petition for prohibition with preliminary
injunction(CivilCaseNo.Q10453)beforetheCourtofFirstInstance(CFI)ofRizal,allegingthatthemortgagewasvoidsincetheydid
notreceivetheproceedsoftheloan.ThetrialcourtinitiallygrantedtheCapays'prayerforpreliminaryinjunction.

OnMarch17,1967,theCapayscausedtobefiledintheRegisterofDeedsofBaguioCityanoticeoflispendens over the disputed

property.SaidnoticewasenteredintheDayBook,aswellasintheCapays'certificateoftitle.

Subsequently,theinjunctionissuedbythetrialcourtwasliftedthusallowingtheforeclosuresaletoproceed.Foreclosureproceedings
were initiated and on October 17, 1968, the property was sold to TRB which was the highest bidder at the auction sale. A sheriff
certificateofsalewasissuedinitsnameonthesameday.OnFebruary25,1970,thepropertywasconsolidatedinthenameofTRB,the
solebidderinthesale.TCTNo.T6595inthenameoftheCapayspouseswasthencancelledandanewone,TCTNo.T16272,2was
enteredinthebank'sname.Thenoticeoflispendens, however, was not carried over in the certificate of title issued in the
nameTRB.
Thereafter,theCapaysfiledwiththeCFIasupplementalcomplaintprayingfortherecoveryofthepropertywithdamagesandattorney's
fees.TrialinCivilCaseNo.Q10453proceededand,onOctober3,1977,theCFIrendereditsdecisiondeclaringthemortgagevoidfor
wantofconsideration.TheCFIordered,amongotherthings,thecancellationofTCTNo.T16272inthenameofTRBandtheissuance
ofnewcertificatesoftitleinthenameoftheCapayspouses.

TRBappealedtotheCourtofAppeals.WhilethecasewaspendingintheCourtofAppeals,TRBonMarch17,1982soldthelandto
Emelita Santiago in whose name a new certificate of title, TCT No. 33774, 3 was issued, also, without any notice of lis pendens
annotatedthereon.Santiagointurndividedthelandintosix(6)lotsandsoldthesetoMarcialAlcantara,ArmandoCruzand
ArtemioSanchez,whobecamecoownersthereof. 4Alcantaraandhiscoownersdevelopedthepropertyandthereaftersold
thesix(6)lotstoseperatebuyerswhoissuedseperatetitles,again,bearingnonoticeoflispendens.5
OnJuly30,1982,theCourtofAppealsrendereditsdecisionmodifyingthedecisionofthetrialcourtastotheawardofdamagesbut
affirmingthesameinallotherrespects.

For having been filed out of time and for lack of merit, the petition for certiorari filed by TRB before this Court 6 was denied in a
ResolutiondatedSeptember12,1983.TRB'smotionforreconsiderationwassimilarlydeniedinaResolutiondatedOctober
http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 1/12
11/21/2016 G.R. No. 114299
12, 1983. The Court's September 12, 1983 Resolution having become final and executory on November 9, 1983, the trial
courtissuedawritofexecutiondirectingtheRegisterofDeedsofBaguioCitytocancelTCTNo.16272inthenameofTRB,
andtoissueanewoneinthenameoftheCapayspouses.
Saidwrit,however,couldnotbeimplementedbecauseofthesuccessivesubsequenttransfersofthesubdividedpropertytobuyerswho
obtainedseparatetitlesthereto.Thus,acomplaintforrecoveryofpossessionownershipdated8June1985wasfiledbeforetheQuezon
CityRegionalTrialCourtagainstTRBandthesubsequenttransfereesoftheproperty,therespondentsinG.R.No.118862(hereinafter,
"thenonbankrespondents").PlaintiffsinsaidcasewerePatriaCapay,herchildrenbyMaximo7whosucceededhimuponhisdeath
onAugust25,1976,andRamonGonzales,counselofthespousesinCivilCaseNo.Q10453whobecomecoownerofthe
property to the extent of 35% thereof as his attorney's fees (collectively, "the Capays"). On March 27, 1991, the trial court
rendereditsdecision,thedispositiveportionofwhichstates:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs against the defendants and ordering the
Register of Deeds for Baguio to cancel TCT No. T36177, Books 198, Page 177 in the names of defendants
SpousesHonoratoD.SantosandMariaCristinaSantostocancelTCTNo.36707,Book201,Page107inthe
namesofdefendantSpousesCecilioPeandJosefinaL.PetocancelTCTNo.T36051,Book198,Page51in
the name of Flora Laron Wescombe, married to Kevin Lind Wescombe (now deceased) to cancel TCT No.
36147,Book198,page147inthenamesofSpousesTelesforoP.AlfelorIIandLizaR.AlfelortocancelTCTNo.
T36730, Book 201, Page 130 in the names of Spouses Dean Roderick Fernando and Laarni Magdamo
FernandotocancelTCTNo.37437,Book205,Page37inthenameofRemediosOca,andissuenewonesfree
fromallliensandencumbrances,togetherwithalltheimprovementsthereininthenamesofplaintiffssharingpro
indivisoasfollows:35%toRamonA.Gonzales,marriedtoLiliaY.Gonzales,oflegalage,withpostaladdressat
23SunriseHill,NewManila,QuezonCity37.92%toPatriaB.Capay,oflegalage,widow,Filipino5.41%eachto
RubyAnnCapay,oflegalage,FilipinomarriedtoPokkaVainio,FinnishcitizenChonaMargaritaCapay,oflegal
age, Filipino, married to Waldo Flores Rosario Capay of legal age, Filipino, married to Jose Cuaycong, Jr.
CynthiaCapay,oflegalage,Filipino,marriedtoRaulFloresLindaJoyCapay,oflegalage,Filipino,marriedto
Pedro Duran, all with postal address at 37 Sampaguita St., Capitolville Subd., Bacolod City, ordering said
defendants to vacate the premises in question and restoring plaintiffs thereto and for defendant Traders Royal
Bank to pay each of the plaintiffs moral damages in the amount of P100,000.00, P40,000.00 in exemplary
damages and P40,000.00 as attorney's fees, all with legal interest from the filing of the complaint, with costs
againstdefendants.

SOORDERED.8

TRBandthenonbankrespondentsappealedtotheCourtofAppeals.InaDecisionpromulgatedonFebruary24,1994inCAG.R.CV
No. 33920, the appellate court affirmed the decision of the trial court intoto. 9 It ruled that the nonbank respondents cannot be
consideredaspurchasersforvalueandingoodfaith,havingpurchasedthepropertysubsequenttotheactioninCivilCase
No. Q10453 and that while the notice of lis pendens was not carried over to TRB's certificate of title, as well as to the
subsequent transferees' titles, it was entered in the Day Book which is sufficient to constitute registration and notice to all
personsofsuchadverseclaim,citingthecasesofVillasorvs.Camon,10Levinvs.Bass11andDirectorofLandsvs.Reyes.
12

AsregardTRB,theCourtofAppealssaidthatthebankwasinbadfaithwhenitsoldthepropertyknowingthatitwasunderthelitigation
andwithoutinformingthebuyerofthatfact.

On April 26, 1994, TRB filed with this Court a petition for review to set aside the CA decision, docketed herein as G.R. No. 114299,
invokingthefollowinggrounds:

I.

THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS

ERROR OF LAW IN PROMULGATING THE DISPUTED DECISION AND THEREBY DECIDED A
QUESTION OF SUBSTANCE WHOLLY CONTRARY TO SETTLED JURISPRUDENCE AND TOTALLY
NOTINACCORDWITHAPPLICABLEDECISIONOFTHISHONORABLESUPREMECOURT.

II.

THE RESPONDENT HONORABLE COURT OF APPEALS HAS COMMITTED SO GRAVE AND

SERIOUSERRORSOFLAWINSANCTIONINGADEPARTUREFROMTHEUSUALANDACCEPTED
COURSE OF JUDICIAL PROCEEDING AS TO CALL FOR THE EXERCISE OF THE POWER OF BY
THISHONORABLESUPREMECOURT.

a)Thepublicrespondenthasplainlyandmanifestlyactedwhimsically,arbitrarily,capriciously,withgrave
abuseofdiscretion,inexcessofjurisdictiontantamounttolackofjurisdiction.

xxxxxxxxx

b) The public respondent erred in not finding that it was not the fault of petitioner when the notice of lis
pendenswasnotcarriedovertoitsnewtitle.

http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 2/12
11/21/2016 G.R. No. 114299
xxxxxxxxx

c)ThepublicrespondenterredinnotfindingthatPDNo.1271hadlegallycausedtheinvalidationofthe
Capay'spropertyandthesubsequentvalidationofTRB'stitleoverthesamepropertywaseffectiveeven
asagainsttheCapays.13

Meanwhile, the nonbank respondents moved for a reconsideration of the Court of Appeals' decision. Convinced of the movants'
arguments,theCourtofAppealsinaResolutionpromulgatedonAugust10,1994grantedthemotionforreconsiderationanddismissed
thecomplaintasagainstthem.Thedispositiveportionoftheresolutionstates:

ACCORDINGLY, in view of the foregoing disquisitions and finding merit in the motion for reconsideration, the same is
hereby GRANTED. Consequently, the decision of this Court, promulgated on February 24, 1994, is hereby
RECONSIDERED.ThecomplaintfiledagainstdefendantsappellantswiththecourtaquoisherebyorderedDISMISSED,
and the certificate of titles originally issued to them in their individual names are hereby ordered restored and duly
respected.Wemakenopronouncementastocosts.

SOORDERED.14

The Capays thus filed with this Court a petition for review, docketed as G.R. No. 118862 to set aside the resolution of the Court of
Appealsraisingthefollowingerrors:

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT TUAZON VS.
REYES,48PHIL.814ANDRIVERAVS.MORAN,48PHIL.836ARENOTAPPLICABLEHEREOF,WHILEPINO VS.
COURTOFAPPEALS,198SCRA436,ISAPPLICABLE.

II

THECOURTOFAPPEALSPALPABLYERREDINREVERSINGITSELFBYNOWHOLDINGTHATATUNVS.MUNOZ,
97PHIL.762ANDLAROZAVS.GUIA,134SCRA34,ARENOTAPPLICABLE.

III

THECOURTOFAPPEALSPALPABLYERREDINREVERSINGITSELFBYNOWHOLDINGTHATLEVINVS.BASS,
91PHIL.419VILLASORVS.CAMON,89PHIL.404ANDDIRECTOROFLANDSVS.REYES,68SCRA73,ARENOT
APPLICABLEHEREOF.

IV

THECOURTOFAPPEALSPALPABLYERREDINREVERSINGITSELFBYNOWHOLDINGTHATPETITIONERSARE
GUILTYOFLACHES.

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT THERE IS NO
DISTINCTIONINTHEREGISTRATIONOFVOLUNTARYINSTRUMENTSVISAVISINVOLUNTARYINSTRUMENTS.

VI

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT RESPONDENTS
WHOARELAWYERS,RESPONSIBLECITIZENSANDWELLRESPECTEDRESIDENTSINTHECOMMUNITY,ARE
EXEMPTEDFROMTHEEFFECTSOFTHECONSTRUCTIVENOTICEARISINGFROMREGISTRATION.

VII

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF WITH REGARDS TO TRADERS ROYAL
BANK,AFTERTHELATTERHASPERFECTEDITSAPPEALTOTHESUPREMECOURT.

VIII

THECOURTOFAPPEALSPALPABLYERREDINNOTRULINGONTHECOUNTERASSIGNMENTOFERRORTHAT:

B) THE LOWER COURT ERRED IN NOT HOLDING THAT DEFENDANTS ARE BOUND BY THE
DECISIONINCIVILCASENO.Q10453.

Subsequently,G.R.No.118862wasconsolidatedwithG.RNo.114299,pursuanttothisCourt'sResolutiondatedJuly3,1996.15

Theconsolidatedcasesprimarilyinvolvetwoissues:(1)who,asbetweentheCapaysandthenonbankrespondents,hasabetterright
tothedisputedproperty,and(2)whetherornotTRBisliabletotheCapaysfordamages.

Onthefirstissue,weruleforthenonbankrespondents.
http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 3/12
11/21/2016 G.R. No. 114299
I

First,whenTRBpurchasedthepropertyattheforeclosuresale,thenoticeoflispendensthattheCapayscausedtobeannotatedon
their certificate of title was not carried to the new one issued to TRB. Neither did the certificate of title of Emelita Santiago, who
purchasedthepropertyfromTRB,containanysuchnotice.WhenSantiagocausedthepropertytobedivided,six(6)newcertificatesof
titlewereissued,noneofwhichcontainedanynoticeoflispendens.SantiagothensoldthelotstoMarcialAlcantaraandhiscoowners
whonextsoldeachofthesetothenonbankrespondents.Thenonbankrespondents,therefore,couldnothavebeenawarethatthe
propertyinquestionwasthesubjectoflitigationwhentheyacquiredtheirrespectiveportionsofsaidproperty.Therewasnothinginthe
certificatesoftitleorrespectivepredecessorsininterestthatcouldhavearousedtheirsuspicion.Thenonbankrespondentshadaright
torelyonwhatappearedonthefaceofthetitleoftheirrespectivepredecessorsininterest,andwerenotboundtogobeyondthesame.
ToholdotherwisewoulddefeatoneoftheprincipalobjectsoftheTorrenssystemoflandregistration,thatis,tofacilitatetransactions
involvinglands.

The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate
transactionsrelativetheretobygivingthepublictherighttorelyuponthefaceofaTorrenscertificateoftitleandto
dispensewiththeneedofinquiringfurther,exceptwhenthepartyconcernedhasactualknowledgeoffactsand
circumstances that should impel a reasonably cautious man to make such further inquiry. Where innocent third
persons,relyingonthecorrectnessofthecertificateoftitlethusissued,acquirerightsovertheproperty,thecourt
cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright
cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance as to whether the title has been
regularly or irregularly issued by the court. Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the
certificatetodeterminetheconditionoftheproperty.

The Torrens system was adopted in this country because it was believed to be the most effective measure to
guaranteetheintegrityoflandtitlesandtoprotecttheirindefeasibilityoncetheclaimofownershipisestablished
andrecognized.Ifapersonpurchasesapieceoflandontheassurancethattheseller'stitletheretoisvalid,he
shouldnotruntheriskofbeingtoldlaterthathisacquisitionwasineffectualafterall.Thiswouldnotonlybeunfair
to him. What is worse is that if this were permitted, public confidence in the system would be eroded and land
transactionswouldhavetobeattendedbycomplicatedandnotnecessarilyconclusiveinvestigationsandproofof
ownership.Thefurtherconsequencewouldbethatlandconflictscouldbeevenmorenumerousandcomplexthan
they are now and possibly also more abrasive, if not even violent. The Government, recognizing the worthy
purposes of the Torrens system, should be the first to accept the validity of titles issued thereunder once the
conditionslaiddownbythelawaresatisfied.16

Second, the foregoing rule notwithstanding, the nonbank respondents nevertheless physically inspected the properties and inquired
from the register of Deeds to ascertain the absence of any defect in the title of the property they were purchasing an exercise of
diligenceabovethatrequiredbylaw.

Thus,respondentAidaFernandoMeeks,whoboughtLot5forhersonDean,testified:

QHowdidyoucometoliveinBaguioCity,particularyinKim.2.5SanLuis,BaguioCity?

AInoneofmyvisitstomysisterwhohasbeenresidingherefortwelve(12)yearsnow,Igotinterestedin
buyingapropertyhere.

QHowdidyoucometoknowofthispropertyatAsinRoadwhereyounowreside?

AMysister,RuthAnnValdez,sir.

QWhenthisparticularpropertywasboughtbyyou,whenwasthat?

AIdonotremembertheexactdate,butitwasin1984,sir.

QAtthetimewhenyouwenttoseetheplacewhereyounowreside,howdiditlook?

AThisparticularpropertythatIboughtwasthenasmallone(1)roomstructure,itisatwo(2)storeyone
(1)bedroomstructure.

QWhatkindofstructurewithregardstomaterial?

AItisasemiconcretestructure,sir.

QAndasidefromthistwo(2)storeyone(1)roomstructure,howdidthesurroundingarealooklikeatthe
timeyouvisited?

ATherewerestonewallsfromtheroadandtherewerestonewallsinfrontofthepropertyandbesidethe
property.

Q At the time you went to see the property with your agent, rather your sister Ruth Ann Valdez did you
cometoknowtheowner?
http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 4/12
11/21/2016 G.R. No. 114299
AWedidbecauseatthetimewewentthere,Mr.Alcantarawastheresupervisingtheworkers.

QAndwho?

AAmadoCruzsir.

QAfteryousawthisproperty,whatelsedidyoudo?

AMyfirstconcernthenwasamIbuyingapropertywithacleantitle.

QInregardstothisconcernofyours,didyoufindananswertothisconcernofyours?

AAtfirstIaskedMr.AlcantaraandIwasansweredbyhim.

QWhatwashisanswer?

AThatitwasapropertywithacleantitle,thathehasshownmethemothertitleanditisacleantitle.

Q Aside from being informed that it is a property with a clean title, did you do anything to answer your
question?

AYes,sit.

QWhatdidyoudo?

AWell,thefirststepIdidwastogototheLandRegistrationOffice.

QAreyoureferringtotheCityHallofBaguio?

AYes,theCityHallofBaguio.

QAndwhatdidyoudointheRegistryofDeeds?

AWelookedforthetitle,theoriginaltitle,sir.

QWhenyousaywe,whowasyourcompanion?

AMr.Alcantaraandmypresenthusband,sir.

QThethree(3)ofyou?

AYes,sir.

QWhattitledidyouseethere?

AWesawthetitlethatwasmadeupinfavorofAmadoCruz,sir.

QAndwhatwastheresultofyourlookingupforthistitleinthenameofAmadoCruz?

AWehadtobereassuredthatitwasagenuineone,soweaskedAtty.Diomampowhoheadstheoffice.
Weshowedhimacopyofthattitleandwewerealsoreassuredbyhimthatanythingthatwassignedby
himwasasgoodasitis.

QDidthisAtty.Diomamporeassureyouthatthetitlewasgood?

AHedid.

QAfteryourconversationwiththeRegisterofDeeds,whatdidyoudo?

AThesecondstepwedidwastoconferwithourlawyer,afriendfromRCBCBinondo,ManilathisisAtty.
NelsonWaje.

QWhatisyourpurposeingoingtothislawyer?

AWewantedanassurancethatweweregettingavalidtitlejustincasewethinkofbuyingtheproperty.

QWhatwastheresultofyourconferencewiththislawyer?

AHewasabsolutelycertainthatwasavalidtitle.

Q Mrs. Meeks, after looking at the place, going to the Register of Deeds, looking at the title and seeing
yourlawyerfriend,whatdecisiondidyoufinallymakeregardingtheproperty?

http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 5/12
11/21/2016 G.R. No. 114299
AWewantedmorereassurances,soweproceededtoBanaue,asadvisedbythatsamelawyer,thereis
anotherofficeoftheBureauofLands.Icannotrecalltheofficebutithassomethingtodowithregistration
oftheold.

QWhatisyourpurposeingoingtothisOfficeinBanaue?

AIwantedmorereassuancesthatIwasgettingavalidtitle.

QWhatwastheresultofyourvisittotheBanaueOffice?

AWefoundthetitleofthispropertyandtherewasreassurancethatitwasacleantitleandwesawthe
mothertitleundertheHilariofamily.

QMrs.Meeks,whenyousayBanaue,whatparticularplaceisthisBanaue?

AItisinBanaueStreetinQuezonCity,sir.

Q And when you saw the title to this property and the mother title, what was the result of your
investigation,theinvestigationthatyoumade?

AWewerereassuredthatwewerepurchasingavalidtitle,wehadagenuinetitle.

QWhenyouwereabletodeterminethatyouhadavalid,authenticorgenuinetitle,whatdidyoudo?

AThatiswhenIfinallythoughtofpurchasingtheproperty.17

TelesforoAlfelorII,thepurchaserofLot4,narratedgoingthroughasimilarroutine:

QHowdidyoucometoknowofthisplaceasAsinRoadwhereyouarepresentlyresiding?

A It was actually through Mrs. Flory Recto who is presently the Branch Manager of CocoBank. She
informedmywifethatthereisapropertyforsaleatAsinRoad,andshewastheonewhointroducedtous
Mr.Alcantara,sir.

QWhenyouwereinformedbyMrs.RectoandwhenyoumetwithMr.Alcantara,didyouseetheproperty
thatwasbeingofferedforsale?

AYes,sir.

QWhendidyouspecificallyseetheproperty,ifyoucanrecall?

AIwouldsayitisaroundthethirdquarterof1983,sir.

QWhenyouwenttoseetheplace,couldyoupleasedescribewhatyousawatthattime?

A When we went there the area is still being developed by Mr. Alcantara. As a matter of fact the road
leadingtothepropertyisstillnotpassableconsideringthatduringthattimeitwasrainyseasonanditwas
muddy, we fell on our way going to the property and walked to have an ocular inspection and physical
checkonthearea,sir.

xxxxxxxxx

QWhatwastheimprovement,ifany,thatwasinthatparcelwhichyouaregoingtopurchase?

ADuringthattime,theriprapofthepropertyisalreadythere,theonehalfoftheriprapsir.

QDoyouknowwhowasmakingthisimprovementatthetimethatyouwentthere?

AIwouldunderstandthatitwasMarcialAlcantara,sir.

QAfteryousawtheplaceriprapandyouwereinthecourseofdecidingtopurchasethisproperty,what
elsedidyoudo?

AFirst,Ihavetoconsiderthatthepropertyisclean.

QHowdidyougoaboutdeterminingwhetherthetitleofthepropertyisclean?

A Considering that Marcial Alcantara is a real estate broker, I went to his office and checked the
documentshehasregardingtheproperty.

QAndwhatwastheresultofyourcheckingastowhetherthetitleofthepropertyisclean?

AHeshowedmethecopyofthetitleanditwasclean,sir.

http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 6/12
11/21/2016 G.R. No. 114299
QAsidefromgoingtoMr.Alcantaratocheckupthetitleoftheproperty,whatelsedidyoudo?

A Well, the next thing is I requested his wife to accompany me to the Bureau of Lands or rather the
RegistryofDeeds,sir.

QWhatregistryofDeedsareyoureferringto?

ATheRegistryofDeedsofBaguioCity,sir.

QAndwereyouabletoseetheRegisterofDeedsregardingwhatyouwouldliketoknow?

AYes,andweweregivenacertificationregardingthisparticularareathatitwasclean,sir.

QWhatCertificationareyoureferringto?

AItisaCertificationdulysignedbytheemployeeoftheRegistryofDeedsAdelinaTabangin,sir.

QDoyouhaveacopyofthatCertification?

AYes,Ihave,sir.18

ThetestimoniesofHonoratoSantos19andJosefinaPe20weretothesameeffect.

Thenonbankrespondentpredecessorininterest,MarcialAlcantara,waslessthorough:

QAndwillyougiveabriefdescriptionofwhatyoudo?

A I normally acquire land, quite big tract of land and subdivide it into smaller lots and sold it to some
interestedparties.

QSpecifically,Mr.AlcantarawillyoupleaseinformtheCourtinwhatplaceinBaguiohaveyouacquired
andsubdividedandsoldlots?

ADominicanHill,LeonilaHill,CristalCaveandAsinRoad,sir.

QYoumentionedAsinRoad,whatparticularplaceinAsinRoadareyoureferring?

AThatpropertyIboughtfromEmelitaSantiago,sir.

QWhenyousayyouboughtitfromEmelitaSantiago,howdidyoucometoknowthatEmelitaSantiagois
disposingoftheproperty?

ABecauseofthefather,heistheonewhoofferedmetheproperty,sir,ArmandoGabriel.

QIshealsoaresidentofBaguio?

AHeisfromBuyagan,LaTrinidadsir,

QHowdidyoucometoknowofthisArmandoGabrielwantingtosellapropertyinAsin?

AHeapproachedmeinthehouse,sir.HehasacquiredatitlefromtheTradersRoyalBank.

QCanyouinformtheHonorableCourtwhenyouhadthisconversationwithArmandoGabrielonthesale
ofthepropertyatAsinRoad?

ALaterpartofMarch,1983,sir.

QNow,whenthisArmandoGabrielinformedyouthathewantshispropertytobesold,whatdidyoudo?

AIwenttotheplacewiththeagent,sir.

QWhenyousayyouwenttotheplacewiththeagent,whatplace?

AKilometer2,AsinRoadsir.

QAndwhenyouwenttheretoseetheplace,didyouactuallygotheretoseetheplace?

ABywalking,Iparkedmycarakilometeraway,sir.

QIsitmyunderstandingthatwhenyouwenttoseethepropertytherewerenoroads?

ANone,sir.

xxxxxxxxx
http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 7/12
11/21/2016 G.R. No. 114299
QMr.Alcantara,whenyouwenttoseethisplaceatAsinRoadlastweekofMarch,1983,willyouplease
brieflydescribehowthisplacelookedlikeatthattime?

ATheplacewasmountainous,grassy,therewerecogontrees,someoftheroadswereerodingalready,
sowecannotpossiblyentertheproperty,sir.

QAtthetimeyouenteredtheplace,wasthereanyvisiblesignofclaimbyanyone?

ANone,sir.

QIntermsoffenceinthearea?

AThereisnosuch,sir.

xxxxxxxxx

QAsidefromlookingorgoingtotheproperty,whatelsedidyoudotothispropertypriortoyourpurchase?

AIinvestigateditwiththeRegisterofDeeds,sir.

QWhatisyourpurposeininvestigatingitwiththeRegisterofDeeds?

AToseeifthepaperincleanandtherearenoencumbrances,sir.

QTowhomdidyoutalk?

AToAtty.ErnestoDiomampo,sir.

Q And when you went to the Registry of Deeds to investigate and check, did you have occasion to talk
withAtty.Diomampo?

AYes,sir.

QAndwhatwastheresultofyourtalkwithAtty.Diomampo?

AThepapersarecleanexcepttotheannotationatthebackwiththeroadrightofway,sir.

QAftermakingthisinvestigationwiththeRegisterofDeedsandtalkingwithAtty.Diomampo,whatelse
transpired?

AWeboughttheproperty,sir.

Q After purchasing the property from Emelita Santiago, could you please tell the Honorable Court what
youdidwiththatdeedofsale?

A We registered it with the Register of Deeds for the Certificate of Title because at that time when we
boughttheproperty,EmelitaSantiagohaditsubdividedintosix(6)lots,sir.

QIsitourunderstandingthatpriortoyourpurchasethepropertywassubdividedintosix(6)parcels?

AYes,sir.

QCouldyoupleaseinformtheHonorableCourtifyouhaveanybuyersinthesubdivisionofthisproperty
priortoyourpurchase?

AYes,Ihave.

QThissubdivisionofthisproperty,towhatofficewasitbroughtforaction?

ABureauofLands,SanFernando,LaUnion,sir.

Q Now, Mr. Alcantara, at the time that you had this property subdivided by the owner, could you please
inform the Court if there was any claim by any other party opposing the subdivision or claiming the
property?

ANone,sir.

QWhentheDeedofSalewasexecutedandyousaidthatyoupresentedittotheRegisterofDeedsand
afterthesubdivisionalready,whatactiondidtheRegisterofDeedshaveregardingthematter?

ATheyapproveditandregistereditalreadyinsix(6)titles,sir.

QInwhosenames?

http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 8/12
11/21/2016 G.R. No. 114299
AOne(1)titleundermyname,AmadoCruzandDr.Sanchez,sir.

QInitially,Mr.Alcantara,yousaidthatyouarethesolepurchaserofthisentireareaofOneThousandFive
HundredNinetyOne(1,591)SquareMeters.Now,youareinformingthisHonorableCourtthatoneAmado
CruzandoneDr.Sanchezwerealsoissuedtwo(2)titles.Couldyouexplainhowthesetitlescameinto
theirpossession?

AActually,two(2)areourcoowners,sir.

QSo,isitourunderstandingthattheDeedofSalefromEmelitaSantiagoisinfavorofthesetwo(2)Atty.
CruzandDr.Sanchez?

AYes,sir.21

Third,betweentwoinnocentpersons,theonewhomadeitpossibleforthewrongtobedoneshouldbetheonetobeartheresulting
loss.22TheCapaysfiledthenoticeoflispendenswaybackonMarch17,1967butthesamewasnotTRB'stitle.TheCapays
andtheircounselAtty.RamonA.Gonzalesknewin1968oftheextrajudicialforeclosuresaleofthepropertytoTRBandthe
consolidationoftitleinthebank'snamefollowingthelapseoftheoneyearperiodofredemption.Butinthenextfifteen(15)
yearsorso,theydidnotbothertofindoutthestatusoftheirtitleorwhethertheliensnotedontheoriginalcertificateoftitle
were still existing considering that the property had already been foreclosed. In the meantime, the subject property had
undergoneaseriesoftransferstobuyersingoodandforvalue.Itwasnotuntilafterthelandwassubdividedanddeveloped
withthebuyersbuildingtheirhousesontheotherlotswhentheCapayssuddenlyappearedandquestionedtheoccupants'
titles. At the very least, the Capays are guilty of laches. Laches has been defined as the failure or neglect, for an
unreasonableandunexplainedlengthoftime,todothatwhichbyexercisingduediligencecouldnorshouldhavebeendone
earlieritisnegligenceoromissiontoassertarightwithinareasonabletime,warrantingpresumptionthatthepartyentitledto
iteitherhasabandoneditordeclinedtoassertit.23

Verily,theprincipleonprescriptionofactionsisdesignedtocoversituationssuchasthecaseatbar,wheretherehave
beenaseriesoftransferstoinnocentpurchasersforvalue.Tosetasidethesetransactionsonlytoaccommodateaparty
whohassleptonhisrightsisanathematogoodorder.

Independentlyoftheprincipleofprescriptionofactionsworkingagainstpetitioners,thedoctrineoflachesmayfurtherbe
countedagainstthem,whichlattertenetfindsapplicationeventoimprescriptible
actions....24

InDeLaCalzadaCierrasvs.CourtofAppeals,25weheld:

Whileitistruethatunderthelawitistheactofregistrationofthedeedofconveyancethatservesastheoperative
acttoconveythelandregisteredundertheTorrensSystem(DavaoGrains,Inc.vs.IntermediateAppellateCourt,
171SCRA612),thepetitionerscannotinvokesaiddictumbecausetheiractiontorecoverLot4362isbarredby
theequitabledoctrineoflaches.

TheactofregisteringtheconveyancetoRosendowasconstructivenoticetothewholeworldofthefactofsuch
conveyance(HeirsofMariaMarasiganvs.IntermediateAppellateCourt,152SCRA253).

Butthepetitioners'complainttorecoverthetitleandpossessionofLot4362wasfiledonlyonJuly21,1981,twelve(12)
yearsaftertheregistrationofthesaletoRosendo.Thepetitionersfailedandneglectedforanunreasonablylongtimeto
asserttheirright,ifany,tothepropertyinRosendo'spossession.

Beingguiltyoflaches,theCapayscannotinvoketherulinginVillasorvs.CamonLevinBassandDirectorofLandsvs.Reyes26tothe
effectthatentryofthenoticeoflispendensinthedaybook(primaryentrybook)issufficienttoconstituteregistrationandsuch
entryisnoticetoallpersonsofsuchadverseclaim.Certainly,itismostiniquitousfortheCapayswho,aftersleepingontheir
rightsforfifteenyearstoassertownershipoverthepropertythathasundergoneseveraltransfersmadeingoodfaithandfor
valueandalreadysubdividedintoseverallotswithimprovementsintroducedthereonbytheirowners.

Inthesamevein,thecasescitedbytheCapaysintheirfirsttwo(2)assignmentoferrors,donothelpthemany,asthetransfereesin
saidcaseswerenotinnocentpurchasersforvalueandingoodfaith.InTuazonvs.Reyesand
Siochi, 27wherethelandinvolvedthereinwassoldbyPetroniloDavidtoVicenteTuazon,itwaswithadeedcontainingthe
recitalthatthelandwasindisputebetweenthevendorandRobertoSiochi.Tuazon,whowasmerelysubrogatedtotherights
ofthevendorwasawareofthedisputeand,furthermore,Daviddidnotwarrantthetitletothesame.InRiveravs.Moran, 28
Riveraacquiredinterestinthelandbeforethefinaldecreewasenteredinthecadastralproceedings.Rivera,thetransferee,
wasawareofthependinglitigationand,consequently,couldnothavebeenconsideredapurchaseringoodfaith.Similarly,in
Atun,etal.vs.Nuez,etal.29andLarozavs.Guia, 30thebuyersofthepropertyatthetimeoftheiracquisitionknewofthe
existenceofthenoticeoflispendens.Incontrasttothecitedcases,thenonbankrespondentsinthecaseatbaracquired
theirrespectiveportionsofthelandwithcleantitlefromtheirpredecessorsininterest.

II

http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 9/12
11/21/2016 G.R. No. 114299
WecomenowtoTRB'sliabilitytowardstheCapays.

TheBankunconvincinglytriestowashitshandsoffthepresentcontroversy,andattemptstoshifttheblameontheCapays,thus:

xxxxxxxxx

23.ThepetitionerBank,duringallthetimethatitwasholdingthetitleforoverfourteen(14)yearsthattherewasnolegal
impedimentforittosellsaidproperty,CentralBankregulationsrequirethatrealpropertiesofbanksshouldnotheheldfor
morethanfive(5)years:

24.ThefaultoftheRegisterofDeedsinnotcarryingovertheNoticeofLisPendenstothenewtitleofthepetitionerBank
shouldnotbeabsorbedbythelatterconsideringthatinallgoodfaith,itwasnotawareoftheexistenceofsaidannotation
during all the time that said title was in its possession for almost fourteen (14) years before the property was sold to
EmelitaG.Santiago....31

TRB concludes that "(t)he inaction and negligence of private respondents allowing ownership to pass for almost 15 years constitute
prescriptionofactionand/orlaches."32

Sec.25oftheGeneralBankingAct, 33providesthatnobank"shallholdthepossessionofanyrealestateundermortgageor
trust,deed,orthetitleandpossessionofanyrealestatepurchasedtosecureanydebtduetoit,foralongerperiodthanfive
years."TRB,however,admitshodingontotheforeclosedpropertyfortwelve(12)yearsafterconsolidatingtitleinitsname.
Thebankis,therefore,estoppedfrominvolvingbankinglawsandregulationstojustifyitsbelateddispositionoftheproperty.It
cannotbeallowedtohidebehindthelawwhichititselfviolated.

TRB cannot feign ignorance of the existence of the lis pendens because when the property was foreclosed by it, the notice of lis
pendenswasannotatedonthetitle.ButwhenTCTNo.T6595inthenameoftheCapayspouseswascancelledaftertheforeclosure,
TCTNo.T16272whichwasissuedinplacethereofinthenameofTRBdidnotcarryoverthenoticeoflispendens.

We do not find the Capays guilty of "inaction and negligence" as against TRB. It may be recalled that upon the commencement of
foreclosureproceedingsbyTRB,theCapaysfiledanactionforprohibitiononSeptember22,1966againsttheTRBbeforetheCFIto
stoptheforeclosuresale.Failinginthatattempt,theCapaysfiledasupplementalcomplaintfortherecoveryoftheproperty.Thecase
reachedthisCourt.PrescriptionorlachescouldnothaveworkedagainsttheCapaysbecausetheyhadpersistentlypursuedtheirsuit
againstTRBtorecovertheirproperty.

Ontheotherhand,itisdifficulttobelieveTRB'sassertionthatafterholdingontothepropertyformorethanten(10)years,itsuddenly
realizedthatitwasactinginviolationoftheGeneralBankAct.WhatisapparentisthatTRBtookadvantageoftheabsenceofthenotice
oflispendens at the back of their certificate of title and sold the property to an unwary purchaser. This notwithstanding the adverse
decisionofthetrialcourtandthependencyofitsappeal.TRB,whosetimingindeedsmacksofbadfaith,thustransferredcausedthe
propertywithoutthelispendensannotatedonitstitletoputitbeyondtheCapays'reach.Clearly,thebankactedinamannercontraryto
morals,goodcustomsandpublicpolicyandshouldbeheldliablefordamages.34

Consideringhowever,thatthemortgageinfavorofTRBhadbeendeclarednullandvoidforwantofconsiderationand,consequently,
the foreclosure proceedings did not have a valid effect, the Capays would ordinarily be entitled to the recovery of their property.
Nevertheless,thisremedyisnotnowavailabletotheCapaysinasmuchastitletosaidpropertyhaspassedintothehandsofthirdparties
whoacquiredthesameingoodfaithandforvalue.Suchbeingthecase,TRBisdutyboundtopaytheCapaysthefairmarketvalueof
thepropertyatthetimeitwassoldtoEmelitaSantiago,thetransfereeofTRB.

WHEREFORE,theDecisionoftheCourtofAppealsdatedFrebruary24,1994inCAG.R.CVNo.33920,asmodifiedbyitsResolution
datedAugust10,1994isherebyAFFIRMED.Inaddition,TradersRoyalBankisorderedtopaytheCapaysthefairmarketvalueofthe
propertyatthetimeitwassoldtoEmelitaSantiago.

ThisDecisioniswithoutprejudicetowhatevercriminal,civiloradministrativeactionagainsttheRegisterofDeedsandorhisassistants
thatmaybetakenbythepartyorpartiesprejudicedbythefailureoftheformertocarryoverthenoticeoflispendenstothecertificateof
titleinthenameofTRB.

SOORDERED.

Davide,Jr.,C.J.,Puno,PardoandYnaresSantiago,JJ.,concur.

Footnotes

1 Said piece of land had been registered in the name of the Capay spouses since December 14, 1959 under TCT No. T695
(Exh."J"),andismoreaccuratelydescribedasfollows:

Aparcelofland(Lot27A2Aofthesubdivisionplan(LRC)Psd24029,beingaportionofLot27A2,describedonplanLRC
Psd23299,LRC(GLRO)RecordNo.Civ.Res.211),situatedintheRes.Sec."L",BaguioCity,IslandofLuzon.Boundedonthe
SE.,point3to4byLot27C,(LRC)Psd10738ontheSW.,points4to5,byLot27C(LRC)Psd10738,andpoints5to1byLot
27A2BoftheSubdivisionplanandontheNW.,andNE.,points1to3,byLot27A2Bofthesubdivisionplan....containing
anareaofONETHOUSANDFIVEHUNDREDANDNINETYONE(1,591)SQUAREMETERS,moreorless.

2Exhibit"K."
http://www.lawphil.net/judjuris/juri1999/oct1999/gr_114299_1999.html 10/12