Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Investco, Inc. was the owner of six parcels of land in Quezon City and Marikina. On September 7, 1976, Investco, Inc. entered into a contract to sell these lands to Solid Homes, Inc. for P10,211,075.00. Solid Homes made a down payment and paid several installments, but defaulted on subsequent payments, leaving a balance of P4,300,282.91. Investco, Inc. filed a complaint for specific performance and damages against Solid Homes to recover the outstanding balance and other expenses. Solid Homes counterclaimed for a refund of alleged excess payments and damages. Procedural History: The Regional Trial Court of Rizal, Pasig, Branch 26, ruled in favor of Investco, Inc. in Civil Case No. 40615, ordering Solid Homes to pay the balance of the purchase price, interest, taxes, and attorney's fees. Solid Homes appealed this decision. Separately, Solid Homes filed Civil Case No. 52999 against the Register of Deeds of Marikina, AFP Mutual Benefit Association, Inc. (AFP MBAI), and Investco, Inc., seeking the annotation of a notice of lis pendens on the titles to the property and damages. The trial court in Civil Case No. 52999 ordered the annotation of the lis pendens and awarded damages against both Investco, Inc. and AFP MBAI. AFP MBAI appealed this decision to the Court of Appeals. The Court of Appeals, in CA-G.R. CV No. 27398, reversed the trial court's decision regarding exemplary damages and reduced nominal damages, but affirmed other aspects. In CA-G.R. SP No. 42386, the Court of Appeals dismissed Solid Homes' petition for review, affirming the trial court's order. The Petition: AFP Mutual Benefit Association, Inc. (AFP MBAI) filed a petition for certiorari (G.R. No. 104769) seeking to set aside the Court of Appeals' decision in CA-G.R. CV No. 27398, arguing that the lower court erred in its findings regarding damages and the annotation of the lis pendens. Solid Homes, Inc. filed a separate petition for certiorari (G.R. No. 135016) seeking to reverse the Court of Appeals' decision in CA-G.R. SP No. 42386, which dismissed its petition for review. The core issue before the Supreme Court is whether Solid Homes was entitled to the annotation of its notice of lis pendens on the titles of the property, which had been sold by Investco, Inc. to AFP MBAI, and whether AFP MBAI was a buyer in bad faith. The petitions were consolidated for joint decision.
Issue(s)
Whether Solid Homes is entitled to the annotation of its notice of lis pendens on the titles of Investco, Inc. and AFP MBAI in relation to Civil Case No. 40615. Whether AFP MBAI is a buyer in good faith and for value. Whether the Court of Appeals erred in holding that Civil Case No. 40615 involved title to or possession of the property, thus warranting a lis pendens annotation.
Ruling
The Supreme Court GRANTED the petition in G.R. No. 104769, SET ASIDE the Court of Appeals' decision, dismissed Solid Homes' complaint, ordered the cancellation of the notice of lis pendens, and ordered Solid Homes to pay AFP MBAI attorney's fees. The petition in G.R. No. 135016 was DENIED for lack of merit. The Court ruled that the Register of Deeds correctly denied the annotation of the notice of lis pendens.
Ratio Decidendi
On the entitlement to annotation of lis pendens: The Court held that the action filed by Investco, Inc. against Solid Homes (Civil Case No. 40615) was primarily for specific performance and collection of a sum of money, representing unpaid installments on the purchase price. This type of action is in personam, meaning it is directed against a specific person and does not directly involve the title to or possession of real property. Therefore, the annotation of a notice of lis pendens was not proper. The Court emphasized that a notice of lis pendens is an incident to an action that affects the title to or possession of real property, serving as a warning to third parties, and cannot be the subject of a principal action itself. The Court disagreed with the Court of Appeals' interpretation that the case involved rescission or title to the property, noting that such claims were not present in Investco's complaint and that specific performance and rescission are alternative remedies, not to be pursued simultaneously. On AFP MBAI as a buyer in good faith: The Court found that AFP MBAI was a buyer in good faith and for value. AFP MBAI conducted thorough due diligence, including verifying the titles with the Register of Deeds, which showed no liens or encumbrances. They also inquired from other government offices and found no pending cases involving the property. The titles issued to AFP MBAI were clean. The Court reiterated the rule that persons dealing with property covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title, absent any circumstance that would excite suspicion. Solid Homes failed to present evidence of bad faith on the part of AFP MBAI, despite alleging conspiracy between Investco, Inc. and AFP MBAI. On the nature of Civil Case No. 40615: The Court clarified that the nature of an action is determined by the allegations in the complaint. Investco's complaint in Civil Case No. 40615 was for collection of sums of money and damages, specifically unpaid installments. This is an action in personam, not an action in rem or one that directly affects title to or possession of real property. Consequently, the doctrine of lis pendens was inapplicable. The Court also noted that even Solid Homes' counterclaim was for sums of money (excess payments and damages), which did not convert the action into a real action involving title or possession. The Register of Deeds' denial of the annotation was therefore correct.
Main Doctrine
A notice of lis pendens may be annotated only when the action or proceeding affects the title to or possession of real property. An action for collection of a sum of money, even if it arises from a contract to sell real property, is an action in personam and does not warrant the annotation of a notice of lis pendens. A buyer who verifies the titles with the Register of Deeds and finds no annotations of liens or encumbrances, and receives no adverse information from other government offices, is considered a buyer in good faith and for value.