UP Law BGC Eve 2024 HSLB v.

Felonia
Civil Procedure Notice of lis pendens
SUMMARY
Felonia mortgaged its property to Delgado but through a Deed of
Sale instead of a REM. Felonia filed a case to reform the
contract to REM. Meanwhile, Delgado assuming she is now the
owner of the property, mortgaged the same to HSLB. HSLB
foreclosed and bought the property. But Felonia filed for the
annulment of foreclosure and sale to HSLB since Delgado is not
the owner. SC ruled that the mortgage lien of HSLB cannot be
carried over to Felonia’s title since HSLB must be aware of the
Notice of Lis Pendens when HSLB bought the property.
2014 Perez
DOCTRINE
A notice of lis pendens is an announcement to the whole world
that a real property is in litigation, serving as a warning that
anyone who acquires an interest over the property does so at
his/her own risk, or that he/she gambles on the result of the
litigation over the property. It is a warning to prospective buyers
to take precautions and investigate the pending litigation. The
purpose of a notice of lis pendens is to protect the rights of the
registrant while the case is pending resolution or decision.

FACTS

 Respondents Felonia and De Guzman are owners of a parcel of land. In 1990, they mortgaged the property to Delgado to secure
their loan of P1.66M. But instead of a real estate mortgage, the parties executed a Deed of Absolute Sale with an Option to
Repurchase.
 RTC Manila (Reformation Case)
o Felonia filed an action for Reformation of Contract.
o RTC ruled in favor of Felonia. The contract of Deed of Sale was reformed to that of a mortgage since it was the intention.
o October 2000: This decision became final and executory in the Court of Appeals.
 RTC Las Piñas (Consolidation Case)
o In 1994: Delgado filed a Petition for Consolidation of Ownership of Property Sold with an Option to Repurchase and
Issuance of a new Certificate of Title
o RTC ordered the issuance of a new title in favor of Delgado. (This is due to the “Deed of Sale” pending the Reformation
Case)
 CA (Consolidation Case)
o Felonia filed a petition for annulment of judgment.
o Meanwhile…
 Delgado mortgaged the property to Homeowners Savings and Loan Bank (HSLB) using Delgado’s new title.
 June 1995: HSLB caused the annotation of the mortgage in Delgado’s title.
 September 1995: Felonia cause the annotation of a Notice of Lis Pendens in Delgado’s title (referring to the
pending Reformation case).
 November 1997: HSLB foreclosed the property and was able to buy it causing the issuance of new title to its
favor.
o CA reversed RTC decision. CA canceled the title of Delgado and reinstated the title of Felonia.
o December 2000: This decision became final and executory.
 RTC Las Piñas (The Present Case)
o Felonia filed a case for the Nullity of Mortgage and Foreclosure Sale, Annulment of Titles of Delgado and HSLB, and
Reconveyance of Possession and Ownership
o HSLB arguments:
 Felonia is barred from laches in annotating the Notice of Lis Pendens on time.
 HSLB must not be bound by the decision of CA in the Reformation and Consolidation cases since it is not a
party therein.
 HSLB is a mortgagee in good faith because the mortgage between Delgado and Felonia was annotated in June
1995, while the Notice of Lis Pendens was annotated only in September 1995.
o RTC ruled in favor of Felonia as the absolute owner of the property. RTC reinstated the title of Felonia and declared the
foreclosure by and sale to HSLB null and void.
 CA affirmed RTC decision (The Present Case)
 SC
o HSLB arguments:
 HSLB does not question the reinstatement of the title to Felonia. What HSLB wants is to carry over the
mortgage lien in favor of HSLB annotated in Delgado’s title to that of Felonia’s, since they are mortgagee
in good faith.

RATIO

W/N the mortgage lien in favor of HSLB annotated in Delgado’s title can be carried over to that of Felonia’s for the reason that
HSLB is a mortgagee in good faith?

NO. While HSLB is a mortgagee in good faith, it was not a purchaser in good faith. When HSLB foreclosed and bought the
subject property, the Notice of Lis Pendens was already annotated to the title. Hence, HSLB must be aware of the legal
repercussions the Notice entails. By the final decision of CA in the Reformation case, the title of Delgado is nullified. There is
no reason for the mortgage lien to be carried over to Felonia’s title.

 HSLB was initially a mortgagee in good faith. When Delgado mortgaged the property to HSLB, the title did not contain any
annotation that would arise HSLB’s suspicion. HSLB had no obligation to undertake further investigation.
 However, in this case, the question is not whether HSLB is a mortgagee in good faith, but whether HSLB is a purchase in good
faith.
 In this case, when the property was mortgaged to HSLB, there was no annotation of the Notice of Lis Pendens. However,
when HSLB foreclosed and bought the property, the Notice of Lis Pendens was already annotated on the title. HSLB already
had actual knowledge of the annotation, but it continued with the purchase knowing the legal repercussions a notice of lis
pendens entails.
  When the Reformation case became final, the Deed of Sale contract was reformed into a mortgage. Hence, Delgado is not the
owner of the property and Delgado’s title must be nullified. Therefore, Delgado cannot mortgage the same to HSLB. There is
no reason to have HSLB’s mortgage lien carried over to Felonia’s title.

Notice of Lis Pendens

 Lis pendens is a Latin term which literally means “a pending suit or a pending litigation” while a notice of lis pendens is an
announcement to the whole world that a real property is in litigation, serving as a warning that anyone who acquires
an interest over the property does so at his/her own risk, or that he/she gambles on the result of the litigation over the
property. It is a warning to prospective buyers to take precautions and investigate the pending litigation.
 The purpose of a notice of lis pendens is to protect the rights of the registrant while the case is pending resolution or
decision. With the notice of lis pendens duly recorded and remaining uncancelled, the registrant could rest secure that he/she
will not lose the property or any part thereof during litigation.
 The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the subject
matter of the litigation within the Court's jurisdiction until the judgment or the decree have been entered; otherwise, by
successive alienations pending the litigation, its judgment or decree shall be rendered abortive and impossible of execution.

FALLO

Petition is DENIED. The mortgage lien of HSLB cannot be carried over to the title of Felonia.