Yu v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Rosario Alzul purchased four lots on installment from B.E. San Diego, Inc. She later assigned her rights to petitioner Wilson Yu under a Conditional Deed of Assignment and Transfer of Rights. B.E. San Diego, Inc. then issued a new Contract to Sell in favor of petitioner. Private respondent Alzul filed a suit for rescission of the deed of assignment due to petitioner's failure to pay the balance, which was decided in her favor and became final. During the pendency of this case, private respondent caused the annotation of a Notice of Lis Pendens on the original copy of the certificate of title. Subsequently, B.E. San Diego, Inc. rescinded and cancelled petitioner's contract and sold the lots to private respondent-spouses Carlos and Sandra Ventura. The spouses received their owner's duplicate copies of the titles bearing the lis pendens annotation. Procedural History: Private respondent-spouses filed an action for Quieting of Title with prayer for Cancellation of Annotation and Damages. The Regional Trial Court ruled in their favor. However, the Court of Appeals reversed this decision, declaring the titles issued to the spouses null and void and reinstating title in the name of B.E. San Diego, Inc. with the lis pendens annotation in favor of Rosario Alzul. Petitioner sought to nullify the Court of Appeals' decision. The Petition: Petitioner argued that the notice of lis pendens was not annotated on the owner's duplicate copy of the titles, only on the original on file with the Register of Deeds. He contended that this lack of annotation on the owner's copy meant they had no actual notice and were buyers in good faith. Petitioner also argued that B.E. San Diego, Inc. was not bound by the rescission suit decision as it was not a party, thus it could sell the lots.
Issue(s)
Whether the annotation of a notice of lis pendens on the original copy of the certificate of title on file with the Register of Deeds, without annotation on the owner's duplicate copy, constitutes sufficient constructive notice to subsequent purchasers. Whether B.E. San Diego, Inc., not being a party to the rescission suit, was bound by the decision therein and consequently barred from selling the lots.
Ruling
The Supreme Court denied the petition for lack of merit, affirming the decision of the Court of Appeals. The Court held that the annotation of a notice of lis pendens on the original copy of the certificate of title is sufficient to constitute constructive notice to subsequent purchasers. It also found that both the respondent-spouses and B.E. San Diego, Inc. were bound by such notice.
Ratio Decidendi
On the sufficiency of the notice of lis pendens: The Court reiterated that the annotation of a notice of lis pendens on the original copy of the certificate of title on file with the Register of Deeds is sufficient to constitute constructive notice to purchasers or other persons subsequently dealing with the same property. It is not required that the annotation be inscribed upon the owner's copy because such copy is often unavailable or in the hands of an adverse party. The Court cited previous rulings, such as Jamora vs. Duran and Rivera vs. Tirona, which established that entry in the Day Book of the Register of Deeds for involuntary registrations like lis pendens is sufficient notice to all persons of an adverse claim. The Court emphasized that once annotated on the original, the notice serves as an announcement to the whole world that the property is under litigation, warning that any acquisition is at the acquirer's own risk. Transferees pendente lite stand in the shoes of their transferors and are bound by the outcome of the litigation, their certificates of title affording no special protection in this regard. Therefore, third persons, including the respondent-spouses, should examine the original titles on file with the Register of Deeds, not just the owner's duplicate copy, to be aware of pending litigations annotated therein. On whether B.E. San Diego, Inc. was bound by the rescission suit: The Court found that B.E. San Diego, Inc. was bound by the results of the suit not only due to the constructive knowledge imparted by the notice of lis pendens but also because it had actual knowledge of the transaction between petitioner and private respondent Alzul. The Court stated that even if B.E. San Diego, Inc. was not a party to the suit, it was still bound by the notice of lis pendens. The Court also noted its surprise at petitioner's forceful argument for reversal, given that his rights to the lots had already been finally disposed of in the rescission case.
Main Doctrine
The annotation of a notice of lis pendens on the original copy of the certificate of title on file with the Register of Deeds is sufficient to constitute constructive notice to subsequent purchasers or persons dealing with the property, even if it is not annotated on the owner's duplicate copy. Such annotation serves as a warning that the property is under litigation, and transferees deal with it at their own risk, acquiring no better rights than their predecessors.