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FIRST DIVISION

[G.R. No. 114299. September 24, 1999.]


TRADERS ROYAL BANK, petitioner, vs. HON. COURT OF APPEALS, PATRIA,
RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all surnamed
CAPAY and RAMON A. GONZALES, respondents.
[G.R. No. 118862. September 24, 1999.]
PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all
surnamed CAPAY, and RAMON A. GONZALES, petitioners, vs. SPS. HONORATO
D. SANTOS and MARIA CRISTINA S. SANTOS, SPS. CECILIO L. PE and
JOSEFINA L. PE, FLORA LARON WESCOMBE, SPS. TELESFORO P. ALFELOR II
and LIZA R. ALFELOR, SPS. DEAN RODERICK FERNANDO and LAARNI
MAGDAMO FERNANDO, REMEDIOS OCA, DEVELOPMENT BANK OF THE
PHILIPPINES and TRADERS ROYAL BANK, respondents.
Gonzalez Sinense Jimenez & Associates for Patria Capay, et al.
Francisco S. Reyes Law Office for non-bank respondents.
SYNOPSIS
On April 26, 1994, Traders Royal Bank filed with this Court a petition for review to set aside the decision of the Court
of Appeals decision holding said bank in bad faith when it sold a property knowing that it was under litigation and
without informing the buyer of said fact. Meanwhile, the buyers of said property moved for a reconsideration of the
said decision. In a resolution dated August 10, 1994, the Court of Appeals granted the motion for reconsideration and
dismissed the complaint as against them. The complainants in the original action for recovery of
possession/ownership filed a petition for review seeking to set aside said resolution. These two petitions for review
were later consolidated.
When the subject property was subdivided, none of the six (6) new certificates of title issued contained any notice of
lis pendens. The buyers of the subdivided properties therefore could not have been aware that the said properties
were the subject of litigation. They had a right to rely on what appeared on the face of the title of their predecessorsin-interest, and were not bound to go beyond the same.
The individual complainants cannot invoke that entry of the notice of lis pendens in the day book is sufficient to
constitute registration. In the fifteen years following the notice of lis pendens, they did not bother to find out the
status of their title. They slept on their rights. Thus, it is most iniquitous for them to assert ownership over the
property that has undergone several transfers made in good faith and for value and already subdivided into several
lots with improvements introduced thereon by their owners.
However, the Traders Royal Bank took advantage of the absence of the notice of lis pendens at the back of their
certificate of title and sold the property to an unwary purchaser. Clearly the bank acted in a manner contrary to
morals, good customs and public policy, and should be held liable for damages.
SYLLABUS
1.LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION; RIGHT OF BUYER TO RELY ON
WHAT APPEARED ON FACE OF TITLE; PARTIES NOT BOUND TO GO BEYOND SAME. When TRB purchased
the property at the foreclosure sale, the notice of lis pendens that the Capays caused to be annotated on their
certificate of title was not carried over to the new one issued to TRB. Neither did the certificate of title of Emelita
Santiago, who purchased the property from TRB, contain any such notice. When Santiago caused the property to be
divided, six (6) new certificates of title were issued, none of which contained any notice of lis pendens. Santiago then
sold the lots to Marcial Alcantara and his co-owners who next sold each of these to the non-bank respondents. The
non-bank respondents, therefore, could not have been aware that the property in question was the subject of
litigation when they acquired their respective portions of said property. There was nothing in the certificates of title
of their respective predecessors-in-interest that could have aroused their suspicion. The non-bank respondents had a
right to rely on what appeared on the face of the title of their respective predecessors-in-interest, and were not bound
to go beyond the same. To hold otherwise would defeat one of the principal objects of the Torrens system of the land
registration, that is, to facilitate transactions involving lands.

2.ID.; ID.; ID.; ID.; EXERCISE OF DILIGENCE MANIFESTS IN CASE AT BAR. The foregoing rule
notwithstanding, the non-bank respondents nevertheless physically inspected the properties and inquired from the
Register of Deeds to ascertain the absence of any defect in the title of the property they were purchasing an
exercise of diligence above that required by law. AaHDSI
3.REMEDIAL LAW; ACTIONS; LACHES; DEFINED. Laches has been defined as the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could nor should have
been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting presumption that
the party entitled to it either has abandoned it or declined to assert it.
4.ID.; ID.; ID.; FAILURE FOR 15 YEARS TO VERIFY STATUS OF TITLE EXTRAJUDICIALLY FORECLOSED IN
FAVOR OF BANK. Between two innocent persons, the one who made it possible for the wrong to be done should
be the one to bear the resulting loss. The Capays filed the notice of lis pendens way back on March 17, 1967 but the
same was not annotated in TRB's title. The Capays and their counsel Atty. Ramon A. Gonzales knew in 1968 of the
extra-judicial foreclosure sale of the property to TRB and the consolidation of title in the bank's name following the
lapse of the one-year period of redemption. But in the next fifteen (15) years or so, they did not bother to find out the
status of their title or whether the liens noted on the original certificate of title were still existing considering that the
property had already been foreclosed. In the meantime, the subject property had undergone a series of transfers to
buyers in good faith and for value. It was not until after the land was subdivided and developed with the buyers
building their houses on the other lots when the Capays suddenly appeared and questioned the occupants' titles. At
the very least, the Capays are guilty of laches.
5.LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION; REGISTRY OF DEEDS; ENTRY OF
NOTICE OF LIS PENDENS IN DAY BOOK OR PRIMARY ENTRY BOOK; SUFFICIENT NOTICE TO CONSTITUTE
REGISTRATION; AVAILABLE TO PARTIES NOT GUILTY OF LACHES. Being guilty of laches, the Capays cannot
invoke the ruling in Villasor vs. Camon, Levin vs. Bass and Director of Lands vs. Reyes to the effect that entry of the
notice of lis pendens in the day book (primary entry book) is sufficient to constitute registration and such entry is
notice to all persons of such adverse claim. Certainly, it is most iniquitous for the Capays who, after sleeping on their
rights for fifteen years, to assert ownership over the property that has undergone several transfers made in good faith
and for value and already subdivided into several lots with improvements introduced thereon by their owners.
6.REMEDIAL LAW; ACTIONS; ESTOPPEL; PARTY CANNOT HIDE BEHIND LAW WHICH IT ITSELF VIOLATED.
Section 25 of the General Banking Act, provides that no bank "shall hold the possession of any real estate under
mortgage or trust, deed, or the title and possession of any real estate purchased to secure any debt due to it, for a
longer period than five years.'' TRB, however, admits holding. onto the foreclosed property for twelve (12) years after
consolidating title in its name. The bank is, therefore, estopped from invoking banking laws and regulations to justify
its belated disposition of the property. It cannot be allowed to hide behind the law which it itself violated.
7.ID.; ID.; LACHES; NEGATED WHERE PARTY PERSISTENTLY PURSUED CASE TO RECOVER PROPERTY.
We do not find the Capays guilty of "inaction and negligence" as against TRB. It may be recalled that upon the
commencement of foreclosure proceedings by TRB, the Capays filed an action for prohibition on September 22, 1966
against the TRB before the CFI to stop the foreclosure sale. Failing in that attempt, the Capays filed a supplemental
complaint for the recovery of the property. The case reached this Court. Prescription or laches could not have worked
against the Capays because they had persistently pursued their suit against TRB to recover their property.
8.CIVIL LAW; DAMAGES; PARTY WHICH TOOK ADVANTAGE OF ABSENCE OF NOTICE OF LIS PENDENS
LIABLE THEREFOR WHERE PROPERTY SOLD TO UNWARY PURCHASER; CASE AT BAR. TRB cannot feign
ignorance of the existence of the lis pendens because when the property was foreclosed by it, the notice of lis pendens
was annotated on the title. But when TCT No. T-6595 in the name of the Capay spouses was cancelled after the
foreclosure, TCT No. T-16272 which was issued in place thereof in the name of TRB did not carry over the notice of
lis pendens. On the other hand, it is difficult to believe TRB's assertion that after holding on to the property for more
than ten (10) years, it suddenly realized that it was acting in violation of the General Bank Act. What is apparent is
that TRB took advantage of the absence of the notice of lis pendens at the back of their certificate of title and sold the
property to an unwary purchaser. This notwithstanding the adverse decision of the trial court and the pendency of its
appeal. TRB, whose timing indeed smacks of bad faith, thus transferred caused the property without the lis pendens
annotated on its title to put it beyond the Capays' reach. Clearly, the bank acted in a manner contrary to morals, good
customs and public policy, and should be held liable for damages.
9.ID.; MORTGAGE; PROPERTY TRANSFERRED TO INNOCENT PURCHASERS FOR VALUE; ORIGINAL OWNER
ENTITLED TO PAYMENT OF FAIR MARKET VALUE OF PROPERTY AT TIME OF SALE WHERE MORTGAGE
DECLARED NULL AND VOID. Considering, however, that the mortgage in favor of TRB had been declared null

and void for want of consideration and, consequently, the foreclosure proceedings did not have a valid effect, the
Capays would ordinarily be entitled to the recovery of their property. Nevertheless, this remedy is not now available
to the Capays inasmuch as title to said property has passed into the hands of third parties who acquired the same in
good faith and for value. Such being the case, TRB is duty bound to pay the Capays the fair market value of the
property at the time it was sold to Emelita Santiago; the transferee of TRB.

DECISION
KAPUNAN, J p:
The present controversy has its roots in a mortgage executed by the spouses Maximo and Patria Capay in favor of
Traders Royal Bank (TRB) pursuant to a loan extended by the latter to the former. The mortgage covered several
properties, including a parcel of land, the subject of the present dispute. 1 The loan became due on January 8, 1964
and the same having remained unpaid, TRB instituted extra-judicial foreclosure proceedings upon the mortgaged
property. cda
To prevent the property's sale by public auction, the Capays, on September 22, 1966, filed a petition for prohibition
with preliminary injunction (Civil Case No. Q-10453) before the Court of First Instance (CFI) of Rizal, alleging that
the mortgage was void since they did not receive the proceeds of the loan. The trial court initially granted the Capay's
prayer for preliminary injunction.
On March 17, 1967, the Capays caused to be filed in the Register of Deeds of Baguio City a notice of lis pendens over
the disputed property. Said notice was entered in the Day Book, as well as in the Capays' certificate of title.
Subsequently, the injunction issued by the trial court was lifted thus allowing the foreclosure sale to proceed.
Foreclosure proceedings were initiated and on October 17, 1968, the property was sold to TRB which was the highest
bidder at the auction sale. A sheriff certificate of sale was issued in its name on the same day. On February 25, 1970,
the property was consolidated in the name of TRB, the sole bidder in the sale. TCT No. T-6595 in the name of the
Capay spouses was then cancelled and a new one, TCT No. T-16272, 2 was entered in the bank's name. The notice of
lis pendens, however, was not carried over in the certificate of title issued in the name of TRB.
Thereafter, the Capays filed with the CFI a supplemental complaint praying for the recovery of the property with
damages and attorney's fees. Trial in Civil Case No. Q-10453 proceeded and, on October 3, 1997, the CFI rendered its
decision declaring the mortgage void for want of consideration. The CFI ordered, among other things, the
cancellation of TCT No. T-16272 in the name of TRB and the issuance of new certificates of title in the name of the
Capay spouses.
TRB appealed to the Court of Appeals. While the case was pending in the Court of Appeals, TRB on March 17, 1982
sold the land to Emelita Santiago in whose name a new certificate of title, TCT No. 33774, 3 was issued, also, without
any notice of lis pendens annotated thereon. Santiago in turn divided the land into six (6) lots and sold these to
Marcial Alcantara, Armando Cruz and Artemio Sanchez, who became co-owners thereof. 4 Alcantara and his coowners developed the property and thereafter sold the six (6) lots to separate buyers who were issued separate titles,
again, bearing no notice of lis pendens. 5
On July 30, 1982, the Court of Appeals rendered its decision modifying the decision of the trial court as to the award
of damages but affirming the same in all other respects.
For having been filed out of time and for lack of merit, the petition for certiorari filed by TRB before this Court 6 was
denied in a Resolution dated September 12, 1983. TRB's motion for reconsideration was similarly denied in a
Resolution dated October 12, 1983. The Court's September 12, 1983 Resolution having become final and executory on
November 9, 1983, the trial court issued a writ of execution directing the Register of Deeds of Baguio City to cancel
TCT No. T-16272 in the name of TRB, and to issue a new one in the name of the Capay spouses.
Said writ, however, could not be implemented because of the successive subsequent transfers of the subdivided
property to buyers who obtained separate titles thereto. Thus, a complaint for recovery of possession/ownership
dated 8 June 1985 was filed before the Quezon City Regional Trial Court against TRB and the subsequent transferees
of the property, the respondents in G.R. No. 118862 (hereinafter, "the non-bank respondents"). Plaintiffs in said case
were Patria Capay, her children by Maximo 7 who succeeded him upon his death on August 25, 1976, and Ramon
Gonzales, counsel of the spouses in Civil Case No. Q-10453 who became co-owner of the property to the extent of
35% thereof as his attorney's fees (collectively, "the Capays"). On March 27, 1991, the trial court rendered its decision,
the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs against the defendants
and ordering the Register of Deeds for Baguio to cancel TCT No. T-36177, Books 198, Page 177
in the names of defendants Spouses Honorato D. Santos and Maria Cristina Santos; to cancel
TCT No. 36707, Book 201, Page 107 in the names of defendant Spouses Cecilio Pe and
Josefina L. Pe; to cancel TCT No. T-36051, Book 198, Page 51 in the name of Flora Laron
Wescombe, married to Kevin Lind Wescombe (now deceased); to cancel TCT No. T-36147,
Book 198, page 147 in the names of Spouses Telesforo P. Alfelor II and Liza R. Alfelor; to
cancel TCT No. T-36730, Book 201, Page 130 in the names of Spouses Dean Roderick
Fernando and Laarni Magdamo Fernando; to cancel TCT No. 37437, Book 205, Page 37 in the
name of Remedios Oca, and issue new ones free from all liens and encumbrances, together
with all the improvements therein in the names of plaintiffs sharing pro indiviso as follows:
35% to Ramon A. Gonzales, married to Lilia Y. Gonzales, of legal age, with postal address at 23
Sunrise Hill, New Manila, Quezon City; 37.92% to Patria B. Capay, of legal age, widow,
Filipino; 5.41% each to Ruby Ann Capay, of legal age, Filipino, married to Pokka Vainio,
Finnish citizen; Chona Margarita Capay, of legal age, Filipino, married to Waldo Flores;
Rosario Capay, of legal age, Filipino, married to Jose Cuaycong, Jr., Cynthia Capay, of legal
age, Filipino, married to Raul Flores; Linda Joy Capay, of legal age, Filipino, married to Pedro
Duran, all with postal address at 37 Sampaguita St., Capitolville Subd., Bacolod City, ordering
said defendants to vacate the premises in question and restoring plaintiffs thereto and for
defendant Traders Royal Bank to pay each of the plaintiffs moral damages in the amount of
P100,000.00, P40,000.00 in exemplary damages and P40,000.00 as attorney's fees, all with
legal interest from the filing of the complaint, with costs against defendants. Cdpr
SO ORDERED. 8
TRB and the non-bank respondents appealed to the Court of Appeals. In a Decision promulgated on February 24,
1994 in CA-G.R. CV No. 33920, the appellate court affirmed the decision of the trial court in toto. 9 It ruled that the
non-bank respondents cannot be considered as purchasers for value and in good faith, having purchased the property
subsequent to the action in Civil Case No. Q-10453 and that while the notice of lis pendens was not carried over to
TRB's certificate of title, as well as to the subsequent transferees' titles, it was entered in the Day Book which is
sufficient to constitute registration and notice to all persons of such adverse claim, citing the case of Villasor vs.
Camon, 10 Levin vs. Bass 11 and Director of Lands vs. Reyes. 12
As regard TRB, the Court of Appeals said that the bank was in bad faith when it sold the property knowing that it was
under litigation and without informing the buyer of that fact.
On April 26, 1994, TRB filed with this Court a petition for review to set aside the CA decision, docketed herein as G.R.
No. 114299, invoking the following grounds:
I.
THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE AND
SERIOUS ERROR OF LAW IN PROMULGATING THE DISPUTED DECISION AND
THEREBY DECIDED A QUESTION OF SUBSTANCE WHOLLY CONTRARY TO SETTLED
JURISPRUDENCE AND TOTALLY NOT IN ACCORD WITH APPLICABLE DECISION OF
THIS HONORABLE SUPREME COURT.
II.
THE RESPONDENT HONORABLE COURT OF APPEALS HAS COMMITTED SO GRAVE
AND SERIOUS ERRORS OF LAW IN SANCTIONING A DEPARTURE FROM THE USUAL
AND ACCEPTED COURSE OF JUDICIAL PROCEEDING AS TO CALL FOR THE EXERCISE
OF THE POWER OF REVIEW BY THIS HONORABLE SUPREME COURT.
a)The public respondent has plainly and manifestly acted whimsically, arbitrarily,
capriciously, with grave abuse of discretion, in excess of jurisdiction tantamount to lack of
jurisdiction.
xxx xxx xxx
b)The public respondent erred in not finding that it was not the fault of petitioner when the
notice of lis pendens was not carried over to its new title.

xxx xxx xxx

VIII

c)The public respondent erred in not finding that PD No. 1271 had legally caused the
invalidation of the Capays property and the subsequent validation of TRB's title over the same
property was effective even as against the Capays. 13
Meanwhile, the non-bank respondents moved for a reconsideration of the Court of Appeals' decision. Convinced of
the movants' arguments, the Court of Appeals in a Resolution promulgated on August 10, 1994 granted the motion
for reconsideration and dismissed the complaint as against them. The dispositive portion of the resolution states:
ACCORDINGLY, in view of the foregoing disquisitions and finding merit in the motion for
reconsideration, the same is hereby GRANTED. Consequently, the decision of this Court,
promulgated on February 24, 1994, is hereby RECONSIDERED. The complaint filed against
defendants-appellants with the court a quo is hereby ordered DISMISSED, and the certificate
of titles originally issued to them in their individual names are hereby ordered restored and
duly respected. We make no pronouncement as to costs.
SO ORDERED. 14
The Capays thus filed with this Court a petition for review, docketed as G.R. No. 118862, to set aside the resolution of
the Court of Appeals raising the following errors:
I
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT TUAZON VS. REYES, 48 PHIL. 814 AND RIVERA VS. MORAN, 48 PHIL. 836 ARE
NOT APPLICABLE HEREOF, WHILE PINO VS. COURT OF APPEALS, 198 SCRA 436, IS
APPLICABLE.

II
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT ATUN VS. MUOZ, 97 PHIL. 762 AND LAROZA VS. GUIA, 134 SCRA 34, ARE NOT
APPLICABLE.
III
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT LEVIN VS. BASS, 91 PHIL. 419 VILLASOR VS. CAMON, 89 PHIL. 404 AND
DIRECTOR OF LANDS VS. REYES, 68 SCRA 73, ARE NOT APPLICABLE HEREOF.
IV
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT PETITIONERS ARE GUILTY OF LACHES.
V
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT THERE IS NO DISTINCTION IN THE REGISTRATION OF VOLUNTARY
INSTRUMENTS VIS-A-VIS INVOLUNTARY INSTRUMENTS.
VI
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING
THAT RESPONDENTS WHO ARE LAWYERS, RESPONSIBLE CITIZENS AND WELLRESPECTED RESIDENTS IN THE COMMUNITY, ARE EXEMPTED FROM THE EFFECTS
OF THE CONSTRUCTIVE NOTICE ARISING FROM REGISTRATION.
VII
THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF WITH REGARDS
TO TRADERS ROYAL BANK, AFTER THE LATTER HAS PERFECTED ITS APPEAL TO THE
SUPREME COURT.

THE COURT OF APPEALS PALPABLY ERRED IN NOT RULING ON THE COUNTERASSIGNMENT OF ERROR THAT:
B)THE LOWER COURT ERRED IN NOT HOLDING THAT DEFENDANTS ARE
BOUND BY THE DECISION IN CIVIL CASE NO. Q-10453.
Subsequently, G.R. No. 118862 was consolidated with G.R. No. 114299, pursuant to this Court's Resolution dated
July 3, 1996. 15
The consolidated cases primarily involve two issues: (1) who, as between the Capays and the non-bank respondents,
has a better right to the disputed property, and (2) whether or not TRB is liable to the Capays for damages.
On the first issue, we rule for the non-bank respondents.
I
First, when TRB purchased the property at the foreclosure sale, the notice of lis pendens that the Capays caused to be
annotated on their certificate of title was not carried over to the new one issued to TRB. Neither did the certificate of
title of Emelita Santiago, who purchased the property from TRB, contain any such notice. When Santiago caused the
property to be divided, six (6) new certificates of title were issued, none of which contained any notice of lis pendens.
Santiago then sold the lots to Marcial Alcantara and his co-owners who next sold each of these to the non-bank
respondents. The non-bank respondents, therefore, could not have been aware that the property in question was the
subject of litigation when they acquired their respective portions of said property. There was nothing in the
certificates of title of their respective predecessors-in-interest that could have aroused their suspicion. The non-bank
respondents had a right to rely on what appeared on the face of the title of their respective predecessors-in-interest,
and were not bound to go beyond the same. To hold otherwise would defeat one of the principal objects of the
Torrens system of land registration, that is, to facilitate transactions involving lands. cdll
The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and
to facilitate transactions relative thereto by giving the public the right to rely upon the face of a
Torrens certificate of title and to dispense with the need of inquiring further, except when the
party concerned has actual knowledge of facts and circumstances that should impel a
reasonably cautious man to make such further inquiry. Where innocent third persons, relying
on the correctness of the certificate of title thus issued, acquire rights over the property, the
court cannot disregard such rights and order the total cancellation of the certificate. The effect
of such an outright cancellation would be to impair public confidence in the certificate of title,
for everyone dealing with property registered under the Torrens system would have to inquire
in every instance as to whether the title has been regularly or irregularly issued by the court.
Every person dealing with registered land may safely rely on the correctness of the certificate
of title issued therefor and the law will in no way oblige him to go beyond the certificate to
determine the condition of the property.
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 indefensibility
once the claim of ownership is established and recognized. If a person purchases a piece of
land on the assurance that the seller's title thereto is valid, he should not run the risk of being
told later that his acquisition was ineffectual after all. This would not only be unfair to him.
What is worse is that if this were permitted, public confidence in the system would be eroded
and land transactions would have to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further consequence would be that land
conflicts could be even more numerous and complex than they are now and possibly also more
abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens
system, should be the first to accept the validity of titles issued thereunder once the conditions
laid down by the law are satisfied. 16
Second, the foregoing rule notwithstanding, the non-bank respondents nevertheless physically inspected the
properties and inquired from the Register of Deeds to ascertain the absence of any defect in the title of the property
they were purchasing an exercise of diligence above that required by law.
Thus, respondent Aida Fernando Meeks, who bought Lot 5 for her son Dean, testified:

QHow did you come to live in Baguio City, particularly in Km. 2.5 San Luis, Baguio City?

AMr. Alcantara and my present husband, sir.

AIn one of my visits to my sister who has been residing here for twelve (12) years now, I got
interested in buying a property here.

QThe three (3) of you?

QHow did you come to know of this property at Asin Road where you now reside?
AMy sister, Ruth Ann Valdez, sir.
QWhen this particular property was bought by you, when was that?
AI do not remember the exact date, but it was in early 1984, sir.
QAt the time when you went to see the place where you now reside, how did it look?
AThis particular property that I bought was then a small one (1)-room structure, it is a two
(2)-storey one (1) bedroom structure.

AYes, sir.
QWhat title did you see there?
AWe saw the title that was made up in favor of Amado Cruz, sir.
QAnd what was the result of your looking up for this title in the name of Amado Cruz?
AWe had to be reassured that it was a genuine one, so we asked Atty. Diomampo who heads
the office. We showed him a copy of that title and we were also reassured by him
that anything that was signed by him was as good as it is.
QDid this Atty. Diomampo reassure you that the title was good?

QWhat kind of structure with regards to material?

AHe did.

AIt is a semi-concrete structure, sir.

QAfter your conversation with the Register of Deeds, what did you do?

QAnd aside from this two (2)-storey one (1)-room structure, how did the surrounding area
look like at the time you visited?

AThe second step we did was to confer with our lawyer, a friend from RCBC Binondo, Manila,
this is Atty. Nelson Waje.

AThere were stone walls from the road and there were stone walls in front of the property and
beside the property.

QWhat is your purpose in going to this lawyer?

QAt the time you went to see the property with your agent, rather, your sister Ruth Ann
Valdez, did you come to know the owner?
AWe did because at the time we went there, Mr. Alcantara was there supervising the workers.
QAnd who?
AAmado Cruz, sir.
QAfter you saw this property, what else did you do?

AWe wanted an assurance that we were getting a valid title just in case we think of buying the
property.
QWhat was the result of your conference with this lawyer?
AHe was absolutely certain that that was a valid title.
QMrs. Meeks, after looking at the place, going to the Register of Deeds, looking at the title and
seeing your lawyer friend, what decision did you finally make regarding the
property?

QIn regards to this concern of yours, did you find an answer to this concern of yours?

AWe wanted more reassurances, so we proceeded to Banaue, as advised by that same lawyer,
there is another office of the Bureau of Lands. I cannot recall the office but it has
something to do with registration of the old.

AAt first, I asked Mr. Alcantara and I was answered by him.

QWhat is your purpose in going to this Office in Banaue?

QWhat was his answer?

AI wanted more reassurances that I was getting a valid title.

AThat it was a property with a clean title, that he has shown me the mother title and it is a
clean title.

QWhat was the result of your visit to the Banaue Office?

AMy first concern then was am I buying a property with a clean title.

QAside from being informed that it is a property with a clean title, did you do anything to
answer your question?

AWe found the title of this property and there was reassurance that it was a clean title and we
saw the mother title under the Hilario family.
QMrs. Meeks, when you say Banaue, what particular place is this Banaue?

AYes, sir.

AIt is in Banaue Street in Quezon City, sir.

QWhat did you do?


AWell, the first step I did was to go to the Land Registration Office.

QAnd when you saw the title to this property and the mother title, what was the result of your
investigation, the investigation that you made?

QAre you referring to the City Hall of Baguio?

AWe were reassured that we were purchasing a valid title, we had a genuine title.

AYes, the City Hall of Baguio.

QWhen you were able to determine that you had a valid, authentic or genuine title, what did
you do?

QAnd what did you do in the Registry of Deeds?


AWe looked for the title, the original title, sir.
QWhen you say we, who was your companion?

AThat is when I finally thought of purchasing the property. 17

Telesforo Alfelor II, the purchaser of Lot 4, narrated going through a similar routine:

QHow did you come to know of this place as Asin Road where you are presently residing?
AIt was actually through Mrs. Flory Recto who is presently the Branch Manager of CocoBank.
She informed my wife that there is a property for sale at Asin road, and she was the
one who introduced to us Mr. Alcantara, sir.
QWhen you were informed by Mrs. Recto and when you met with Mr. Alcantara, did you see
the property that was being offered for sale?
AYes, sir.
QWhen did you specifically see the property, if you can recall?
AI would say it is around the third quarter of 1983, sir.
QWhen you went to see the place, could you please describe what you saw at that time?
AWhen we went there the area is still being developed by Mr. Alcantara. As a matter of fact the
road leading to the property is still not passable considering that during that time it
was rainy season and it was muddy, we fell on our way going to the property and
walked to have an ocular inspection and physical check on the area, sir. LLjur
xxx xxx xxx

The non-bank respondents' predecessor-in-interest, Marcial Alcantara, was no less thorough:


QAnd will you give a brief description of what you do?
AI normally acquire land, quite big tract of land and subdivide it into smaller lots and sold it
to some interested parties.
QSpecifically, Mr. Alcantara, will you please inform the Court in what place in Baguio have
you acquired and subdivided and sold lots?
ADominican Hill, Leonila Hill, Crystal Cave and Asin Road, sir.
QYou mentioned Asin Road, what particular place in Asin Road are you referring?
AThat property I bought from Emelita Santiago, sir.
QWhen you say you bought it from Emelita Santiago, how did you come to know that Emelita
Santiago is disposing of the property?
ABecause of the father, he is the one who offered me the property, sir, Armando Gabriel.
QIs he also a resident of Baguio?
AHe is from Buyagan, La Trinidad, sir.

QWhat was the improvement, if any, that was in that parcel which you are going to purchase?

QHow did you come to know of this Armando Gabriel wanting to sell a property in Asin?

ADuring that time, the riprap of the property is already there, the one-half of the riprap sir.

AHe approached me in the house, sir. He has acquired a title from the Traders Royal Bank.

QDo you know who was making this improvement at the time that you went there?

QCan you inform the Honorable Court when you had this conversation with Armando Gabriel
on the sale of the property at Asin Road?

AI would understand that it was Marcial Alcantara, sir.


QAfter you saw the place and you saw the riprap and you were in the course of deciding to
purchase this property, what else did you do?

ALater part of March, 1983, sir.

AFirst, I have to consider that the property is clean.

QNow, when this Armando Gabriel informed you that he wants his property to be sold, what
did you do?

QHow did you go about determining whether the title of the property is clean?

AI went to the place with the agent, sir.

AConsidering that Marcial Alcantara is a real estate broker, I went to his office and checked
the documents he has regarding the property.

QWhen you say you went to the place with the agent, what place?

QAnd what was the result of your checking as to whether the title of the property is clean?

QAnd when you went there to see the place, did you actually go there to see the place?

AHe showed me the copy of the title and it was clean, sir.

ABy walking, I parked my car a kilometer away, sir.

QAside from going to Mr. Alcantara to check up the title of the property, what else did you do?

QIs it my understanding that when you went to see the property there were no roads?

AWell, the next thing is I requested his wife to accompany me to the Bureau of Lands or rather
the Registry of Deeds, sir.

ANone, sir.

QWhat registry of Deeds are you referring to?


AThe Registry of Deeds of Baguio City, sir.
QAnd were you able to see the Register of Deeds regarding what you would like to know?

AKilometer 2, Asin Road, sir.

xxx xxx xxx


QMr. Alcantara, when you went to see this place at Asin Road last week of March, 1983, will
you please briefly describe how this place looked like at that time?

AYes, and we were given a certification regarding this particular area that it was clean, sir.

AThe place was mountainous, grassy, there were cogon trees, some of the roads were eroding
already, so we cannot possibly enter the property, sir.

QWhat Certification are you referring to?

QAt the time you entered the place, was there any visible sign of claim by anyone?

AIt is a Certification duly signed by the employee of the Registry of Deeds Adelina Tabangin,
sir.

ANone, sir.

QDo you have a copy of that Certification?

AThere is no such, sir.

AYes, I have, sir. 18


The testimonies of Honorato Santos 19 and Josefina Pe 20 were to the same effect.

QIn terms of fence in the area?

xxx xxx xxx

QAside from looking or going to the property, what else did you do to this property prior to
your purchase?

AActually, two (2) are our co-owners, sir.

AI investigated it with the Register of Deeds, sir.

QSo, is it our understanding that the Deed of Sale from Emelita Santiago is in favor of these
two (2) Atty. Cruz and Dr. Sanchez?

QWhat is your purpose in investigating it with the Register of Deeds?

AYes, sir. 21

ATo see if the paper is clean and there are no encumbrances, sir.
QTo whom did you talk?
ATo Atty. Ernesto Diomampo, sir.
QAnd when you went to the Registry of Deeds to investigate and check, did you have occasion
to talk with Atty. Diomampo?
AYes, sir.
QAnd what was the result of your talk with Atty. Diomampo?
AThe papers are clean except to the annotation at the back with the road right of way, sir.
QAfter making this investigation with the Register of Deeds and talking with Atty. Diomampo,
what else transpired?
AWe bought the property, sir.
QAfter purchasing the property from Emelita Santiago, could you please tell the Honorable
Court what you did with that deed of sale?
AWe registered it with the Register of Deeds for the Certificate of Title because at that time
when we bought the property, Emelita Santiago had it subdivided into six (6) lots,
sir.
QIs it our understanding that prior to your purchase the property was subdivided into six (6)
parcels?
AYes, sir.
QCould you please inform the Honorable Court if you have any buyers in the subdivision of
this property prior to your purchase?
AYes, I have.
QThis subdivision of this property, to what office was it brought for action?
ABureau of Lands, San Fernando, La Union, sir.
QNow, Mr. Alcantara, at the time that you had this property subdivided by the owner, could
you please inform the Court if there was any claim by any other party opposing the
subdivision or claiming the property?
ANone, sir.
QWhen the Deed of Sale was executed and you said that you presented it to the Register of
Deeds and after the subdivision already, what action did the Register of Deeds have
regarding the matter?
AThey approved it and registered it already in six (6) titles, sir.
QIn whose names?
AOne (1) title under my name, Amado Cruz and Dr. Sanchez, sir.
QInitially, Mr. Alcantara, you said that you are the sole purchaser of this entire area of One
Thousand Five Hundred Ninety One (1,591) Square Meters. Now, you are informing
this Honorable Court that one Amado Cruz and one Dr. Sanchez were also issued
two (2) titles. Could you explain how these titles came into their possession?

Third, between two innocent persons, the one who made it possible for the wrong to be done should be the one to
bear the resulting loss. 22 The Capays filed the notice of lis pendens way back on March 17, 1967 but the same was
not annotated in TRB's title. The Capays and their counsel Atty. Ramon A. Gonzales knew in 1968 of the extrajudicial foreclosure sale of the property to TRB and the consolidation of title in the bank's name following the lapse of
the one-year period of redemption. But in the next fifteen (15) years or so, they did not bother to find out the status of
their title or whether the liens noted on the original certificate of title were still existing considering that the property
had already been foreclosed. In the meantime, the subject property had undergone a series of transfers to buyers in
good faith and for value. It was not until after the land was subdivided and developed with the buyers building their
houses on the other lots when the Capays suddenly appeared and questioned the occupants' titles. At the very least,
the Capays are guilty of laches. Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence could nor should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting presumption that the party entitled to it
either has abandoned it or declined to assert it. 23
Verily, the principle on prescription of actions is designed to cover situations such as the case
at bar, where there have been a series of transfers to innocent purchasers for value. To set
aside these transactions only to accommodate a party who has slept on his rights is anathema
to good order. cdrep
Independently of the principle of prescription of actions working against petitioners, the
doctrine of laches may further be counted against them, which latter tenet finds application
even to imprescriptible actions. . . . 24
In De La Calzada-Cierras vs. Court of Appeals, 25 we held:
While it is true that under the law it is the act of registration of the deed of conveyance that
serves as the operative act to convey the land registered under the Torrens System (Davao
Grains, Inc. vs. Intermediate Appellate Court, 171 SCRA 612), the petitioners cannot invoke
said dictum because their action to recover Lot 4362 is barred by the equitable doctrine of
laches.

The act of registering the conveyance to Rosendo was constructive notice to the whole world of
the fact of such conveyance (Heirs of Maria Marasigan vs. Intermediate Appellate Court, 152
SCRA 253).
But the petitioners' complaint to recover the title and possession of Lot 4362 was filed only on
July 21, 1981, twelve (12) years after the registration of the sale to Rosendo. The petitioners
failed and neglected for an unreasonably long time to assert their right, if any, to the property
in Rosendo's possession.
Being guilty of laches, the Capays cannot invoke the ruling in Villasor vs. Camon, Levin vs. Bass and Director of
Lands vs. Reyes 26 to the effect that entry of the notice of lis pendens in the day book (primary entry book) is
sufficient to constitute registration and such entry is notice to all persons of such adverse claim. Certainly, it is most
iniquitous for the Capays who, after sleeping on their rights for fifteen years, to assert ownership over the property
that has undergone several transfers made in good faith and for value and already subdivided into several lots with
improvements introduced thereon by their owners.
In the same vein, the cases cited by the Capays in their first two (2) assignment of errors do not help them any, as the
transferees in said cases were not innocent purchasers for value and in good faith. In Tuazon vs. Reyes and Siochi,
27 where the land involved therein was sold by Petronilo David to Vicente Tuazon, it was with a deed containing the
recital that the land was in dispute between the vendor and Roberto Siochi. Tuazon, who was merely subrogated to
the rights of the vendor was aware of the dispute and, furthermore, David did not warrant the title to the same. In
Rivera vs. Moran, 28 Rivera acquired interest in the land before the final decree was entered in the cadastral
proceedings. Rivera, the transferee, was aware of the pending litigation and, consequently, could not have been

considered a purchaser in good faith. Similarly, in Atun, et al. vs. Nunez, et al. 29 and Laroza vs. Guia, 30 the
buyers of the property at the time of their acquisition knew of the existence of the notice of lis pendens. In contrast to
the cited cases, the non-bank respondents in the case at bar acquired their respective portions of the land with clean
title from their predecessors-in-interest.
II

This Decision is without prejudice to whatever criminal, civil or administrative action against the Register of Deeds
and/or his assistants that may be taken by the party or parties prejudiced by the failure of the former to carry over
the notice of lis pendens to the certificate of title in the name of TRB.
SO ORDERED.
Davide, Jr., C.J., Puno, Pardo and Santiago, JJ., concur.

We come now to TRB's liability towards the Capays.


The Bank unconvincingly tries to wash its hands off the present controversy, and attempts to shift the blame on the
Capays, thus:
xxx xxx xxx
23.The petitioner Bank, during all the time that it was holding the title for over fourteen (14)
years that there was no legal impediment for it to sell said property, Central Bank regulations
require that real properties of banks should not be held for more than five (5) years;
24.The fault of the Register of Deeds in not carrying over the Notice of Lis Pendens to the new
title of the petitioner Bank should not be absorbed by the latter considering that in all good
faith, it was not aware of the existence of said annotation during all the time that said title was
in its possession for almost fourteen (14) years before the property was sold to Emelita G.
Santiago . . . . 31
TRB concludes that "(t)he inaction and negligence of private respondents, allowing ownership to pass for almost 15
years constitute prescription of action and/or laches." 32
Section 25 of the General Banking Act, 33 provides that no bank "shall hold the possession of any real estate under
mortgage or trust, deed, or the title and possession of any real estate purchased to secure any debt due to it, for a
longer period than five years." TRB, however, admits holding on to the foreclosed property for twelve (12) years after
consolidating title in its name. The bank is, therefore, estopped from invoking banking laws and regulations to justify
its belated disposition of the property. It cannot be allowed to hide behind the law which it itself violated.
TRB cannot feign ignorance of the existence of the lis pendens because when the property was foreclosed by it, the
notice of lis pendens was annotated on the title. But when TCT No. T-6595 in the name of the Capay spouses was
cancelled after the foreclosure, TCT No. T-16272 which was issued in place thereof in the name of TRB did not carry
over the notice of lis pendens.
We do not find the Capays guilty of "inaction and negligence" as against TRB. It may be recalled that upon the
commencement of foreclosure proceedings by TRB, the Capays filed an action for prohibition on September 22, 1966
against the TRB before the CFI to stop the foreclosure sale. Failing in that attempt, the Capays filed a supplemental
complaint for the recovery of the property. The case reached this Court. Prescription or laches could not have worked
against the Capays because they had persistently pursued their suit against TRB to recover their property. prLL
On the other hand, it is difficult to believe TRB's assertion that after holding on to the property for more than ten (10)
years, it suddenly realized that it was acting in violation of the General Bank Act. What is apparent is that TRB took
advantage of the absence of the notice of lis pendens at the back of their certificate of title and sold the property to an
unwary purchaser. This notwithstanding the adverse decision of the trial court and the pendency of its appeal. TRB,
whose timing indeed smacks of bad faith, thus transferred caused the property without the lis pendens annotated on
its title to put it beyond the Capay's reach. Clearly, the bank acted in a manner contrary to morals, good customs and
public policy, and should be held liable for damages. 34
Considering, however, that the mortgage in favor of TRB had been declared null and void for want of consideration
and, consequently, the foreclosure proceedings did not have a valid effect, the Capays would ordinarily be entitled to
the recovery of their property. Nevertheless, this remedy is not now available to the Capays inasmuch as title to said
property has passed into the hands of third parties who acquired the same in good faith and for value. Such being the
case, TRB is duty bound to pay the Capays the fair market value of the property at the time it was sold to Emelita
Santiago, the transferee of TRB.
WHEREFORE, the decision of the Court of Appeals dated February 24, 1994 in CA-G.R. CV No. 33920, as modified
by its Resolution dated August 10, 1994 is hereby AFFIRMED. In addition, Traders Royal Bank is ordered to pay the
Capays the fair market value of the property at the time it was sold to Emelita Santiago.

Traders Royal Bank vs. Court of Appeals, Patria Capay, et al G.R. No. 118862, Sept. 24,
1999 (315 SCRA 190) case digest
Facts:
A parcel of land owned by the spouses Capay was mortgage to and subsequently extrajudicially foreclosed by Traders
Royal Bank (TRB). To prevent property sale in public auction, the Capays filed a petition for preliminary injunction
alleging the mortgage was void because they did not receive the proceeds of the loan. A notice of lis pendens (suit
pending) was filed before the Register of Deeds with the notice recorded in the Day Book. Meanwhile, a foreclosure
sale proceeded with the TRB as the sole and winning bidder. The Capays title was cancelled and a new one was
entered in TRBs name without the notice of lis pendens carried over the title. The Capays filed recovery of the
property and damages. Court rendered a decision declaring the mortgage was void for want of consideration and thus
cancelled TRBs title and issued a new cert. of title for the Capays.
ending its appeal before the court, TRB sold the land to Santiago who subsequently subdivided and sold to buyers
who were issued title to the land. Court ruled that the subsequent buyers cannot be considered purchasers for value
and in good faith since they purchase the land after it became a subject in a pending suit before the court. Although
the lis pendens notice was not carried over the titles, its recording in the Day Book constitutes registering of the land
and notice to all persons with adverse claim over the property. TRB was held to be in bad faith upon selling the
property while knowing it is pending for litigation. The Capays were issued the cert. of title of the land in dispute
while TRB is to pay damages to Capays.

Issue:
1.

Who has the better right over the land in dispute?

2.

Whether or not TRB is liable for damages

Ruling:
The court ruled that a Torrens title is presumed to be valid which purpose is to avoid conflicts of title to real
properties. When the subsequent buyers bought the property there was no lis pendens annotated on the title. Every
person dealing with a registered land may safely rely on the correctness of the title and is not obliged to interpret
what is beyond the face of the registered title. Hence the court ruled that the subsequent buyers obtained the
property from a clean title in good faith and for value. On one hand, the Capays are guilty of latches. After they filed
the notice for lis pendens, the same was not annotated in the TRB title. They did not take any action for 15 years to
find out the status of the title upon knowing the foreclosure of the property. In consideration to the declaration of the
mortgage as null and void for want of consideration, the foreclosure proceeding has no legal effect. However, in as
much as the Capays remain to be the real owner of the property it has already been passed to purchasers in good faith
and for value. Therefore, the property cannot be taken away to their prejudice. Thus, TRB is duty bound to pay the
Capays the fair market value of the property at the time they sold it to Santiago.