FIRST DIVISION the bank's name.

The notice of lis pendens, however, was not

carried over in the certificate of title issued in the name TRB.
 
Thereafter, the Capays filed with the CFI a supplemental
G.R. No. 114299 September 24, 1999 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, 1977, the CFI rendered its
TRADERS ROYAL BANK, petitioner,
decision declaring the mortgage void for want of consideration.
vs.
The CFI ordered, among other things, the cancellation of TCT
HON. COURT OF APPEALS, PATRIA, RUBY ANN,
No. T-16272 in the name of TRB and the issuance of new
MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all
certificates of title in the name of the Capay spouses.
surnamed CAPAY and RAMON A.
GONZALES, respondents.
TRB appealed to the Court of Appeals. While the case was
pending in the Court of Appeals, TRB on March 17, 1982 sold
G.R. No. 118862 September 24, 1999
the land to Emelita Santiago in whose name a new certificate
of title, TCT No. 33774, 3 was issued, also, without any notice
PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, of lis pendens annotated thereon. Santiago in turn divided the
LINDA JOY, all surnamed CAPAY, and RAMON A. land into six (6) lots and sold these to Marcial Alcantara,
GONZALES, petitioners, Armando Cruz and Artemio Sanchez, who became co-owners
vs. thereof. 4 Alcantara and his co-owners developed the property
SPS. HONORATO D. SANTOS and MARIA CRISTINA S. and thereafter sold the six (6) lots to seperate buyers who
SANTOS, SPS. CECILIO L. PE and JOSEFINA L. PE, issued seperate titles, again, bearing no notice of lis pendens. 5
FLORA LARON WESCOMBE, SPS. TELESFORO P.
ALFELOR II and LIZA R. ALFELOR, SPS. DEAN RODERICK
FERNANDO and LAARNI MAGDAMO FERNANDO, On July 30, 1982, the Court of Appeals rendered its decision
REMEDIOS OCA, DEVELOPMENT BANK OF THE modifying the decision of the trial court as to the award of
damages but affirming the same in all other respects.
PHILIPPINES and TRADERS ROYAL BANK, respondents.

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
KAPUNAN, J.: motion for reconsideration was similarly denied in a Resolution
dated October 12, 1983. The Court's September 12, 1983
The present controversy has its roots in a mortgage executed Resolution having become final and executory on November 9,
by the spouses Maximo and Patria Capay in favor of Traders 1983, the trial court issued a writ of execution directing the
Royal Bank (TRB) pursuant to a loan extended by the latter to Register of Deeds of Baguio City to cancel TCT No. 16272 in
the former. The mortgage covered several properties, including the name of TRB, and to issue a new one in the name of the
a parcel of land, the subject of the present Capay spouses.
dispute. 1 The loan became due on January 8, 1964 and the
same having remained unpaid, TRB instituted extra-judicial Said writ, however, could not be implemented because of the
foreclosure proceedings upon the mortgaged property. successive subsequent transfers of the subdivided property to
buyers who obtained separate titles thereto. Thus, a complaint
To prevent the property's sale by public auction, the Capays, for recovery of possession ownership dated 8 June 1985 was
on September 22, 1966, filed a petition for prohibition with filed before the Quezon City Regional Trial Court against TRB
preliminary injunction (Civil Case No. Q-10453) before the and the subsequent transferees of the property, the
Court of First Instance (CFI) of Rizal, alleging that the respondents in G.R. No. 118862 (hereinafter, "the non-bank
mortgage was void since they did not receive the proceeds of respondents"). Plaintiffs in said case were Patria Capay, her
the loan. The trial court initially granted the Capays' prayer for children by Maximo 7 who succeeded him upon his death on
preliminary injunction. August 25, 1976, and Ramon Gonzales, counsel of the
spouses in Civil Case No. Q-10453 who become co-owner of
On March 17, 1967, the Capays caused to be filed in the the property to the extent of 35% thereof as his attorney's fees
Register of Deeds of Baguio City a notice of lis pendens over (collectively, "the Capays"). On March 27, 1991, the trial court
the disputed property. Said notice was entered in the Day rendered its decision, the dispositive portion of which states:
Book, as well as in the Capays' certificate of title.
WHEREFORE, judgment is hereby rendered in favor of the
Subsequently, the injunction issued by the trial court was lifted plaintiffs against the defendants and ordering the Register of
thus allowing the foreclosure sale to proceed. Foreclosure Deeds for Baguio to cancel TCT No. T-36177, Books 198,
proceedings were initiated and on October 17, 1968, the Page 177 in the names of defendants Spouses Honorato D.
property was sold to TRB which was the highest bidder at the Santos and Maria Cristina Santos; to cancel TCT No. 36707,
auction sale. A sheriff certificate of sale was issued in its name Book 201, Page 107 in the names of defendant Spouses
on the same day. On February 25, 1970, the property was Cecilio Pe and Josefina L. Pe; to cancel TCT No. T-36051,
consolidated in the name of TRB, the sole bidder in the sale. Book 198, Page 51 in the name of Flora Laron Wescombe,
TCT No. T-6595 in the name of the Capay spouses was then married to Kevin Lind Wescombe (now deceased); to cancel
cancelled and a new one, TCT No. T-16272, 2 was entered in TCT No. 36147, Book 198, page 147 in the names of Spouses
Telesforo P. Alfelor II and Liza R. Alfelor; to cancel TCT No. T- LAW IN SANCTIONING A DEPARTURE FROM THE USUAL
36730, Book 201, Page 130 in the names of Spouses Dean AND ACCEPTED COURSE OF JUDICIAL PROCEEDING AS
Roderick Fernando and Laarni Magdamo Fernando; to cancel TO CALL FOR THE EXERCISE OF THE POWER OF BY THIS
TCT No. 37437, Book 205, Page 37 in the name of Remedios HONORABLE SUPREME COURT.
Oca, and issue new ones free from all liens and
encumbrances, together with all the improvements therein in a) The public respondent has plainly and manifestly acted
the names of plaintiffs sharing  pro indiviso  as follows: 35% to whimsically, arbitrarily, capriciously, with grave abuse of
Ramon A. Gonzales, married to Lilia Y. Gonzales, of legal age, discretion, in excess of jurisdiction tantamount to lack of
with postal address at 23 Sunrise Hill, New Manila, Quezon jurisdiction.
City 37.92% to Patria B. Capay, of legal age, widow, Filipino;
5.41% each to Ruby Ann Capay, of legal age, Filipino married x x x           x x x          x x x
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 b) The public respondent erred in not finding that it was not the
Capay, of legal age, Filipino, married to Raul Flores; Linda Joy fault of petitioner when the notice of lis pendens was not
Capay, of legal age, Filipino, married to Pedro Duran, all with carried over to its new title.
postal address at 37 Sampaguita St., Capitolville Subd.,
Bacolod City, ordering said defendants to vacate the premises x x x           x x x          x x x
in question and restoring plaintiffs thereto and for defendant
Traders Royal Bank to pay each of the plaintiffs moral c) The public respondent erred in not finding that PD No. 1271
damages in the amount of P100,000.00, P40,000.00 in had legally caused the invalidation of the Capay's property and
exemplary damages and P40,000.00 as attorney's fees, all with the subsequent validation of TRB's title over the same property
legal interest from the filing of the complaint, with costs against was effective even as against the Capays. 13
defendants.
Meanwhile, the non-bank respondents moved for a
SO ORDERED. 8 reconsideration of the Court of Appeals' decision. Convinced of
the movants' arguments, the Court of Appeals in a Resolution
TRB and the non-bank respondents appealed to the Court of promulgated on August 10, 1994 granted the motion for
Appeals. In a Decision promulgated on February 24, 1994 in reconsideration and dismissed the complaint as against them.
CA-G.R. CV No. 33920, the appellate court affirmed the The dispositive portion of the resolution states:
decision of the trial court in toto. 9 It ruled that the non-bank
respondents cannot be considered as purchasers for value and ACCORDINGLY, in view of the foregoing disquisitions and
in good faith, having purchased the property subsequent to the finding merit in the motion for reconsideration, the same is
action in Civil Case No. Q-10453 and that while the notice of lis hereby GRANTED. Consequently, the decision of this Court,
pendens was not carried over to TRB's certificate of title, as promulgated on February 24, 1994, is hereby
well as to the subsequent transferees' titles, it was entered in RECONSIDERED. The complaint filed against defendants-
the Day Book which is sufficient to constitute registration and appellants with the court a quo is hereby ordered DISMISSED,
notice to all persons of such adverse claim, citing the cases and the certificate of titles originally issued to them in their
of Villasor vs. Camon, 10 Levin vs. Bass 11 and Director of individual names are hereby ordered restored and duly
Lands vs. Reyes. 12 respected. We make no pronouncement as to costs.

As regard TRB, the Court of Appeals said that the bank was in SO ORDERED. 14
bad faith when it sold the property knowing that it was under
the litigation and without informing the buyer of that fact. The Capays thus filed with this Court a petition for review,
docketed as G.R. No. 118862 to set aside the resolution of the
On April 26, 1994, TRB filed with this Court a petition for review Court of Appeals raising the following errors:
to set aside the CA decision, docketed herein as G.R. No.
114299, invoking the following grounds: I

I. THE COURT OF APPEALS PALPABLY ERRED IN

REVERSING ITSELF BY NOW HOLDING THAT TUAZON VS.
THE RESPONDENT HONORABLE COURT OF APPEALS REYES, 48 PHIL. 814 AND RIVERA VS. MORAN, 48 PHIL.
COMMITTED GRAVE AND SERIOUS ERROR OF LAW IN 836 ARE NOT APPLICABLE HEREOF, WHILE PINO VS.
PROMULGATING THE DISPUTED DECISION AND COURT OF APPEALS, 198 SCRA 436, IS APPLICABLE.
THEREBY DECIDED A QUESTION OF SUBSTANCE
WHOLLY CONTRARY TO SETTLED JURISPRUDENCE AND II
TOTALLY NOT IN ACCORD WITH APPLICABLE DECISION
OF THIS HONORABLE SUPREME COURT.
THE COURT OF APPEALS PALPABLY ERRED IN
REVERSING ITSELF BY NOW HOLDING THAT ATUN VS.
II. MUNOZ, 97 PHIL. 762 AND LAROZA VS. GUIA, 134 SCRA
34, ARE NOT APPLICABLE.
THE RESPONDENT HONORABLE COURT OF APPEALS
HAS COMMITTED SO GRAVE AND SERIOUS ERRORS OF 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 respondents had a right to rely on what appeared on the face
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.
annotated on their certificate of title was not carried 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 or respective predecessors-in-
interest that could have aroused their suspicion. The non-bank
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.

VI The main purpose of the Torrens system is to avoid possible

conflicts of title to real estate and to facilitate transactions
THE COURT OF APPEALS PALPABLY ERRED IN relative thereto by giving the public the right to rely upon the
REVERSING ITSELF BY NOW HOLDING THAT face of a Torrens certificate of title and to dispense with the
RESPONDENTS WHO ARE LAWYERS, RESPONSIBLE need of inquiring further, except when the party concerned has
CITIZENS AND WELL-RESPECTED RESIDENTS IN THE actual knowledge of facts and circumstances that should impel
COMMUNITY, ARE EXEMPTED FROM THE EFFECTS OF a reasonably cautious man to make such further inquiry. Where
THE CONSTRUCTIVE NOTICE ARISING FROM innocent third persons, relying on the correctness of the
REGISTRATION. certificate of title thus issued, acquire rights over the property,
the court cannot disregard such rights and order the total
VII 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
THE COURT OF APPEALS PALPABLY ERRED IN
under the Torrens system would have to inquire in every
REVERSING ITSELF WITH REGARDS TO TRADERS ROYAL
instance as to whether the title has been regularly or irregularly
BANK, AFTER THE LATTER HAS PERFECTED ITS APPEAL
issued by the court. Every person dealing with registered land
TO THE SUPREME COURT.
may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go
VIII beyond the certificate to determine the condition of the
property.
THE COURT OF APPEALS PALPABLY ERRED IN NOT
RULING ON THE COUNTER-ASSIGNMENT OF ERROR The Torrens system was adopted in this country because it
THAT: was believed to be the most effective measure to guarantee
the integrity of land titles and to protect their indefeasibility
B) THE LOWER COURT ERRED IN NOT HOLDING THAT once the claim of ownership is established and recognized. If a
DEFENDANTS ARE BOUND BY THE DECISION IN CIVIL person purchases a piece of land on the assurance that the
CASE NO. Q-10453. seller's title thereto is valid, he should not run the risk of being
told later that his acquisition was ineffectual after all. This
Subsequently, G.R. No. 118862 was consolidated with G.R No. would not only be unfair to him. What is worse is that if this
114299, pursuant to this Court's Resolution dated July 3, were permitted, public confidence in the system would be
1996. 15 eroded and land transactions would have to be attended by
complicated and not necessarily conclusive investigations and
The consolidated cases primarily involve two issues: (1) who, proof of ownership. The further consequence would be that
as between the Capays and the non-bank respondents, has a land conflicts could be even more numerous and complex than
better right to the disputed property, and (2) whether or not they are now and possibly also more abrasive, if not even
TRB is liable to the Capays for damages. 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
On the first issue, we rule for the non-bank respondents. law are satisfied. 16

I Second, the foregoing rule notwithstanding, the non-bank

respondents nevertheless physically inspected the properties
First, when TRB purchased the property at the foreclosure and inquired from the register of Deeds to ascertain the
sale, the notice of lis pendens that the Capays caused to be absence of any defect in the title of the property they were
purchasing — an exercise of diligence above that required by Q What was his answer?
law.
A That it was a property with a clean title, that he has shown
Thus, respondent Aida Fernando Meeks, who bought Lot 5 for me the mother title and it is a clean title.
her son Dean, testified:
Q Aside from being informed that it is a property with a clean
Q How did you come to live in Baguio City, particulary in Kim. title, did you do anything to answer your question?
2.5 San Luis, Baguio City?
A Yes, sit.
A In one of my visits to my sister who has been residing here
for twelve (12) years now, I got interested in buying a property Q What did you do?
here.
A Well, the first step I did was to go to the Land Registration
Q How did you come to know of this property at Asin Road Office.
where you now reside?
Q Are you referring to the City Hall of Baguio?
A My sister, Ruth Ann Valdez, sir.
A Yes, the City Hall of Baguio.
Q When this particular property was bought by you, when was
that? Q And what did you do in the Registry of Deeds?

A I do not remember the exact date, but it was in 1984, sir. A We looked for the title, the original title, sir.

Q At the time when you went to see the place where you now Q When you say we, who was your companion?
reside, how did it look?
A Mr. Alcantara and my present husband, sir.
A This particular property that I bought was then a small one
(1) room structure, it is a two (2)-storey one (1) bedroom
structure. Q The three (3) of you?

Q What kind of structure with regards to material? A Yes, sir.

A It is a semi-concrete structure, sir. Q What title did you see there?

Q And aside from this two (2)-storey one (1)-room structure, A We saw the title that was made up in favor of Amado Cruz,
how did the surrounding area look like at the time you visited? sir.

A There were stone walls from the road and there were stone Q And what was the result of your looking up for this title in the
walls in front of the property and beside the property. name of Amado Cruz?

Q At the time you went to see the property with your agent, A We had to be reassured that it was a genuine one, so we
rather your sister Ruth Ann Valdez did you come to know the asked Atty. Diomampo who heads the office. We showed him a
owner? copy of that title and we were also reassured by him that
anything that was signed by him was as good as it is.
A We did because at the time we went there, Mr. Alcantara
was there supervising the workers. Q Did this Atty. Diomampo reassure you that the title was
good?
Q And who?
A He did.
A Amado Cruz sir.
Q After your conversation with the Register of Deeds, what did
you do?
Q After you saw this property, what else did you do?
A The second step we did was to confer with our lawyer, a
A My first concern then was am I buying a property with a clean friend from RCBC Binondo, Manila this is Atty. Nelson Waje.
title.
Q What is your purpose in going to this lawyer?
Q In regards to this concern of yours, did you find an answer to
this concern of yours?
A We wanted an assurance that we were getting a valid title
just in case we think of buying the property.
A At first; I asked Mr. Alcantara and I was answered by him.
Q What was the result of your conference with this lawyer? Q When you went to see the place, could you please describe
what you saw at that time?
A He was absolutely certain that was a valid title.
A When we went there the area is still being developed by Mr.
Q Mrs. Meeks, after looking at the place, going to the Register Alcantara. As a matter of fact the road leading to the property is
of Deeds, looking at the title and seeing your lawyer friend, still not passable considering that during that time it was rainy
what decision did you finally make regarding the property? season and it was muddy, we fell on our way going to the
property and walked to have an ocular inspection and physical
A We wanted more reassurances, so we proceeded to Banaue, check on the area, sir.
as advised by that same lawyer, there is another office of the
Bureau of Lands. I cannot recall the office but it has something x x x           x x x          x x x
to do with registration of the old.
Q What was the improvement, if any, that was in that parcel
Q What is your purpose in going to this Office in Banaue? which you are going to purchase?

A I wanted more reassuances that I was getting a valid title. A During that time, the riprap of the property is already there,
the one-half of the riprap sir.
Q What was the result of your visit to the Banaue Office?
Q Do you know who was making this improvement at the time
A We found the title of this property and there was reassurance that you went there?
that it was a clean title and we saw the mother title under the
Hilario family. A I would understand that it was Marcial Alcantara, sir.

Q Mrs. Meeks, when you say Banaue, what particular place is Q After you saw the place riprap and you were in the course of
this Banaue? deciding to purchase this property, what else did you do?

A It is in Banaue Street in Quezon City, sir. A First, I have to consider that the property is clean.

Q And when you saw the title to this property and the mother Q How did you go about determining whether the title of the
title, what was the result of your investigation, the investigation property is clean?
that you made?
A Considering that Marcial Alcantara is a real estate broker, I
A We were reassured that we were purchasing a valid title, we went to his office and checked the documents he has regarding
had a genuine title. the property.

Q When you were able to determine that you had a valid, Q And what was the result of your checking as to whether the
authentic or genuine title, what did you do? title of the property is clean?

A That is when I finally thought of purchasing the property. 17 A He showed me the copy of the title and it was clean, sir.

Telesforo Alfelor II, the purchaser of Lot 4, narrated going Q Aside from going to Mr. Alcantara to check up the title of the
through a similar routine: property, what else did you do?

Q How did you come to know of this place as Asin Road where A Well, the next thing is I requested his wife to accompany me
you are presently residing? to the Bureau of Lands or rather the Registry of Deeds, sir.

A It was actually through Mrs. Flory Recto who is presently the Q What registry of Deeds are you referring to?
Branch Manager of CocoBank. She informed my wife that there
is a property for sale at Asin Road, and she was the one who A The Registry of Deeds of Baguio City, sir.
introduced to us Mr. Alcantara, sir.
Q And were you able to see the Register of Deeds regarding
Q When you were informed by Mrs. Recto and when you met what you would like to know?
with Mr. Alcantara, did you see the property that was being
offered for sale? A Yes, and we were given a certification regarding this
particular area that it was clean, sir.
A Yes, sir.
Q What Certification are you referring to?
Q When did you specifically see the property, if you can recall?
A It is a Certification duly signed by the employee of the
A I would say it is around the third quarter of 1983, sir. Registry of Deeds Adelina Tabangin, sir.
Q Do you have a copy of that Certification?
A Yes, I have, sir. 18
The testimonies of Honorato Santos 19 and Josefina Pe 20 were
to the same effect.
The non-bank respondent predecessor-in-interest, Marcial
Alcantara, was less thorough:
Q And when you went there to see the place, did you actually
go there to see the place?
A By walking, I parked my car a kilometer away, sir.
Q Is it my understanding that when you went to see the
property there were no roads?
A None, sir.

Q And will you give a brief description of what you do? x x x           x x x          x x x

A I normally acquire land, quite big tract of land and subdivide it Q Mr. Alcantara, when you went to see this place at Asin Road
into smaller lots and sold it to some interested parties. last week of March, 1983, will you please briefly describe how
this place looked like at that time?
Q Specifically, Mr. Alcantara will you please inform the Court in
what place in Baguio have you acquired and subdivided and A The place was mountainous, grassy, there were cogon trees,
sold lots? some of the roads were eroding already, so we cannot possibly
enter the property, sir.
A Dominican Hill, Leonila Hill, Cristal Cave and Asin Road, sir.
Q At the time you entered the place, was there any visible sign
Q You mentioned Asin Road, what particular place in Asin of claim by anyone?
Road are you referring?
A None, sir.
A That property I bought from Emelita Santiago, sir.
Q In terms of fence in the area?
Q When you say you bought it from Emelita Santiago, how did
you come to know that Emelita Santiago is disposing of the A There is no such, sir.
property?
x x x           x x x          x x x
A Because of the father, he is the one who offered me the
property, sir, Armando Gabriel. Q Aside from looking or going to the property, what else did
you do to this property prior to your purchase?
Q Is he also a resident of Baguio?
A I investigated it with the Register of Deeds, sir.
A He is from Buyagan, La Trinidad sir,
Q What is your purpose in investigating it with the Register of
Q How did you come to know of this Armando Gabriel wanting Deeds?
to sell a property in Asin?
A To see if the paper in clean and there are no encumbrances,
A He approached me in the house, sir. He has acquired a title sir.
from the Traders Royal Bank.
Q To whom did you talk?
Q Can you inform the Honorable Court when you had this
conversation with Armando Gabriel on the sale of the property A To Atty. Ernesto Diomampo, sir.
at Asin Road?
Q And when you went to the Registry of Deeds to investigate
A Later part of March, 1983, sir. and check, did you have occasion to talk with Atty. Diomampo?

Q Now, when this Armando Gabriel informed you that he wants A Yes, sir.
his property to be sold, what did you do?
Q And what was the result of your talk with Atty. Diomampo?
A I went to the place with the agent, sir.
A The papers are clean except to the annotation at the back
Q When you say you went to the place with the agent, what with the road right of way, sir.
place?
Q After making this investigation with the Register of Deeds
A Kilometer 2, Asin Road sir. and talking with Atty. Diomampo, what else transpired?

A We bought the property, sir.

Q After purchasing the property from Emelita Santiago, could back on March 17, 1967 but the same was not TRB's title. The
you please tell the Honorable Court what you did with that deed Capays and their counsel Atty. Ramon A. Gonzales knew in
of sale? 1968 of the extra-judicial foreclosure sale of the property to
TRB and the consolidation of title in the bank's name following
A We registered it with the Register of Deeds for the Certificate the lapse of the one-year period of redemption. But in the next
of Title because at that time when we bought the property, fifteen (15) years or so, they did not bother to find out the
Emelita Santiago had it subdivided into six (6) lots, sir. status of their title or whether the liens noted on the original
certificate of title were still existing considering that the property
Q Is it our understanding that prior to your purchase the had already been foreclosed. In the meantime, the subject
property had undergone a series of transfers to buyers in good
property was subdivided into six (6) parcels?
and for value. It was not until after the land was subdivided and
developed with the buyers building their houses on the other
A Yes, sir. lots when the Capays suddenly appeared and questioned the
occupants' titles. At the very least, the Capays are guilty of
Q Could you please inform the Honorable Court if you have laches. Laches has been defined as the failure or neglect, for
any buyers in the subdivision of this property prior to your an unreasonable and unexplained length of time, to do that
purchase? which by exercising due diligence could nor should have been
done earlier; it is negligence or omission to assert a right within
A Yes, I have. a reasonable time, warranting presumption that the party
entitled to it either has abandoned it or declined to assert it. 23
Q This subdivision of this property, to what office was it brought
for action? Verily, the principle on prescription of actions is designed to
cover situations such as the case at bar, where there have
A Bureau of Lands, San Fernando, La Union, sir. 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.
Q Now, 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 Independently of the principle of prescription of actions working
subdivision or claiming the property? against petitioners, the doctrine of laches may further be
counted against them, which latter tenet finds application even
to imprescriptible
A None, sir.
actions. . . . 24

Q When the Deed of Sale was executed and you said that you
In De La Calzada-Cierras vs. Court of Appeals, 25 we held:
presented it to the Register of Deeds and after the subdivision
already, what action did the Register of Deeds have regarding
the matter? 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
A They approved it and registered it already in six (6) titles, sir.
Grains, Inc. vs. Intermediate Appellate Court, 171 SCRA 612),
the petitioners cannot invoke said dictum because their action
Q In whose names? to recover Lot 4362 is barred by the equitable doctrine of
laches.
A One (1) title under my name, Amado Cruz and Dr. Sanchez,
sir. The act of registering the conveyance to Rosendo was
constructive notice to the whole world of the fact of such
Q Initially, Mr. Alcantara, you said that you are the sole conveyance (Heirs of Maria Marasigan vs. Intermediate
purchaser of this entire area of One Thousand Five Hundred Appellate Court, 152 SCRA 253).
Ninety One (1,591) Square Meters. Now, you are informing this
Honorable Court that one Amado Cruz and one Dr. Sanchez But the petitioners' complaint to recover the title and
were also issued two (2) titles. Could you explain how these possession of Lot 4362 was filed only on July 21, 1981, twelve
titles came into their possession? (12) years after the registration of the sale to Rosendo. The
petitioners failed and neglected for an unreasonably long time
A Actually, two (2) are our co-owners, sir. to assert their right, if any, to the property in Rosendo's
possession.
Q So, is it our understanding that the Deed of Sale from
Emelita Santiago is in favor of these two (2) Atty. Cruz and Dr. Being guilty of laches, the Capays cannot invoke the ruling
Sanchez? in Villasor vs. Camon Levin Bass and Director of Lands vs.
Reyes 26 to the effect that entry of the notice of lis pendens in
A Yes, sir.  21 the day book (primary entry book) is sufficient to constitute
registration and such entry is notice to all persons of such
Third, between two innocent persons, the one who made it adverse claim. Certainly, it is most iniquitous for the Capays
possible for the wrong to be done should be the one to bear the who, after sleeping on their rights for fifteen years to assert
resulting loss. 22 The Capays filed the notice of lis pendens way ownership over the property that has undergone several
transfers made in good faith and for value and already property. It cannot be allowed to hide behind the law which it
subdivided into several lots with improvements introduced itself violated.
thereon by their owners.
TRB cannot feign ignorance of the existence of the lis
In the same vein, the cases cited by the Capays in their first pendens because when the property was foreclosed by it, the
two (2) assignment of errors, do not help them any, as the notice of lis pendens was annotated on the title. But when TCT
transferees in said cases were not innocent purchasers for No. T-6595 in the name of the Capay spouses was cancelled
value and in good faith. In Tuazon vs. Reyes and after the foreclosure, TCT No. T-16272 which was issued in
Siochi, 27 where the land involved therein was sold by Petronilo place thereof in the name of TRB did not carry over the notice
David to Vicente Tuazon, it was with a deed containing the of lis pendens.
recital that the land was in dispute between the vendor and
Roberto Siochi. Tuazon, who was merely subrogated to the We do not find the Capays guilty of "inaction and negligence"
rights of the vendor was aware of the dispute and, furthermore, as against TRB. It may be recalled that upon the
David did not warrant the title to the same. In Rivera vs. commencement of foreclosure proceedings by TRB, the
Moran, 28 Rivera acquired interest in the land before the final Capays filed an action for prohibition on September 22, 1966
decree was entered in the cadastral proceedings. Rivera, the against the TRB before the CFI to stop the foreclosure sale.
transferee, was aware of the pending litigation and, Failing in that attempt, the Capays filed a supplemental
consequently, could not have been considered a purchaser in complaint for the recovery of the property. The case reached
good faith. Similarly, in Atun, et al. vs. Nuñez, et this Court. Prescription or laches could not have worked
al. 29 and Laroza vs. Guia, 30 the buyers of the property at the against the Capays because they had persistently pursued
time of their acquisition knew of the existence of the notice their suit against TRB to recover their property.
of lis pendens. In contrast to the cited cases, the non-bank
respondents in the case at bar acquired their respective On the other hand, it is difficult to believe TRB's assertion that
portions of the land with clean title from their predecessors-in- after holding on to the property for more than ten (10) years, it
interest. suddenly realized that it was acting in violation of the General
Bank Act. What is apparent is that TRB took advantage of the
II absence of the notice of lis pendens at the back of their
certificate of title and sold the property to an unwary purchaser.
We come now to TRB's liability towards the Capays. This notwithstanding the adverse decision of the trial court and
the pendency of its appeal. TRB, whose timing indeed smacks
The Bank unconvincingly tries to wash its hands off the present of bad faith, thus transferred caused the property without the lis
controversy, and attempts to shift the blame on the Capays, pendens annotated on its title to put it beyond the Capays'
thus: reach. Clearly, the bank acted in a manner contrary to morals,
good customs and public policy and should be held liable for
damages. 34
x x x           x x x          x x x

Considering however, that the mortgage in favor of TRB had

23. The petitioner Bank, during all the time that it was holding
been declared null and void for want of consideration and,
the title for over fourteen (14) years that there was no legal
consequently, the foreclosure proceedings did not have a valid
impediment for it to sell said property, Central Bank regulations
effect, the Capays would ordinarily be entitled to the recovery
require that real properties of banks should not he held for
of their property. Nevertheless, this remedy is not now
more than five (5) years:
available to the Capays inasmuch as title to said property has
passed into the hands of third parties who acquired the same in
24. The fault of the Register of Deeds in not carrying over the good faith and for value. Such being the case, TRB is duty
Notice of Lis Pendens to the new title of the petitioner Bank bound to pay the Capays the fair market value of the property
should not be absorbed by the latter considering that in all at the time it was sold to Emelita Santiago, the transferee of
good faith, it was not aware of the existence of said annotation TRB.
during all the time that said title was in its possession for
almost fourteen (14) years before the property was sold to
WHEREFORE, the Decision of the Court of Appeals dated
Emelita G. Santiago. . . . 31
Frebruary 24, 1994 in CA-G.R. CV No. 33920, as modified by
its Resolution dated August 10, 1994 is hereby AFFIRMED. In
TRB concludes that "(t)he inaction and negligence of private addition, Traders Royal Bank is ordered to pay the Capays the
respondents allowing ownership to pass for almost 15 years fair market value of the property at the time it was sold to
constitute prescription of action and/or laches." 32 Emelita Santiago.

Sec. 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 hoding on to the foreclosed
property for twelve (12) years after consolidating title in its
name. The bank is, therefore, estopped from involving banking
laws and regulations to justify its belated disposition of the
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 Ynares-Santiago, JJ.,
concur.