Voluntad v. Dizon
REITERATIONFacts
The Antecedents: Petitioners obtained a loan secured by a mortgage over their property. Upon failure to pay, the bank foreclosed the mortgage and became the highest bidder. The bank assigned its rights to respondent-spouses Dizon. Petitioners filed a petition for mandamus to compel the Dizons to render an accounting and to allow them to exercise their right of redemption. A notice of lis pendens was annotated on the property's title. Procedural History: The trial court dismissed the case on the ground of res judicata and ordered the cancellation of the notice of lis pendens. The Court of Appeals reversed this dismissal and remanded the case. The trial court subsequently rendered a decision in favor of petitioners, granting their right to redeem the property. After the judgment became final, a writ of execution was issued but returned unsatisfied as the property was sold to respondent-spouses Reyes. An alias writ was also returned unsatisfied because the Dizons had sold the property to the Reyeses. Petitioners sought a second alias writ against the Reyeses, arguing they were transferees pendente lite. The trial court denied this motion, as did the Court of Appeals. The Petition: The Supreme Court was asked to determine if the Court of Appeals erred in not ordering the issuance of a second alias writ of execution against the Reyeses, who were alleged to be successors-in-interest and transferees pendente lite of the Dizons, and in concluding that the Reyeses were buyers in good faith.
Issue(s)
Whether respondent-spouses Eugenio and Vicenta Reyes, as transferees pendente lite, are bound by the final judgment allowing petitioners to repurchase the property. Whether respondent-spouses Eugenio and Vicenta Reyes are purchasers in good faith despite the circumstances surrounding their purchase.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals affirming the order of the trial court which denied petitioners' motion for a second alias writ of execution against respondent-spouses Eugenio and Vicenta Reyes is REVERSED and SET ASIDE. The case is remanded to the trial court for the immediate issuance of a second alias writ of execution against respondents Eugenio and Vicenta Reyes for the enforcement of the final judgment allowing petitioners to exercise their right to repurchase the property.
Ratio Decidendi
On the issue of transferees pendente lite and purchasers in good faith: The Court held that the circumstances clearly indicated that an examination of the certificate of title and its annotations would have disclosed that the property was involved in a civil action. The annotation of lis pendens, even though subsequently cancelled, should have prompted a prudent purchaser to inquire further into the status of the case. The cancellation of the lis pendens was premature as it occurred before the order of dismissal became final, and an appeal was still pending. The Court reiterated the rule that while a person dealing with registered land may rely on the Torrens Certificate of Title, this protection is lost if the party has actual knowledge of facts and circumstances that would impel a reasonably cautious person to make further inquiry, or if the purchaser has knowledge of a defect or lack of title in their vendor. The Reyeses, by purchasing the property with knowledge of the pending litigation, stood in the place of their vendors, the Dizons, and were bound by the final judgment. Their failure to intervene in the suit meant they were bound by its outcome. On the duty of a prudent purchaser: The Court emphasized that a purchaser of registered land who fails to act with the diligence of a prudent man cannot be considered a purchaser in good faith. The general rule that one can rely on the Torrens title does not apply when there are circumstances that indicate a cloud or vice in the ownership or encumbrances. In such cases, the purchaser is required to investigate further. The Reyeses' failure to investigate despite the annotation of lis pendens and the fact that the cancellation was premature meant they could not claim to be innocent purchasers for value. Their purchase was made with constructive notice of the pending litigation, making them transferees pendente lite and subject to the final judgment.
Main Doctrine
A transferee pendente lite stands exactly in the shoes of the transferor and is bound by any judgment or decree that may be rendered for or against the transferor. A purchaser of registered land who fails to act with the diligence of a prudent man cannot be a purchaser in good faith, especially when the certificate of title contains annotations that should have alerted them to investigate further.