FACTS:

The case involves a challenge to the rulings of the Court of Appeals which annulled the trial court's order of annotation of a notice of lis pendens on Transfer Certificate Title (TCT) No. T-77739, registered under the names of respondent-spouses Armando and Angela Garana. The notice of lis pendens was sought by the heirs of Manuel Uy Ek Liong to bind properties subject to an action for specific performance with damages. On October 6, 1993, the notice of lis pendens was entered in the primary entry book of the Register of Deeds of Lucena City, except for TCT No. T-72029, which was missing. The original of TCT No. T-72029 was later found in the custody of a clerk at the register of deeds. The Spouses Garana purchased the land covered by TCT No. T-72029 on November 7, 1994, after finding out that the adverse claim annotated on the title had been cancelled. RD Lucena cancelled TCT No. T-72029 and issued TCT No. T-77739 under the names of the Spouses Garana. The heirs of Manuel Uy requested for the annotation of the notice of lis pendens on the new title, which was opposed by the Spouses Garana and Bank of the Philippine Islands (BPI). The trial court ruled in favor of RD Lucena, but the Court of Appeals reversed the ruling. The main issue before the Supreme Court is whether the entry of a notice of lis pendens in the primary entry book serves as notice to third persons of the claim against a registered land.

ISSUES:

1. Whether an encumbrance that is recorded in the Register of Deeds' primary entry book or day book but not annotated on the certificate of title is valid and binding.

2. Whether the prior registration of an involuntary instrument, such as a notice of attachment, prevails over the subsequent registration of a sale.

3. Whether the notation of an involuntary instrument in the primary entry book or day book of the Register of Deeds amounts to valid registration.

4. Whether the Spouses Garana and BPI are considered innocent purchasers for value.

5. Whether the notice of lis pendens of the heirs of Manuel Uy should be annotated on TCT No. T-77739.

6. Whether the defendants can raise the defense of the doctrine of indefeasibility of title.

RULING:

1. The Court ruled that an encumbrance that is recorded in the Register of Deeds' primary entry book or day book but not annotated on the certificate of title is valid and binding. The mere recording of the involuntary instrument in the primary entry book or day book is sufficient to bind the registered land and affect third persons dealing with it. This ruling is based on the provisions of Act No. 496 and subsequent cases that have interpreted and reiterated these provisions. The duty to annotate the encumbrance rests with the Register of Deeds and not with the registrant.

2. Yes, the prior registration of an involuntary instrument, such as a notice of attachment, prevails over the subsequent registration of a sale. The Court held that the person who first registered his instrument has a superior right over the others, even if the notice of attachment was not annotated on the certificate of title. The earlier registered notice of attachment takes precedence over the subsequent sale.

3. Yes, the notation of an involuntary instrument in the primary entry book or day book of the Register of Deeds amounts to valid registration. Such registration constitutes notice to all persons dealing with the registered land from the date of entry or notation.

4. No, the Spouses Garana and BPI are not considered innocent purchasers for value. The Spouses Garana were aware of a prior adverse claim on the property and failed to investigate further before proceeding with the purchase. BPI, on the other hand, should have conducted proper due diligence and discovered the existing adverse claim. Their failure to investigate beyond the face of the certificate of title negated their claim of being innocent purchasers for value.

5. Yes, the notice of lis pendens of the heirs of Manuel Uy should be annotated on TCT No. T-77739. The recording of the notice of lis pendens in RD Lucena's primary entry book amounted to a valid registration, serving notice to all persons, including the Spouses Garana and BPI. The court ruled that the notice should be annotated to uphold the heirs' registered right and to make the entry consistent with the inscription on TCT No. T-77739, which was derived from TCT No. T-72029.

6. No, the defendants cannot raise the defense of the doctrine of indefeasibility of title. The Spouses Garana and BPI did not act in good faith and disregarded glaring facts and circumstances that should have prompted them to inquire beyond the four corners of TCT No. T-72029.

PRINCIPLES:

• Registration in the primary entry book or day book of the Register of Deeds is sufficient to bind the registered land and affect third persons dealing with it, even if the encumbrance is not annotated on the certificate of title.

• Involuntary instruments, such as attachments, liens, and notices of lis pendens, do not require the presentation and annotation on the owner's duplicate title.

• The duty to annotate encumbrances on the certificate of title rests with the Register of Deeds.

• The person who first registers his instrument has a superior right over others.

• The notation of an involuntary instrument in the primary entry book or day book of the Register of Deeds constitutes valid registration.

• The presence of anything that excites or arouses suspicion should prompt a buyer to investigate the title further.

• An innocent purchaser for value is one who buys the property without notice of any adverse claim or defect in the title.

• Section 70 of PD No. 1529 - An adverse claim may only be cancelled at the instance of the trial court or the claimant.

• Banks are expected to exert a higher degree of diligence, care, and prudence in handling real estate transactions.

• The notice of lis pendens serves as a valid registration and serves notice to all persons, including subsequent buyers.

• The doctrine of indefeasibility of title does not protect those who act in bad faith or disregard relevant facts.