At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking to set aside the Decision^[1] of the Court of Appeals^[2] dated June 30, 1993 in CA-G.R. CV NO. 37452 which affirmed the Decision^[3] dated January 14, 1992 in Civil Case No. 6767 of Branch 2, Regional Trial Court of Legaspi City.

The antecedent facts are as follows:

On December 10, 1964, Felix Lim filed with the then Court of the First Instance of Albay Civil Case No. 2953 against his brother Lim Kok Chiong^[4] and Legaspi Avenue Hardware Company (LACHO) to annul two deeds of sale executed by Lim Kok Chiong in favor of LACHO, covering lots 1557 and 1558 located in the commercial district of Legaspi City, on the ground that the said deeds included the three-fourteenth 3/14 pro-indiviso portion of subject lots which he (Felix Lim) inherited by Will from his foster parents.

During the pendency of Civil Case No. 2953, Felix Lim caused the annotation of notice of lis pendens on the certificates of title of said lots. On May 15, 1969, the trial court dismissed the Complaint, declaring LACHO the absolute owner of lots 1557 and 1558. Consequently, the notice of lis pendens annotated on TCT No. 2580 covering lot No. 1557 was cancelled on May 26, 1969. Aggrieved, Felix Lim appealed the case to the Court of Appeals.

Pending the appeal thus interposed by Felix Lim before the Court of Appeals from such decision below, LACHO sold subject lots to the spouses Roy Po Lam and Josefa Ong Po Lam.

On April 29, 1980, the Court of Appeals came out with its decision in AC G. R. No. 49770-R affirming the appealed decision a quo. Felix Lim presented a motion for reconsideration but to no avail. The motion was denied. Without leave of court, he then resorted to a second motion for reconsideration which was favorably acted upon by the Court of Appeals on March 11, 1981, disposing thus:

"WHEREFORE, the decision of this Court of April 29, 1980, is hereby RECONSIDERED and SET ASIDE and a new judgment rendered:

(1) Setting aside the decision of the lower Court;

(2) Declaring plaintiff the owner of three-fourteenth (3/14) pro indiviso x x x portion of Cadastral Lots Nos. 1557 and 1558 of the Albay Cadastre;

(3) Declaring plaintiff entitled to exercise the right of redemption of said properties which were sold by Lim Kok Chiong to defendant Legazpi Avenue Hardware by returning to said vendee within thirty (30) days from receipt of notice from the Clerk of Court of First Instance of Albay of the records of this case from this Court pursuant to Section 11 of Rule 52 of the Rules of Court, the sum of P20,000.00 plus expenses of the contract and other legitimate payments made by defendants by reason of the sale and such necessary and useful expenses that may have been made on the properties by defendants;

(4) In the event that the parties cannot agree on the amount of expenses of the contract and other legitimate expenses made by reason of the sale and the necessary and useful expenses made by defendant on the properties, the court a quo shall receive the evidence of the parties solely for the purpose of determining said amounts to be paid by plaintiff in addition to the P20,000.00. Pending determination of the said amount and upon payment by plaintiff of the sum of P20,000.00 to defendant within the aforesaid period of thirty (30) days above-mentioned, defendant shall execute an appropriate deed of conveyance in favor of plaintiff of the properties in question without prejudice to the determination of the additional amounts to be paid by plaintiff to defendant. Should defendant refuse or fail to execute said deed of conveyance within thirty (30) days the Court a quo shall order its clerk of court to execute said deed of conveyance.

No pronouncement as to costs.'^[5]

LACHO having failed to appeal therefrom, the aforesaid decision became final and executory.

On November 12, 1981, Lim filed in the same Civil Case No. 2953 a motion to annotate the said Resolution of the Court of Appeals of March 11, 1989 in G.R. No. 44770-R on the certificate of title of the spouses Po Lam. He likewise moved for the issuance of a writ of execution to enforce the said Resolution and for the execution in his favor of a deed of conveyance of the lots litigated upon. However, the said motions were all denied by the trial court in its Order dated February 4, 1982, the decretal portion of which Order reads:

'WHEREFORE, reserving to the party/plaintiff the right to institute an action on whether or not the acquisition of the properties in question by spouses Roy Po Lam and Josefa Ong Po Lam, were made in good faith, or whether in the process the cooperation of the Register of Deeds pave the way for such transfer, the writ of execution issued under and by virtue of the Order dated October 20, 1981 is hereby ordered Quash.

Consequently likewise, the motion filed by the party/plaintiff to have the order of the Court of Appeals annotated TCT Nos. 8102 and 13711 of the Register of Deeds of Legaspi registered in the name of Roy Po Lam and Josefa Ong Po Lam are hereby DENIED for being premature sans a finding of bad faith on the part of the latter; and the motion to require the party/defendant to execute the deed of conveyance or in his stead, the Clerk of Court are hereby DENIED on the ground of impossibility of performance.'^[6]

Instead of an appeal from the said Order, on February 9, 1982 Felix Lim filed with the Regional Trial Court of Legaspi City, Branch 2, the instant case, docketed as Civil Case No. 6767 for reconveyance and annulment of sale against the spouses Roy Po Lam and Josefa Ong Po Lam.

On September 19, 1985, Lim again filed with the trial court in Civil Case 2953, a motion to include spouses Roy Po Lam and Josefa Ong Po Lam as party defendants in the case, as well as a motion to execute the March 11, 1981 Resolution of the Court of Appeals in AC G.R. No. 44770-R. On October 16, 1985, both motions were denied by the trial court and on appeal, in CA G. R. No. 08533-CV, the Court of Appeals upheld the Order of Denial.

On October 29, 1990, Felix Lim assigned all his rights to and interest in subject properties to Jose Lee, (a lessee of a commercial building standing on Lot No. 1557), who since then, has substituted Felix Lim as party plaintiff, now the private respondent.

Meanwhile, in June 1970, after the herein petitioners bought subject lots from LACHO, the former leased the commercial building on Lot 1557 to the herein private respondent, Jose Lee. But the petitioners later lodged against the latter a Complaint for unlawful detainer, docketed as Civil case No. 2687, before the Metropolitan Trial Court of Legaspi City.

On December 19, 1993, the Metropolitan Trial Court of Legaspi City handed down its decision in the said unlawful detainer case, declaring the herein petitioners as the lawful owners of Lot 1557, and disposing:

'WHEREFORE, judgment is hereby rendered: (1) declaring the plaintiffs as lawful owners of, and rightfully entitled to the immediate possession of the leased commercial building and Lot 1557, covered by TCT No. 8102 (formerly TCT 2580) as described in paragraph 2 of the complaint; (2) directing the defendant, his agent, or anyone acting in his behalf, to vacate said leased building and lot, and to restore the actual possession thereof, to the plaintiffs; (3) ordering the defendant to pay directly the plaintiffs the whole rentals which accrued, from October 1981 up to the time he shall have vacated the leased premises, at the rate of P2,500.00 a month, minus the amounts already deposited with the City Treasurer's Office of Legazpi, which amounts are hereby allowed to be withdrawn by the plaintiffs, their counsel or representative; (4) directing the defendant to also pay the plaintiffs the amounts of (a) P2,500.00 and P1,200.00 as exemplary damages and attorney's fees respectively; and (b) the costs of the suit.'^[7]

The aforesaid decision was affirmed by the Regional Trial Court and thereafter, by the Court of Appeals in CA-G.R. No. 12316-SP.

On February 18, 1988, in G. R. No. 84145-55 (Lim vs. Court of Appeals^[8] ), this Court ruled on Felix Lim's appeal from CA-G.R. No. 12316-SP (unlawful detainer case) and from CA G. R. No. 08533-CV (which affirmed the October 16, 1985 Order of the trial court in Civil Case no. 2953) as follows:

"ACCORDINGLY, the decisions appealed from are modified. The portions of the appealed decisions dealing with the March 11, 1981 resolution in AC G.R. No. 44770-R are reversed and set aside and the said resolution is ordered reinstated. The decisions are affirmed in all other respects. Costs against private respondents.

SO ORDERED"^[9]

On January 14, 1992, the Regional Trial Court of Legaspi City decided Civil Case No 6767 to the following effect:

"WITH THE FOREGOING RATIOCINATION AND DEDUCTION, the court hereby DECLARES the defendants spouses Roy Po Lam and Josefa Ong Po Lam as TRANSFEREES PENDENTE LITE, thus they are not purchasers in good faith. They are therefore bound by the decision rendered in AC-G. R. No. 44770-R promulgated on March 11, 1981.

No damages having been proved, no award is made concerning the same.

No pronouncement as to costs.

SO ORDERED."^[10]

The herein petitioners appealed to the Court of Appeals which affirmed the Decision appealed from on June 30, 1990.^[11]

Undaunted, petitioners found their way to this court via the present petition, contending that:

"I - CONTRARY TO ITS EARLIER JUDGMENTS IN CA-G.R. NO. 12316-SP AND AC-G.R. NO. 08533-CV FEBRUARY 18, 1988. THE HONORABLE COURT, IN ITS SUBJECT DECISION, GRAVELY ERRED IN THE CONCLUSION THEREIN THAT '(T)HE MARCH 11, 1981 DECISION' 'WOULD NATURALLY AND LOGICALLY' BE ENFORCEABLE AGAINST DEFENDANT-APPELLANTS. (CA DECISION, JUNE 30, 1993)"^[12]

"II. - THE PRONOUNCEMENT IN LIM VS. COURT OF APPEALS, 188 SCRA 23, 32-34, SUPPORTS THE ADVERTED TWIN JUDGMENTS CA-G.R. No. 12316-SP and AC-G.R. No. 08533-CV AND INVOLVES, NOT THE ISSUE OF 'VESTED RIGHTS IN TECHNICALITIES, BUT THE MORE VITAL AND DECISIVE QUESTION OF CA JURISDICTION TO ALTER ITS EXECUTIRY JUDGMENT OF APRIL 28, 1980."^[13]

"III - THE FATAL ERRORS OF RESPONDENT FELIX LIM, SUBSTITUTED BY JOSE LEE, ARE THAT (1) HIS COMPLAINT, FILED ON DECEMBER 10, 1964 TO DECLARE VOID AND SET ASIDE TWO DEEDS OF SALE COVERING LOTS 1557 AND 1558, EXECUTED BY LIM KOK CHIONG IN FAVOR OF LEGAZPI AVENUE HARDWARE CO. (LACHO), ALLEGEDLY BECAUSE SAID DEEDS INCLUDED HIS 3/14 PRO INDIVISO PORTION THEREOF, WAS DISMISSED BY THE TRIAL COURT UPON FELIX LIM'S MOTION (LIM VS. COURT OF APPEALS, 188 SCRA 25) DESPITE THE MANDATORY RULE ON IMPLEADING AN INDESPENSABLE (sic) PARTY; AND THAT (2) FROM THE CA DECISION THEREON, INSTEAD OF PERFECTING AN APPEAL BY CERTIORARI TO THE SUPREME COURT (SEC. 1, RULE 45). LIM FILED HIS USELESS SECOND MOTION FOE RECONSIDERATION.'^[14]

"III - THERE WAS A GRAVE ERROR, A GRAVE ABUSE OF DISCRETION AND A SERIOUS ANOMALY IN THE LOWER COURT'S APPEALED DECISION ANENT THE SUPPOSED OBITER DICTUM (DECISION IN CIVIL CASE NO, 6767, JAN. 14, 1992, P. 14; FIRST ASSIGNMENT OF ERROR, APPELLANTS' BRIEF, CA-G.R. CV NO. 37452, PP. 14-17; CA DECISION, JUNE 30, 1993; P.8) IN G.R. NO. 68789, NOVEMBER 10, 1986, 145 SCRA 408-418, THE LEGAL EFFECT OF WHICH WAS IGNORED IN THE CA DECISION SOUGHT TO BE NULLIFIED AND SET ASIDE."^[15]

"V - THERE IS NO EVIDENCE OF PETITIONER'S BEING ALLEGEDLY IN BAD FAITH AND TRASNFEREES PENDENTE LITE; NEITHER IS THERE EVIDENCE OF FRAUD."^[16]

Petitioners capitalize on what this Court said in Lim vs. Court of Appeals that they could not be affected by the proceedings held in Civil Case No. 2953 and CA G. R. No. 44770-R, as they are parties-litigants therein. Petitioners overlooked the fact that the said pronouncement was made with an explicit recognition by this court of the pendency then of the present case (Civil Case No. 6767) before Branch 2, Regional Trial Court of Legaspi City, where the good faith or bad faith of petitioners in acquiring subject lots is the very issue. As ratiocinated by the Court of Appeals, when the Supreme Court declared that the March 11, 1981 Resolution cannot affect the herein petitioners, it was referring to the said March 11, 1981 Resolution, without prejudice to the outcome of this litigation commenced by the latter, to whom the right to bring the said action was reserved by the trial court in its Order of February 4, 1982.^[17] Thus, the March 11, 1981 Resolution, coupled with a finding of bad faith on the part of the petitioners in the case at bar, would necessarily make the said March 11, 1981 Resolution enforceable against the petitioners.

The procedural matters questioned by the petitioners in the second and third assigned errors deserve scant consideration, the same having been passed upon by this court in the case of Lim vs. Court of Appeals, on the basis of the following disquisition:

"x x x But one does not have any vested right in technicalities. In meritorious cases, a liberal not literal interpretation of the rules becomes imperative and technicalities should not be resorted to in derogation of the intent of the rules which is the proper and just determination of litigations. Litigations should, as much as possible be decided on their merits and not on technicality, x x x. As has been the constant ruling of this Court, every party-litigant should be afforded the amplest opportunity for the proper and just disposition of his cause free from the constraints of technicalities (Fonseca v. CA, G.R. No. L-36035, 30 August 1988; Hernandez v. Quirtan, G.R. No. L-48457, 29 November 1988, 168 SCRA 99). Furthermore, private respondents failed to raise the issue of failure to comply with the rules. Their failure has the effect of waiver (Republic v. Judge Villanueva, G.R. No. 83333, February 2, 1989, En Banc, Minute Resolution).

The reversal made by respondent Court of its April 29, 1980 decision in AC-G.R. No. 44770-R thru its March 11, 1981 resolution was the result of a thorough deliberation and evaluation of the evidence of the parties. x x x "^[18]

So also, Lim vs. Court of Appeals ruled on the legal effect of the Decision of the City Court of Legaspi City in the unlawful detainer case, which declared that the herein petitioners are the lawful owners of Lot 1557. The ruling in Lim vs. Court of Appeals reinstating the Resolution of the Court of Appeals, dated March 11, 1981, would lead to the inevitable conclusion that this court recognized the finality of the said Resolution declaring Felix Lim as the owner of the 3/14 pro indiviso portion of subject lots and further declaring him (Lim) to be entitled to the exercise the right of redemption of said properties subject, however, to the finding in this case on the good faith or bad faith of the herein petitioners in purchasing the said lots.

What portions then of the March 11, 1981 Resolution were ordered reversed and set aside in the dispositive portion of Lim vs. Court of Appeals? Bearing in mind the pendency of the case before the Regional Trial Court of Legaspi City (which case is intended precisely to determine the validity of petitioners' acquisition of Lots 1557 and 1558), the reversed portions of said Resolution would logically be no other than: 1) the decision of the MTC of Legaspi City declaring the herein petitioners as the lawful owners of the 3/14 undivided portion of Lot 1557; and 2) the declaration of the Court of Appeals in CA 44770 (Civil Case No. 2953) that the herein petitioners are considered buyers in bad faith.

We now look into and resolve the validity of petitioners' acquisition of the lots in dispute. As to Lot 1558, there is no question that they (petitioners) cannot be deemed buyers in good faith. The annotation of lis pendens on TCT No. 2581 which covers Lot 1558, served as a notice to them that the said lot is involved in a pending litigation.^[19] Settled is the rule that one who deals with property subject of a notice of lis pendens cannot invoke the right of a purchaser in good faith. Neither can he acquire better rights than those of his predecessors in interest. A transferee pendente lite stands in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor.^[20] It is thus beyond cavil that the herein petitioners, who purchased Lot 1558 subject of a notice of lis pendens, are not purchasers in good faith and are consequently bound by the Resolution dated March 11, 1981 of the Court of Appeals.

Can petitioners then be treated purchasers in good faith of Lot 1557 covered by TCT No. 2580 considering that the notice of lis pendens thereon had been already cancelled at the time of the sale? We rule in the negative. It is a firmly settled jurisprudence that a purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in good faith in the belief that there was no defect in the title of the vendor.^[21] His mere refusal to believe that such a defect exist, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him innocent purchaser for value, if it develops afterwards that the title was in fact defective, and it appears that he had notice of such defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.^[22]

In the case under consideration, there exist circumstances which should have placed the herein petitioners on guard. As aptly stressed upon by the respondent court, while it is true that when the petitioners purchased Lot 1557, the notice of lis pendens affecting said lot had been cancelled, it could not be denied that such inscription appears on the Transfer Certificate of Title of the said lot together with the cancellation of the notice of lis pendens. This fact coupled with the non-cancellation of the notice of lis pendens on Transfer Certificate of Title No. 2581 covering Lot 1558, should have sufficiently alerted the petitioners vis-a-vis a possible defect in the title of LACHO, especially so that Lots 1557 and 1558 were simultaneously sold to the petitioners in a single deed of sale executed on May 28, 1969.

Then too, considering that Lots 1557 and 1558 are prime commercial lots at the heart of the commercial district of Legaspi City, it is unbelievable that the petitioners who were assisted in purchasing the lots by Atty. Rodolfo Madrid (who during his time was a well-known lawyer of competence in the Province of Albay) would have released the purchase price of 700,000.00 without inquiring into the status of the subject lots. Verily, spouses Roy Po Lam and Josefa Ong Po Lam willfully closed their eyes to the possibility of a defect in the vendor's (LACHO) title. The petitioners, very much aware of the pending litigation affecting the lots under controversy, gambled on the outcome of the litigation. Consequently, they cannot now be permitted to evade the outcome of the risk they assumed.

Premises studiedly considered, the Court is of the ineluctable conclusion, and so holds, that the petitioners, Roy Po Lam and Josefa Ong Po Lam, are transferees pendente lite and therefore, not purchasers in good faith and are thus bound by the Resolution dated March 11, 1981 of the Court of Appeals in AC-G.R. No. 44770-R.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 37452 AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Melo, Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

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^[1] Annex "B", Rollo, pp. 69-89.

^[2] Thirteenth Division, composed of Associate Justices: Serafin V. C. Guingona (ponente), Antonio M. Martinez (chairman), and Eubulo C. Verzola.

^[3] Annex "A", Rollo, pp. 49-68.

^[4] On November 3, 1969, the trial court on motion of Felix Lim dropped the case against him.

^[5] Decision, Rollo, pp. 51-52.

^[6] Decision, Rollo, p. 53.

^[7] Decision, Rollo, p. 54.

^[8] 188 SCRA 23.

^[9] 188 SCRA 23, p. 37.

^[10] Decision, Annex "A", Rollo, p. 68.

^[11] Decision, Rollo, p. 88.

^[12] Petition, Rollo, p. 29.

^[13] Id., p. 34.

^[14] Id., p. 37.

^[15] Id., p. 41.

^[16] Id., p. 44.

^[17] Decision, Annex "B", Rollo, p. 88.

^[18] Lim vs. Court of Appeals, 188 SCRA 23, pp. 33-34.

^[19] Yu vs. Court of Appeals 251 SCRA 509, p.513.

^[20] Id. p. 513 - 514, citing Constantino vs. Espiritu, 45 SCRA 557 [1972], Tuazon vs. Reyes and Siochi, 48 Phil. 844 [1962]; Demontano vs. Court of Appeals, 81 SCRA 287 [1978]; Rivera vs. Moran 48 Phil. 388[1926]; Director of Lands vs. Martin 48 Phil. 140 [1949] .

^[21] Leung Yee vs. F.L. Strong Machinery Co. and Williamson 37 Phil. 644, p. 665.

^[22] Rehabilitation Finance Corporation vs. Lucio Javillonas, et al., 107 Phil. 644, p. 667-668.