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AFP MUTUAL BENEFIT ASSOCIATION v. CA

FACTS:

The consolidated cases involve an appeal by AFP Mutual Benefit Association, Inc. (AFP MBAI) and Solid Homes, Inc. from decisions of the Court of Appeals. The first case (G.R. No. 104769) pertains to AFP MBAI's appeal from the decision of the Court of Appeals. The second case (G.R. No. 135016) involves Solid Homes' appeal from the decision of the Court of Appeals. The facts of the case begin with Investco, Inc. as the owner of six parcels of raw land in Quezon City and Marikina. On September 7, 1976, Investco, Inc. agreed to sell the six parcels of land to Solid Homes for a total amount payable in installments. The contract included provisions on down payment, semi-annual installments, and interest rates. The contract also stipulated that failure to pay any installment on its due date would result in the entire balance becoming due and demandable. Investco, Inc. was to contribute to clearing the property of occupants and obtaining new titles. The contract was not registered nor annotated on the original titles. Solid Homes made partial payments but eventually stopped making payments after February 19, 1981, leaving a balance of P4,300,282.91 due. Investco, Inc. filed an action for specific performance and damages against Solid Homes. Solid Homes answered and filed a counterclaim. Solid Homes also filed a notice of lis pendens, which was recorded but not actually annotated on the titles in Investco, Inc.'s name.

Investco, Inc. obtained a judgment in its favor against Solid Homes, ordering the latter to pay the balance of the purchase price, transfer taxes, and attorney's fees. The trial court ordered the transmission of the original record to the appellate court due to Solid Home's filing of a notice of appeal. While the appeal was pending, Investco, Inc. offered to sell the property to AFP Mutual Benefit Association, Inc. (AFP MBAI) and provided certified true copies of the titles to AFP MBAI, who verified the titles with the Register of Deeds and found them to be genuine and free from liens or encumbrances. AFP MBAI inspected the property and confirmed that it was undeveloped and had squatter shanties. AFP MBAI agreed to purchase the property and paid the purchase price in installments. Investco, Inc. executed a Deed of Absolute Sale, warranting its good and valid title. AFP MBAI verified the records of the Register of Deeds and found no lis pendens or adverse claims. AFP MBAI completed its payments and the Register of Deeds issued clean titles in AFP MBAI's name. Solid Homes then filed a complaint for annotation of lis pendens and damages against the Register of Deeds, AFP MBAI, and Investco, Inc., seeking to enforce the judgment in their favor against Investco, Inc. and to declare AFP MBAI as a buyer in bad faith.

ISSUES:

  1. Whether Solid Homes is entitled to the annotation of its notice of lis pendens on the titles of Investco, Inc. and AFP Mutual Benefit Association, Inc., in relation to Civil Case No. 40615 of the Regional Trial Court, Pasig, and be bound by the final judgment therein.

  2. Whether the action filed by Investco, Inc. against Solid Homes involves the title to or possession of the subject property, warranting the annotation of the notice of lis pendens on the titles.

  3. Whether the denial of the annotation of the notice of lis pendens by the Register of Deeds of Marikina was proper.

  4. The issue in this case is whether AFP MBAI is a transferee pendente lite of the subject parcels of land and bound by the result of the suit.

RULING:

  1. Solid Homes is not entitled to the annotation of its notice of lis pendens on the titles of Investco, Inc. and AFP Mutual Benefit Association, Inc. The action filed by Solid Homes is actually one for mandamus to compel the Register of Deeds to perform its clear legal duty to annotate the notice of lis pendens. Solid Homes cannot seek the annotation of lis pendens as a principal action for relief because it is merely an incident to a pending lawsuit. A notice of lis pendens serves as a warning to third parties that a property is in litigation, and transactions involving the property are done at their own risk.

  2. The action filed by Investco, Inc. against Solid Homes does not involve the title to or possession of the subject property. The Court of Appeals erred in determining the nature of the action by venturing into speculation and conjecture. Investco's complaint was solely an action for collection of sums of money for unpaid installments on the purchase price of the property, and it did not seek rescission of the contract as an alternative remedy. Therefore, the doctrine of lis pendens is not applicable to this case.

  3. The denial of the annotation of the notice of lis pendens by the Register of Deeds of Marikina was proper as the action was in personam and did not affect the title to or possession of the property.

  4. The Court ruled that AFP MBAI is not a transferee pendente lite and is a buyer in good faith and for value. Thus, AFP MBAI acquired clean and valid titles to the property in question. The Court also ordered Solid Homes, Inc. to pay AFP MBAI attorney's fees and expenses of litigation.

PRINCIPLES:

  • A notice of lis pendens is an announcement to the whole world that a particular property is in litigation, serving as a warning to potential buyers or mortgagees that they acquire an interest in the property at their own risk.

  • An action for the annotation of lis pendens is actually an action for mandamus to compel the Register of Deeds to perform its legal duty to annotate the notice of lis pendens on the titles.

  • The notice of lis pendens is an incidental matter to a pending lawsuit and does not affect the merits thereof. It is intended to warn third parties of the litigation and the potential outcome on the property rights.

  • The nature of an action is determined by the allegations of the complaint.

  • Notice of lis pendens may only be annotated when there is an action or proceeding in court which affects title to or possession of real property.

  • The denial of the annotation of the notice of lis pendens by the Register of Deeds may be appealed to the Commissioner of Land Registration. The Commissioner's resolution is conclusive and binding upon all Register of Deeds, and may be further appealed to the Court of Appeals.

  • All 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. Good faith is presumed, and the burden of proof lies on the party alleging bad faith.

  • The burden of proof rests on the party alleging bad faith on the part of a possessor.

  • A buyer in good faith and for value who acquires titles to a property before a notice of lis pendens is annotated in the titles is not bound by the result of the suit.