In the Philippines, property disputes often involve navigating the complexities of adverse claims and notices of lis pendens. The Supreme Court in Valderama v. Arguelles clarified that a notice of lis pendens does not automatically cancel a prior adverse claim on a property title. This means an individual’s property rights, protected by an adverse claim, are not swept aside simply because a lawsuit (lis pendens) is filed regarding the same property. The court emphasized that both mechanisms serve distinct protective functions and must be independently evaluated.

When Two Claims Collide: Can a Notice of Lis Pendens Nullify an Adverse Claim?

The case revolves around a property dispute where Lourdes Valderama (petitioner) contested the cancellation of an adverse claim on a land title, a claim initially filed by her sister, Conchita Amongo Francia. Sonia and Lorna Arguelles (respondents) sought to cancel the adverse claim after they had filed a complaint for recovery of ownership and physical possession of the property, which led to a notice of lis pendens being annotated on the title. The Regional Trial Court (RTC) initially ordered the cancellation of the adverse claim, a decision that the Court of Appeals (CA) upheld, leading to this appeal to the Supreme Court. At the heart of the legal issue is whether the subsequent filing of a notice of lis pendens effectively nullifies a pre-existing adverse claim on the same property title.

The Supreme Court began its analysis by distinguishing between an **adverse claim** and a **notice of lis pendens**, both of which are involuntary dealings recognized under Presidential Decree No. 1529 (P.D. 1529), also known as the Property Registration Decree. An adverse claim, under Section 70 of P.D. 1529, serves as a warning to third parties that someone is claiming an interest in the property that is adverse to the registered owner. The Court in Flor Martinez v. Ernesto G. Garcia and Edilberto M. Brua, emphasized that adverse claim is:

…a measure designed to protect the interest of a person over a piece of real property, where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act No. 496 (now P.D. No. 1529 or the Property Registration Decree), and serves a warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than that of the registered owner thereof.

A notice of lis pendens, governed by Sections 76 and 77 of P.D. 1529, serves to inform potential buyers or encumbrancers that the property is involved in a court case that could affect its title or possession. It is a notice to the world that a specific property is subject to pending litigation.

The Court highlighted critical differences between the two, primarily that an adverse claim protects a claimant’s rights during a controversy, while a notice of lis pendens protects rights during an action or litigation. Furthermore, adverse claims require a court hearing to determine validity, whereas notices of lis pendens can be cancelled without such a hearing. The Supreme Court clarified that these distinctions are crucial in determining whether one can negate the other.

The respondents heavily relied on the ruling in Villaflor v. Juezan, where the Court appeared to suggest that a notice of lis pendens could supersede an adverse claim. However, the Supreme Court distinguished the facts of Villaflor, noting that in that case, the related civil case was already terminated and had attained finality. In contrast, in Valderama v. Arguelles, the civil case was still pending before the RTC, making the Villaflor precedent inapplicable. This distinction is vital because it underscores that the final resolution of the underlying dispute is a crucial factor.

The Supreme Court found more relevant guidance in the case of Ty Sin Tei v. Dy Piao, which presented a similar issue. In Ty Sin Tei, the Court held that instituting an action and annotating a notice of lis pendens does not invalidate a prior adverse claim on the same title. The Court in Ty Sin Tei emphasized the protective nature of both mechanisms and the right of a claimant to utilize both, stating:

…the action taken by the lower Court in ordering the cancellation of the adverse claim before its validity could he passed upon, is not sanctioned by law.

This earlier ruling emphasized that an adverse claim should only be cancelled after its validity has been properly adjudicated. The Court in Valderama v. Arguelles aligned itself with the principles articulated in Ty Sin Tei, reinforcing the idea that the two remedies are not mutually exclusive but rather complementary.

Building on this principle, the Supreme Court reasoned that an adverse claim constitutes a lien on the property, and its cancellation requires a substantive hearing to determine its validity. The court hearing the petition for cancellation of adverse claim cannot excuse itself from hearing the validity of the said adverse claim unless the subject controversy of the adverse claim is finally settled by another court in a related case. The court emphasized that unless the controversy is settled, the adverse claim remains a lien on the property.

The decision underscored the importance of upholding fair play and justice. It noted that allowing the outright cancellation of an adverse claim based solely on a subsequent notice of lis pendens could lead to unjust outcomes, potentially encouraging parties to avoid annotating a notice of lis pendens if an adverse claim is already in place. Such a scenario could leave the adverse claimant without adequate legal protection. Here’s a comparative table illustrating the key differences:

Feature	Adverse Claim	Notice of Lis Pendens
Purpose	Protects claimant’s rights during a controversy.	Protects claimant’s rights during an action/litigation.
Cancellation	Requires court hearing to determine validity.	Can be cancelled without a court hearing.
Nature	Constitutes a lien on the property.	A mere incident of an action; does not create a lien.

The Supreme Court concluded that the RTC had erred in ordering the cancellation of the petitioner’s adverse claim based merely on the subsequent annotation of a notice of lis pendens. The court reversed the CA’s decision and dismissed the petition for cancellation of the adverse claim.

FAQs

What was the key issue in this case?	The key issue was whether annotating a notice of lis pendens on a property title automatically cancels a prior adverse claim on the same title.
What is an adverse claim?	An adverse claim is a legal notice on a property title, warning third parties of someone claiming an interest or right that could supersede the registered owner’s.
What is a notice of lis pendens?	A notice of lis pendens is a notice that a lawsuit is pending that could affect the title to a piece of property.
Can a notice of lis pendens cancel an adverse claim?	No, according to this ruling, a notice of lis pendens does not automatically cancel a prior adverse claim; each serves a distinct legal purpose.
What did the Supreme Court decide in this case?	The Supreme Court ruled that the lower court erred in ordering the cancellation of the adverse claim based solely on the annotation of a notice of lis pendens.
What case did the court use to support its decision?	The court relied on the principles established in Ty Sin Tei v. Dy Piao, which held that both remedies are not contradictory and can be availed of simultaneously.
What happens if the lawsuit related to the lis pendens is dismissed?	If the related case is dismissed, the adverse claim remains valid until a court determines its validity through a proper hearing.
Why is it important to understand the difference between these two legal tools?	Understanding the difference is crucial for protecting property rights, as each tool serves a distinct purpose in safeguarding claims against a property.

This ruling provides clarity on the interplay between adverse claims and notices of lis pendens, emphasizing that both mechanisms have distinct roles in protecting property rights. It reinforces the principle that an adverse claim cannot be dismissed lightly and requires a proper judicial assessment of its validity. This decision helps ensure that individuals’ property rights are not easily undermined by the mere filing of a lawsuit.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Lourdes Valderama vs. Sonia Arguelles and Lorna Arguelles, G.R. No. 223660, April 02, 2018