Lim vs. Vera Cruz

The Court held that a notice of lis pendens may be cancelled only upon a proper showing that it is for the purpose of molesting the adverse party or that it is not necessary to protect the rights of the party who caused it to be recorded, and that neither the disproportionality between the litigated portion and the total property, nor the posting of an indemnity bond, nor the pendency of an unregistered deed of sale justifies cancellation. The notice of lis pendens applies only to the particular property subject of the litigation and does not require the annotating party to first prove ownership or interest over the property.

Respondent Pepito M. Vera Cruz had been in possession of a 200-square-meter portion of Lot 4204 in Malolos, Bulacan, since 1960, claiming ownership by virtue of an unregistered deed of sale executed in 1983 by one of the registered co-owners. Petitioners Spouses Henry and Rosario Lim, asserting ownership over the entire 5,432-square-meter property under TCT No. T-16375, filed an ejectment suit against Vera Cruz and obtained a favorable judgment. Claiming that the Lims' title was procured in bad faith and through fraud, Vera Cruz filed a complaint for quieting of title, annulment, and damages against the Lims and caused the annotation of a notice of lis pendens on the Lims' title.

• The Underlying Dispute: Respondent Pepito M. Vera Cruz occupied a 200-square-meter portion of Lot 4204 in Barrio Tikay, Malolos, Bulacan, since 1960. In 1983, Rosary Aldaba, one of the registered co-owners, sold the 200-square-meter portion to Vera Cruz via an unregistered deed of sale.
• The Ejectment Case: Petitioners Spouses Henry and Rosario Lim, claiming ownership over the entire 5,432-square-meter property covered by TCT No. T-16375, filed an ejectment case against Vera Cruz in 1993. The court rendered judgment against Vera Cruz, who elevated the case to the appellate court.
• The Quieting of Title Case: Claiming that the Lims' title was procured in bad faith and fraud, Vera Cruz filed a complaint for quieting of title, annulment, and damages against the Lims before the RTC of Malolos, Bulacan, docketed as Civil Case No. 195-M-94. Vera Cruz caused the annotation of a notice of lis pendens at the back of TCT No. T-16375.
• Motion to Cancel Lis Pendens: The Lims moved to cancel the notice of lis pendens, contending it was intended to molest them and was unnecessary to protect Vera Cruz's rights. The RTC granted the motion on July 22, 1998, ordering the cancellation upon the Lims' posting of a P2,000,000.00 indemnity bond. The RTC reasoned that the 200-square-meter claim was grossly disproportionate to the 5,432-square-meter total area, effectively holding the entire property hostage. The trial court further held that an unregistered deed of sale could not outweigh a certificate of title. The RTC denied Vera Cruz's motion for reconsideration on October 7, 1998.

• Petitioners maintained that the notice of lis pendens was designed solely to molest them and restrict their right of dominion over the entire 5,432-square-meter property, as the litigated portion was only 200 square meters.
• Petitioners argued that the trial court correctly balanced the equities by requiring an indemnity bond to protect respondent's claim while cancelling the annotation, which otherwise unjustly burdened the unclaimed portion of the property.
• Petitioners insisted that because respondent lost the prior ejectment suit, he lost whatever right he had to the 200-square-meter portion, rendering the lis pendens unnecessary to protect his rights.

• Respondent countered that the notice of lis pendens was recorded to protect his right of ownership over the 200-square-meter portion and to avoid the sale of the property pending the execution of judgment in the quieting of title case.

• Procedural Issues: Whether the trial court committed grave abuse of discretion in cancelling the notice of lis pendens.
• Substantive Issues:
  • Whether a notice of lis pendens may be cancelled on the ground that the claimed portion is disproportionate to the total area covered by the title.
  • Whether the posting of an indemnity bond is a valid substitute for a notice of lis pendens.
  • Whether a notice of lis pendens requires proof of ownership or a registered deed of sale for its annotation.
  • Whether a prior loss in an ejectment suit renders a notice of lis pendens unnecessary in a subsequent quieting of title case.

• Procedural: The Court held that the trial court committed grave abuse of discretion in cancelling the notice of lis pendens, as the trial court's reasons did not fall within the exclusive grounds provided by the Rules of Court and jurisprudence for such cancellation.
• Substantive: The Court ruled that a notice of lis pendens applies only to the particular property subject of the litigation, not the entire property covered by the title. Thus, the annotation of the lis pendens on the entire title does not molest the owners' dominion over the unlitigated portions. The Court further held that the Rules allow cancellation of a lis pendens only on two grounds: (1) the notice is for the purpose of molesting the adverse party, or (2) it is not necessary to protect the rights of the party who caused it to be recorded. The Court ruled that an unregistered deed of sale is sufficient basis for annotating a lis pendens; there is no requirement that the applicant prove ownership or interest over the property at the time of annotation, and such annotation does not constitute a collateral attack on the title. The Court also held that an indemnity bond cannot substitute for a lis pendens, as this would defeat the doctrine's purpose of keeping the property within the court's power and preventing alienation pending litigation. Finally, the Court held that the respondent's loss in the ejectment case did not extinguish his right to the lis pendens, because the notice was annotated in the separate quieting of title case, which involves a different cause of action.

• Doctrine of Lis Pendens — Founded upon reasons of public policy and necessity, the doctrine keeps properties in litigation within the power of the court until the litigation is terminated and prevents the defeat of the judgment by subsequent alienation. The Court applied this doctrine to hold that a notice of lis pendens cannot be substituted by an indemnity bond, as allowing such substitution would render the doctrine meaningless.
• Grounds for Cancellation of Lis Pendens — A notice of lis pendens may be cancelled only upon order of the court after a proper showing that: (a) the notice is for the purpose of molesting the adverse party, or (b) it is not necessary to protect the rights of the party who caused it to be recorded. The Court applied this by ruling that neither the disproportionality of the litigated area nor the existence of an unregistered deed of sale falls under these statutory grounds.
• Scope of Lis Pendens — Only the particular property subject of the litigation is covered by the notice of lis pendens. The Court applied this to clarify that the annotation on the title did not hold the entire 5,432-square-meter property hostage, but merely warned prospective buyers of the 200-square-meter portion in dispute.

• "Only the particular property subject of litigation is covered by the notice of lis pendens."
• "For purposes of annotating a notice of lis pendens, there is nothing in the rules which requires the party seeking annotation to show that the land belongs to him. In fact, there is no requirement that the party applying for the annotation of the notice must prove his right or interest over the property sought to be annotated."
• "The doctrine of lis pendens is founded upon reasons of public policy and necessity, the purpose of which is to keep the properties in litigation within the power of the court until the litigation is terminated, and to prevent the defeat of the judgment or decree by subsequent alienation. This purpose would be rendered meaningless if petitioners are allowed to file a bond, regardless of the amount, if substitution of said notice."

• Tan vs. Lantin, 142 SCRA 423 (1986) — Cited as controlling precedent holding that the law does not authorize a judge to cancel a notice of lis pendens pending litigation upon the mere filing of a sufficient bond by the party on whose title the notice is annotated.
• Villanueva vs. Court of Appeals, 281 SCRA 298 (1997) — Followed for the proposition that there is no requirement that a party applying for the annotation of a notice of lis pendens must prove his right or interest over the property.
• Baranda vs. Gustilo, 165 SCRA 757 (1988) — Followed for the principle that a lis pendens serves as a warning to a prospective purchaser or encumbrancer that the property is in litigation and that he purchases at his own risk.
• Somes vs. Government of the Philippine Islands, 62 Phil. 432 (1935-1936) — Followed for the principle that the registration of a notice of lis pendens does not create a right or lien, but merely means that a person purchases or contracts on the property subject to the result of the pending litigation.

• Section 14, Rule 13 of the 1997 Rules of Civil Procedure — Governs the notice of lis pendens and its cancellation. The Court applied this provision to emphasize that cancellation is allowed only on two specific grounds: that the notice is for molesting the adverse party, or that it is not necessary to protect the annotating party's rights.
• Section 77, Presidential Decree No. 1529 (Property Registration Decree) — Reiterates the grounds for the cancellation of a notice of lis pendens before final judgment. The Court applied this provision in tandem with Section 14, Rule 13 to underscore the limited grounds for cancellation.

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