Mendoza vs. Spouses Garana

Entry or notation of an involuntary instrument such as a notice of lis pendens in the primary entry book or day book of the Register of Deeds amounts to valid registration and constitutes constructive notice to all persons dealing with the registered land from the date of entry, even without annotation on the certificate of title, provided the registrant has filed the instrument and paid the required fees, as the duty to annotate rests with the Register of Deeds.

The heirs of Manuel Uy Ek Liong, represented by Belen Uy, filed an action for specific performance with damages (Civil Case No. 93-176) against the owners of several parcels of land — including Leovina Jalbuena, the registered owner of TCT No. T-72029 — to compel the owners to sell the properties to them. The dispute arises within the framework of the Torrens System of land registration as governed by PD No. 1529 (the Property Registration Decree), which carried over from Act No. 496 (the Land Registration Act) the distinction between voluntary and involuntary instruments and their respective registration requirements. The Register of Deeds of Lucena City, originally represented by Atty. Alberto Marquez and later substituted by petitioner Herminia Mendoza, is the government official tasked with annotating encumbrances on certificates of title.

On August 16, 1993, Belen Uy, representing the heirs of Manuel Uy Ek Liong, caused the annotation of an adverse claim on TCT Nos. T-72027 through T-72033, including TCT No. T-72029 owned by Leovina Jalbuena. On October 6, 1993, the heirs of Manuel Uy sought the registration of a notice of lis pendens with the Register of Deeds of Lucena City over the same titles, as these were the subject of an action for specific performance with damages (Civil Case No. 93-176) filed to compel the owners to sell the properties to them. After paying the required fees, the notice was entered as Entry No. 56142 in Volume VI, page 241 of the primary entry book at 1:30 p.m. The Register of Deeds, Atty. Alberto Marquez, wrote letters to the respective owners asking them to surrender their owner's duplicate copies for annotation. Jalbuena did not surrender hers.

The Register of Deeds annotated the notice of lis pendens on all affected titles except TCT No. T-72029, whose original was missing from the vault — it was in the custody of Carmelina Rodriguez, a clerk who had processed another transaction involving the title and forgot to return it for annotation. Meanwhile, the adverse claim annotated on August 16, 1993 was cancelled on October 4, 1994, upon the filing of an affidavit by one Bienaflor C. Umali, a person other than Belen Uy or the heirs of Manuel Uy.

Sometime in 1994, the Spouses Armando and Angela Garana began inquiring about Jalbuena's land for a possible purchase. They discovered Belen Uy's adverse claim on the title. Upon learning that this annotation had been cancelled on October 4, 1994, they immediately purchased the land from Jalbuena on November 7, 1994. In accordance with the sale, the Register of Deeds cancelled TCT No. T-72029 and issued TCT No. T-77739 in the Spouses Garana's names. Because the October 6, 1993 notice of lis pendens did not appear on the cancelled title, it was not reflected in the new title either. The Spouses Garana subsequently mortgaged the property to Far East Bank and Trust Company (now Bank of the Philippine Islands) as security for a loan.

The heirs of Manuel Uy later learned that Jalbuena had sold the subject land and that a new title had been issued without reflecting their notice of lis pendens. They notified the Register of Deeds of this procedural lapse and asked for the annotation of the notice of lis pendens on the Spouses Garana's new title. To remedy its oversight, the Register of Deeds, now through petitioner Herminia Mendoza, filed a petition with the trial court to allow annotation of the notice of lis pendens on TCT No. T-77739. The Spouses Garana and BPI opposed, arguing that the annotation was too late and would prejudice them, and that the Spouses Garana were innocent purchasers for value who relied on a clean title. The trial court ruled in favor of the Register of Deeds and ordered the annotation. On appeal, the Court of Appeals reversed, holding that the Spouses Garana were innocent purchasers for value under the Torrens System and that recording in the primary entry book did not operate as notice to third persons.

• Validity of Registration Despite Non-Annotation: Petitioner admitted its own omission to annotate the notice of lis pendens but argued that the entry in the primary entry book already amounted to valid registration, invoking Levin vs. Bass, where the Court ruled that in involuntary registration, entry in the primary book or day book is sufficient notice to all persons of the adverse claim.
• No Prejudice to Registrant: Petitioner maintained that the Register of Deeds' failure to annotate should not prejudice the heirs of Manuel Uy, who had validly undertaken all necessary steps — filing the notice with the Register of Deeds and paying the registration fees — and who had a right to presume that the official would perform his duty properly.
• Binding Effect on Third Persons: Petitioner argued that the existence of a record in the primary entry book amounted to notice to the whole world and should bind all persons dealing with the subject land, including the Spouses Garana and BPI.
• Denial of Innocent Purchaser Status: Petitioner submitted that the Spouses Garana were not innocent purchasers for value because they already knew of Belen Uy's adverse claim before buying the land and only waited for its cancellation before proceeding with the purchase, indicating they knew all along of the heirs of Manuel Uy's claim.

• Innocent Purchaser for Value: The Spouses Garana argued that their reliance on the clean title of TCT No. T-72029 should not diminish their status as innocent purchasers for value, as the notice of lis pendens was not annotated on the title they purchased.
• Prejudice from Late Annotation: The Spouses Garana argued that the annotation was too late and would prejudice them.
• Clean Title for Mortgage: BPI submitted that when the land was mortgaged to them, there was no indication on the title that it was the subject of pending litigation.
• Indefeasibility of Torrens Title: Respondents invoked the doctrine of indefeasibility of titles under the Torrens System, arguing that any person dealing with registered land must be able to safely rely on the correctness of the certificate of title and should not be obliged to go beyond it.

• Validity of Involuntary Registration: Whether the entry of a notice of lis pendens in the primary entry book or day book of the Register of Deeds serves as notice to third persons of the existence of such claim against registered land, even in the absence of an annotation on the certificate of title.
• Innocent Purchaser for Value: Whether the Spouses Garana and BPI were innocent purchasers for value entitled to the protection of the doctrine of indefeasibility of title under the Torrens System.

• Validity of Involuntary Registration: Yes. Entry of an involuntary instrument in the primary entry book or day book amounts to valid registration and constitutes constructive notice to all persons dealing with the registered land from the date of entry, even without annotation on the certificate of title, pursuant to Section 56 in relation to Section 52 of PD No. 1529.
• Innocent Purchaser for Value: No. The Spouses Garana were not innocent purchasers for value because they knew of the prior adverse claim and failed to investigate the suspicious circumstances of its cancellation by a third party. BPI likewise failed to exercise the higher degree of diligence required of banking institutions. Neither could raise the defense of indefeasibility of title having not acted in good faith.

• Validity of Involuntary Registration: The Court traced its doctrine from Villasor vs. Camon (1951) and Levin vs. Bass (1952), decided under Act No. 496. The Court distinguished voluntary from involuntary instruments: voluntary instruments such as sales, mortgages, or leases require the owner's production of his duplicate certificate of title for complete registration (Section 55 of Act No. 496, now Section 53 of PD No. 1529), because the instrument is the wilful act of the owner. Involuntary instruments such as attachments, liens, and notices of lis pendens are adverse to the registered owner, who cannot be expected to provide the necessary documents. For involuntary instruments, the law does not require presentation or annotation on the owner's duplicate or even the original title; mere recording in the primary entry book is sufficient to bind the land and affect third persons. Under Section 56 of Act No. 496 (now Section 56 of PD No. 1529), instruments are deemed registered from the time noted in the primary entry book. Under Section 51 of Act No. 496 (now Section 52 of PD No. 1529), such registration constitutes constructive notice to all persons from the time of registering, filing, or entering. These provisions were carried over into PD No. 1529, so the rulings in Villasor and Levin remain governing. The Court reaffirmed this through Caviles vs. Bautista, Armed Forces and Police Mutual Benefit Association vs. Santiago, and Saberon vs. Ventanilla, consistently holding that entry in the primary entry book amounts to valid registration. The duty to annotate rests with the Register of Deeds, not the registrant, who has a right to presume the official will perform his duty properly. Where neither the registrant nor the buyer is in bad faith, the first to register has a superior right. In this case, the heirs of Manuel Uy filed their notice and paid the fees on October 6, 1993, before the Spouses Garana's purchase on November 7, 1994, so the prior involuntary registration prevails.

• Innocent Purchaser for Value: Unlike the vendees in Caviles and Saberon, the Spouses Garana did not entirely act in good faith. Before the notice of lis pendens was sought on October 6, 1993, Belen Uy had already annotated an adverse claim on August 16, 1993. This was cancelled on October 4, 1994 by Bienaflor C. Umali — a different person, not Belen Uy. The Spouses Garana knew of the adverse claim and bought the land shortly after its cancellation without investigating why a third party had cancelled it or inquiring from Belen Uy. Under Casimiro Development Corporation vs. Mateo, the presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the certificate and investigate. The cancellation of an adverse claim by someone other than the claimant was an irregularity, since under Section 70 of PD No. 1529, an adverse claim may only be cancelled at the instance of the trial court or the claimant. BPI, as a banking institution, was expected to exert a higher degree of diligence, care, and prudence than ordinary individuals and should have discovered this irregularity through proper due diligence. The doctrine of indefeasibility of title cannot be raised by parties who disregarded glaring facts and circumstances that should have prompted inquiry beyond the four corners of the title.

• Involuntary Registration Doctrine — For involuntary instruments (attachment, levy, execution, notice of lis pendens, and the like), mere entry in the primary entry book or day book of the Register of Deeds is sufficient to constitute valid registration and constructive notice to all persons dealing with the registered land, even without annotation on the certificate of title. This contrasts with voluntary instruments (sale, mortgage, lease), which require presentation of the owner's duplicate certificate for complete registration. The duty to annotate rests with the Register of Deeds, not the registrant, who has a right to presume the official will perform his duty properly. Where neither party is in bad faith, the first to register has a superior right. The doctrine was established under Act No. 496 and carried over into PD No. 1529.

• Innocent Purchaser for Value — Duty to Investigate — A buyer is not an innocent purchaser for value when circumstances surrounding the title should have prompted suspicion and further investigation. The presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the certificate and investigate the title of the vendor. A party who disregards glaring facts and circumstances negates the claim of being an innocent purchaser for value and cannot invoke the doctrine of indefeasibility of title.

• Higher Degree of Diligence for Banking Institutions — Banking institutions are expected to exert a higher degree of diligence, care, and prudence than ordinary individuals in handling real estate transactions, and must conduct proper due diligence to discover irregularities in the titles they accept as mortgage security.

• "the law does not require the presentation as well as the annotation of the involuntary instrument on the owner's duplicate title, or even on the original title. 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 passage states the core ratio decidendi distinguishing involuntary from voluntary registration, establishing that entry in the primary entry book suffices for involuntary instruments.

• "a party which delivers its notice of attachment to the register of deeds and pays the corresponding fees therefor has a right to presume that the official would perform his duty properly." — Quoted from Caviles vs. Bautista, this defines the allocation of duty between the registrant and the Register of Deeds, holding that the registrant is not negligent for the Register of Deeds' failure to annotate.

• "the first person to register his instrument has a superior right over the others. Thus, if entry in the primary entry book or day book of the Register Deeds precedes the registration of a sale, such involuntary registration will prevail over the subsequent sale of the land." — This articulates the priority rule for competing claims where neither party is in bad faith, drawn from Saberon vs. Ventanilla.

• "the presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the certificate and to investigate the title of the vendor appearing on the face of said certificate." — Quoted from Casimiro Development Corporation vs. Mateo, this defines the duty to investigate that negates innocent purchaser for value status.

• Villasor vs. Camon, 89 Phil. 404 (1951) — Originating precedent distinguishing voluntary from involuntary registration under Act No. 496; held that mere recording of involuntary instruments in the primary entry book suffices to bind the land and affect third persons. Followed and reaffirmed.

• Levin vs. Bass, 91 Phil. 420 (1952) — Reiterated Villasor; held that entry of an involuntary instrument in the primary entry book serves as adequate notice to all persons of an adverse claim over registered land. Followed and reaffirmed.

• Caviles vs. Bautista, G.R. No. 102648, Nov. 24, 1999 — Applied the doctrine under PD No. 1529; held that the duty to annotate rests with the Register of Deeds, not the registrant, and that the first registrant has a superior right. Followed.

• Armed Forces and Police Mutual Benefit Association vs. Santiago, G.R. No. 147559, June 27, 2008 — Gave preference to a prior registered attachment over a subsequent sale despite non-annotation on the certificate of title. Followed.

• Saberon vs. Ventanilla, G.R. No. 192669, April 21, 2014 — Reapplied Caviles; held that where neither party is in bad faith, the first to register has a superior right. Followed.

• Casimiro Development Corporation vs. Mateo, G.R. No. 175485, July 27, 2011 — Held that suspicious circumstances should prompt a vendee to investigate beyond the certificate. Applied to find the Spouses Garana were not innocent purchasers for value.

• Arguelles vs. Malarayat Rural Bank, G.R. No. 200468, March 19, 2014 — Cited for the principle that banking institutions must exercise a higher degree of diligence in real estate transactions. Applied to BPI.

• Section 52, PD No. 1529 (Property Registration Decree) — Provides that every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument, or entry affecting registered land, if registered, filed, or entered in the office of the Register of Deeds, constitutes constructive notice to all persons from the time of such registering, filing, or entering. Corresponds to Section 51 of Act No. 496. Applied to hold that entry of the notice of lis pendens in the primary entry book constituted constructive notice to the Spouses Garana and BPI.

• Section 53, PD No. 1529 — Provides that no voluntary instrument shall be registered unless the owner's duplicate certificate is presented, except in cases expressly provided for or upon court order. Corresponds to Section 55 of Act No. 496. Cited to distinguish voluntary from involuntary registration requirements.

• Section 56, PD No. 1529 — Requires the Register of Deeds to keep a primary entry book in which all instruments are entered in the order of their reception, noting the date, hour, and minute of reception; instruments are regarded as registered from the time so noted. Corresponds to Section 56 of Act No. 496. Applied to hold that the notice of lis pendens was deemed registered from the time it was entered in the primary entry book.

• Section 70, PD No. 1529 — Governs adverse claims; provides that an adverse claim may be cancelled only at the instance of the trial court or the claimant. Applied to show that the cancellation of Belen Uy's adverse claim by Bienaflor C. Umali — a third party — was an irregularity that should have prompted suspicion.

Carpio (Chairperson), Villarama, Jr., Mendoza, and Leonen, JJ., concurred.