Cunanan v. Jumping Jap Trading Corporation
REITERATIONFacts
The Antecedents: Carmencita Fradejas Nemoto is the registered owner of a lot and house in Ayala Alabang Village, Muntinlupa City. Respondent Jumping Jap Trading Corporation (JJTC) claims a superior right to this property based on a prior deed of conditional sale from the same seller, Metropolitan Land Corporation (MLC). JJTC alleged that it had paid a substantial portion of the purchase price, with an agreement that Nobuyasu Nemoto would pay the remainder and reimburse JJTC, while the title would be held by JJTC. However, MLC did not deliver the title to JJTC. Subsequently, MLC executed a deed of absolute sale in favor of Carmencita Nemoto, and a Transfer Certificate of Title (TCT) No. 213246 was issued in her name. Despite demands, the Nemotos failed to reimburse JJTC for its advances. Procedural History: JJTC filed a case (Civil Case No. 01-098) seeking to annul the deed of sale to Carmencita and her title, and to reconvey the property. The Regional Trial Court (RTC) initially dismissed this case and ordered the cancellation of the notice of lis pendens annotated on TCT No. 213246. However, the RTC later reconsidered its dismissal and reinstated the notice of lis pendens. Ultimately, the RTC ruled in favor of JJTC in Civil Case No. 01-098. Meanwhile, Carmencita mortgaged the property to petitioners Isabelita and Carolyn Cunanan. JJTC then filed another case (Civil Case No. 02-189) seeking to nullify this mortgage and the subsequent extra-judicial foreclosure, arguing the mortgage was executed fraudulently and the Cunanans were mortgagees in bad faith due to the pending litigation. The RTC ruled in favor of JJTC, declaring the mortgage void and the Cunanans as mortgagees in bad faith. The Court of Appeals affirmed this decision, finding that the notice of lis pendens was subsisting or had been reinstated at the time of the mortgage and foreclosure. The Petition: Petitioners Isabelita and Carolyn Cunanan are seeking a review of the Court of Appeals' decision affirming the RTC's ruling. They are filing this petition for review on certiorari under Rule 45 of the Rules of Court. The core issue presented is whether the Cunanans are bound by the notice of lis pendens, which was initially ordered cancelled by the RTC but later reinstated. Petitioners argue that they relied on the cancellation of the notice of lis pendens and that the mortgage was executed in good faith. The Supreme Court is asked to determine if the Cunanans, as mortgagees, were in bad faith given the circumstances surrounding the notice of lis pendens and the pending litigation.
Issue(s)
Whether Reuben Protacio is authorized to institute the complaint on behalf of Jumping Jap Trading Corporation. Whether the Cunanans are bound by the notice of lis pendens despite its cancellation by the RTC.
Ruling
The Court affirmed the decision of the Court of Appeals. It held that Reuben Protacio was authorized to file the complaint and that the Cunanans are bound by the notice of lis pendens, rendering them mortgagees in bad faith.
Ratio Decidendi
On the authority of Reuben Protacio: The Court found that Reuben Protacio was authorized to institute the complaint. A certification issued by the majority of the directors clearly indicated his authority to demand and collect the corporation's claims over the property and to initiate legal actions. This authority was deemed broad enough to cover necessary legal actions to protect the respondent's interest, including the execution of the verification and certification against forum shopping. On whether the Cunanans are bound by the notice of lis pendens: The Court held that the Cunanans are bound by the notice of lis pendens. The deed of real estate mortgage was executed on July 20, 2001, three days before the Register of Deeds cancelled the notice of lis pendens on July 23, 2001. Therefore, at the time of execution, the annotation was still subsisting and had not yet been cancelled. Even if the cancellation order was issued, it did not improve the Cunanans' situation because the mortgage deed was executed after the order of dismissal and cancellation was issued but before the order became final and executory, as a motion for reconsideration was filed and subsequently granted. The Court emphasized that a notice of lis pendens is an announcement to the world that a property is in litigation, and anyone acquiring an interest does so at their own risk. The principle that one dealing with Torrens registered property need only rely on the face of the title does not apply when the party has actual knowledge of facts that would impel a reasonably cautious person to inquire further, as was the case here. The Cunanans' knowledge of the pending litigation made them mortgagees in bad faith.
Main Doctrine
A party who acquires an interest in a property subject to an existing notice of lis pendens does so at his own risk, and such acquisition is subject to the outcome of the litigation. Even if the notice of lis pendens is subsequently cancelled, if the cancellation order is not yet final and executory, or if the notice is subsequently reinstated, a party who had actual knowledge of the pending litigation or defect in title may be considered a mortgagee in bad faith.