In a decision with significant implications for real estate transactions, the Supreme Court has ruled that the entry of a notice of lis pendens in the primary entry book of the Register of Deeds serves as notice to third persons, even if it is not annotated on the certificate of title. This ruling protects the rights of those with pending legal claims on a property, ensuring that subsequent buyers or mortgagees are bound by the outcome of the litigation, thus preventing potentially fraudulent transfers of land.
Hidden Claims and Forgotten Entries: When a Clerical Error Changes Everything
The case of Herminia L. Mendoza v. Spouses Armando and Angela Garana and Far East Bank & Trust Co., Inc. revolves around a procedural lapse that had far-reaching consequences. In 1993, the heirs of Manuel Uy Ek Liong sought to register a notice of lis pendens against several land titles, including TCT No. T-72029, due to a pending legal action for specific performance. The notice was duly entered in the Register of Deeds’ primary entry book. However, due to a clerical oversight, the notice was not annotated on the title itself. Later, the Spouses Garana purchased the land, relying on the clean title presented to them, and subsequently mortgaged the property to Far East Bank & Trust Co. (now BPI). The central legal question is whether the unannotated notice of lis pendens, recorded in the primary entry book, is sufficient to bind subsequent purchasers and mortgagees.
The Supreme Court, in resolving this issue, delved into the nature of registration under the Torrens System. The Court distinguished between voluntary and involuntary instruments. Voluntary instruments, such as sales and mortgages, require the presentation of the owner’s duplicate certificate of title for registration. This requirement ensures that the registered owner is aware of and consents to the transaction. However, involuntary instruments, such as attachments and notices of lis pendens, are adverse to the owner’s interests. Therefore, the law does not require the presentation of the owner’s duplicate title. The mere recording of the involuntary instrument in the primary entry book is sufficient to bind the registered land and affect third persons.
The Court underscored the significance of the primary entry book, citing Sections 51, 55, and 56 of Act No. 496 (the early Land Registration Act), which were later carried over into Presidential Decree No. 1529 (the Property Registration Decree). These provisions stipulate that an instrument, once entered in the primary entry book, is deemed registered from the date of such entry. This registration serves as notice to all persons dealing with the registered land from the time of registration. Section 52 of PD No. 1529 states:
Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.
Building on this principle, the Court emphasized that the duty to annotate the notice on the title rests with the Register of Deeds, not the registrant. As the Court articulated in Caviles v. Bautista:
Petitioners paid the corresponding fees for the annotation of the notice of attachment and they had every right to presume that the register of deeds would inscribe said notice on the original title covering the subject property. The register of deeds had the duty to inscribe the notice on the original title. This was not a duty of petitioners. This Court has held that a party which delivers its notice of attachment to the register of deeds and pays the corresponding fees therefor has a right to presume that the official would perform his duty properly.
However, the Court also considered the good faith of the Spouses Garana and BPI. The Court found that the Spouses Garana were not entirely innocent purchasers for value, due to a prior annotation of an adverse claim on the title by the heirs of Manuel Uy. The cancellation of this adverse claim by a third party should have raised suspicions and prompted further investigation. The Court has consistently held that the presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the certificate and to investigate the title of the vendor.
The same degree of diligence was expected of BPI as a banking institution. Banks are expected to exercise a higher degree of care and prudence in handling real estate transactions. Had BPI conducted proper due diligence, it would have discovered the irregularity in the cancellation of the prior adverse claim. The Court in Arguelles v. Malarayat Rural Bank, elucidated this principle:
As a banking institution, BPI is expected to exert a higher degree of diligence, care, and prudence than ordinary individuals in handling its real estate transactions.
Given these considerations, the Supreme Court ruled in favor of the heirs of Manuel Uy, ordering the annotation of the notice of lis pendens on TCT No. T-77739. This decision underscores the importance of the primary entry book as a source of notice in land registration and serves as a reminder to all parties dealing with registered land to exercise due diligence in verifying the title’s history and any potential encumbrances. The Court emphasized the crucial role of the Registers of Deeds, their officers and employees in faithfully observing prudence and conscientiousness in the conduct of their duties, noting that a dependable and reliable registration system is dependent on those involved in the process to diligently perform their roles.
The following table summarizes the Court’s reasoning:
| Issue | Court’s Ruling |
|---|---|
| Effect of entry in primary entry book | Constitutes valid registration and notice to all persons. |
| Duty to annotate on title | Rests with the Register of Deeds, not the registrant. |
| Good faith of purchasers | Spouses Garana and BPI not in good faith due to prior adverse claim and suspicious cancellation. |
FAQs
| What is a notice of lis pendens? | A notice of lis pendens is a legal notice informing the public that a lawsuit is pending that affects the title to or right of possession of a specific piece of real property. It serves as a warning to anyone who may be interested in purchasing or lending money on the property that their rights may be affected by the outcome of the lawsuit. |
| What is the primary entry book (or day book)? | The primary entry book, also known as the day book, is a record kept by the Register of Deeds where all instruments relating to registered land are entered in the order they are received. This book serves as a preliminary record of registration, noting the date, hour, and minute of reception for each instrument. |
| What is the difference between voluntary and involuntary instruments? | Voluntary instruments are transactions that the owner willingly enters into, such as sales, mortgages, and leases. Involuntary instruments, on the other hand, are actions taken against the owner’s will, such as attachments, liens, and notices of lis pendens. |
| What is the significance of registering an instrument in the primary entry book? | Registration in the primary entry book is considered constructive notice to the whole world that a certain claim exists over a property. This means that anyone dealing with the property is presumed to know about the claim, even if it is not annotated on the certificate of title. |
| Who is responsible for annotating instruments on the certificate of title? | The Register of Deeds is responsible for annotating instruments on the certificate of title. Individuals who submit documents for registration and pay the corresponding fees have the right to assume that the Register of Deeds will properly perform their duty. |
| What does it mean to be an innocent purchaser for value? | An innocent purchaser for value is someone who buys property without knowledge of any defects or claims on the title and pays a fair price for it. Such a purchaser is generally protected by law and acquires good title to the property. |
| What is due diligence in real estate transactions? | Due diligence in real estate transactions refers to the reasonable steps a buyer or lender should take to investigate the property and its title before completing the transaction. This includes examining the certificate of title, checking for any annotations or encumbrances, and inquiring about any potential claims or disputes. |
| How does this ruling affect banks and other lending institutions? | This ruling emphasizes the importance of thorough due diligence for banks and lending institutions when dealing with real estate. They are expected to exercise a higher degree of care and prudence in examining titles and investigating potential claims before granting loans or mortgages. |
| What should a buyer do if they find a suspicious cancellation of an adverse claim? | If a buyer encounters a suspicious cancellation of an adverse claim, they should conduct further investigation to determine the validity of the cancellation. This may involve contacting the original claimant, inquiring with the Register of Deeds, or seeking legal advice. |
This case serves as a reminder of the importance of both diligence and integrity in land transactions. It highlights the crucial role of the Register of Deeds in maintaining accurate records and the need for all parties involved to exercise due care in verifying the status of land titles. The ruling ensures that the Torrens system serves its purpose of providing security and stability in land ownership, while also protecting the rights of those with legitimate claims.
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: Mendoza v. Garana, G.R. No. 179751, August 05, 2015