AFP Mutual Benefit Association, Inc. vs. Solid Homes, Inc.

A purchaser in good faith and for value is one who buys property without notice of another's claim and pays a full and fair price; provisional pencil markings on titles are ineffective as annotations of lis pendens which require proper formal annotation to protect the integrity of the Torrens system; and only the prevailing party, not the losing party, may move for execution of a final judgment as a matter of right.

The dispute originated from a 1976 Contract to Sell between Investco, Inc. and Solid Homes, Inc. covering real property in Quezon City and Marikina. Solid Homes, Inc. defaulted on its installment payments for over fourteen years. Investco, Inc. extra-judicially rescinded the contract and subsequently sold the property absolutely to AFP Mutual Benefit Association, Inc. (AFPMBAI), which paid in full and registered clean titles in its name. Meanwhile, Solid Homes, Inc. had filed Civil Case No. 40615, an action for collection of sums of money, against Investco, Inc., and attempted to annotate a notice of lis pendens on the titles through pencil markings.

• In September 1976, Investco, Inc. and Solid Homes, Inc. entered into a Contract to Sell covering property in Quezon City and Marikina, wherein Investco agreed to sell its "rights and interest" in the property (then registered in the names of Angela Perez Staley and Antonio Perez) to Solid Homes, Inc.
• The contract stipulated that Investco would first cause the titles to be transferred to its name, after which Solid Homes would pay in installments; upon full payment, Investco would execute a Deed of Absolute Sale and Solid Homes would execute a mortgage in favor of Investco.
• On March 21, 1979, titles to the Marikina property were issued in the name of Investco, Inc., but Solid Homes, Inc. never completed the installment payments, defaulting since 1981/1982.
• Solid Homes, Inc. failed to register its contract to sell with the Register of Deeds pursuant to Presidential Decree No. 1529.
• Investco, Inc. extra-judicially rescinded the contract due to Solid Homes' default and subsequently sold the property absolutely to AFPMBAI, which paid the full purchase price.
• AFPMBAI caused the transfer of titles to its name; the transfer certificates of title were clean and free from any encumbrance or annotation.
• Civil Case No. 40615 filed by Investco against Solid Homes was categorized as an action for collection of sums of money, damages, and attorney's fees, not an action affecting title to or possession of real property.
• Solid Homes, Inc. attempted to annotate a notice of lis pendens on the titles through "provisional" pencil markings.
• The subject property is a 35.53-hectare lot located at the outskirts of Marikina City, adjacent to Loyola Grand Villa Subdivision, Ayala Heights Subdivision, and Capitol Golf and Country Club, Quezon City, which had significantly appreciated in value over fourteen years.

• Solid Homes, Inc. argued that AFPMBAI was not a purchaser in good faith and for value because the notice of lis pendens annotated on the vendor's title must be deemed carried over to AFPMBAI's titles, making AFPMBAI a transferee pendente lite subject to the litigation's final result.
• It contended that the Court erred in failing to appreciate Solid Homes, Inc.'s cause of action in Civil Case No. 52999.
• It argued that the Court erred in denying its petition (G.R. No. 135016) to set aside the trial court's order denying its motion to execute the decision in Civil Case No. 40615.
• It maintained that when the decision became final, there was no one to move for execution since Investco had absconded and resold the property to AFPMBAI.
• It implied that the transaction constituted a double sale.

• AFPMBAI (substituted for Investco as prevailing party) maintained that it is a buyer in good faith and for value having purchased the property without notice of any claim and paid full price.
• It argued that pencil markings are not valid annotations of lis pendens and that Civil Case No. 40615 (collection of money) did not affect title to real property, hence no valid lis pendens could be annotated.
• It asserted that the transaction between Investco and Solid Homes was merely a contract to sell that was automatically rescinded due to default, while its transaction with Investco was an absolute sale.
• It contended that Solid Homes, Inc., as the losing party, lacked legal personality to move for execution of the judgment.

• Procedural Issues:
  • Whether Solid Homes, Inc., as the losing party in Civil Case No. 40615, has the legal personality to file a motion for execution of the final judgment.
  • Whether the Court erred in denying Solid Homes, Inc.'s petition to set aside the trial court's order denying its motion for execution.
• Substantive Issues:
  • Whether AFPMBAI qualifies as a purchaser in good faith and for value.
  • Whether the notice of lis pendens was validly annotated on the titles issued to AFPMBAI.
  • Whether the transaction between Investco, Inc. and AFPMBAI constitutes a double sale.
  • Whether the contract to sell between Investco, Inc. and Solid Homes, Inc. was validly rescinded.

• Procedural:
  • The Court held that Solid Homes, Inc., being the losing party in Civil Case No. 40615, has no personality to move for execution of the final judgment. Only the prevailing party (Investco, Inc.) is entitled as a matter of right to a writ of execution under Rule 39, Section 1 of the Revised Rules of Court. The trial court correctly denied Solid Homes, Inc.'s motion for execution. It is not the option of the losing party to compel the winning party to take the judgment.
• Substantive:
  • AFPMBAI is a buyer in good faith and for value because it purchased the property without notice that some other person has a right to or interest in such property and paid a full and fair price for the same. The transfer certificates of title conveyed to AFPMBAI were clean and without any encumbrance.
  • Pencil markings, even if admitted to be provisional, are not an accepted form of annotating a notice of lis pendens. The law requires proper annotation, not provisional annotation. Allowing provisional annotations would erode the indefeasibility of the Torrens system.
  • There was no valid annotation on the titles issued to AFPMBAI because Civil Case No. 40615 was an action for collection of sums of money and did not involve titles to, possession, or ownership of the subject property or an interest therein. Therefore, it was not a proper subject of a notice of lis pendens under Rule 13, Section 14 of the Revised Rules of Court.
  • There is no double sale. The transaction between Investco and Solid Homes was a contract to sell that was automatically rescinded due to Solid Homes' failure to pay, while the transaction between Investco and AFPMBAI was an absolute sale that culminated in the registration of deeds and issuance of certificates of title.
  • In a contract to sell, payment of the price is a positive suspensive condition; failure to pay is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective, resulting in automatic rescission without need for judicial action.

• Purchaser in Good Faith and for Value — Defined as one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of purchase or before notice of the claim. The Court applied this to protect AFPMBAI who relied on the face of clean certificates of title.
• Notice of Lis Pendens — Proper only in actions affecting the title or right of possession of real property, or an interest therein, such as actions to recover possession, quiet title, remove clouds, or partition. Requires proper formal annotation; pencil markings are insufficient and would undermine the Torrens system.
• Contract to Sell vs. Contract of Sale — In a contract of sale, title passes to the vendee upon delivery; in a contract to sell, ownership is reserved in the vendor and does not pass until full payment. Payment in a contract to sell is a positive suspensive condition, and failure to pay results in automatic rescission, not breach of contract.
• Torrens System — Guarantees the integrity and indefeasibility of land titles. Purchasers are not required to go beyond what appears on the face of the certificate, and public confidence in the system must be protected by ensuring that valid acquisitions are not disturbed by informal or provisional annotations.
• Execution of Final Judgments — Once a judgment becomes final and executory, only the prevailing party can have it executed as a matter of right, and the issuance of a writ of execution becomes a ministerial duty of the court. The losing party cannot compel execution.

• "We have defined a purchaser in good faith and for value as one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property."
• "If we allow provisional annotations as a valid form of annotation of notice of lis pendens, we would be eroding the very value of the indefeasibility of the torrens system."
• "The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized."
• "All persons dealing with property covered by the torrens certificate of title are not required to go beyond what appears on the face of the title."
• "In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price."
• "Once a judgment becomes final and executory, the prevailing party can have it executed as a matter of right, and the issuance of a writ of execution becomes a ministerial duty of the court."

• Diaz-Duarte v. Ong — Cited for the definition of a purchaser in good faith and for value.
• Solid Homes, Inc. v. Court of Appeals (235 SCRA 299 [1994]) — Cited for the categorization of Civil Case No. 40615 as an action for collection of sums of money, not affecting title to real property.
• Salazar v. Court of Appeals — Cited for the distinction between a contract to sell and a contract of sale.
• Traders Royal Bank v. Court of Appeals and Capay v. Santos — Cited regarding the protection of the integrity and indefeasibility of the Torrens system.
• Vda. de Medina v. Cruz — Cited for the principle that persons dealing with Torrens titles need not go beyond the face of the certificate.
• Buaya v. Stronghold Insurance Co., Inc. — Cited for the rule that only the prevailing party can have a final judgment executed as a matter of right.
• Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc. — Cited for the doctrine that failure to pay in a contract to sell results in automatic rescission.
• Gochan v. Young and Villanueva v. Court of Appeals — Cited for the proper subjects of a notice of lis pendens.
• Alberto v. Court of Appeals — Cited for the rule that lis pendens applies to proceedings directly affecting title to land.

• Presidential Decree No. 1529 (Property Registration Decree) — Relevant to the registration of contracts to sell and the indefeasibility of registered titles.
• Rule 13, Section 14, Revised Rules of Court — Governs the annotation of notice of lis pendens in actions affecting title or right of possession of real property.
• Rule 39, Section 1, Revised Rules of Court — Provides that the prevailing party may file a motion for execution of a final judgment as a matter of right.

• Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ. — Concurred in the resolution denying the motion for reconsideration without issuing separate opinions.