Andro Sanopao

January 27, 2018

Traders Royal Bank vs. Court of Appeals, Patria Capay,

et al G.R. No. 118862, Sept. 24, 1999 (315 SCRA 190)

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 TRB’s 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 TRB’s title and issued a new cert.
of title for the Capays.

Pending 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.