G.R. No. 173834; April 24, 2009
ISABELITA CUNANAN, CAROLYN CUNANAN and CARMENCITA F. NEMOTO, Petitioners, vs. JUMPING JAP TRADING CORPORATION, represented by REUBEN M. PROTACIO, Respondent.

FACTS

Petitioner Carmencita F. Nemoto is the registered owner of a property in Ayala Alabang covered by TCT No. 213246. Respondent Jumping Jap Trading Corporation filed Civil Case No. 01-098 seeking annulment of Nemoto’s deed of sale and title, and reconveyance of the property, claiming a superior right based on a prior conditional sale and payments made. On April 19, 2001, respondent caused the annotation of a notice of lis pendens on the title. Despite this, on July 20, 2001, Carmencita executed a deed of real estate mortgage over the property in favor of petitioners Isabelita and Carolyn Cunanan to secure a loan. On July 18, 2001, the RTC dismissed Civil Case No. 01-098 and ordered the cancellation of the lis pendens. An amended order to that effect was issued on July 23, 2001, and the Register of Deeds cancelled the lis pendens and annotated the mortgage on the same day. However, the RTC later granted respondent’s motion for reconsideration on October 24, 2001, and the lis pendens was re-annotated on December 12, 2001. The RTC ultimately decided Civil Case No. 01-098 in favor of respondent on February 26, 2002. Meanwhile, the Cunanans extrajudicially foreclosed the mortgage on July 17, 2002. Respondent then filed Civil Case No. 02-189 to nullify the mortgage and foreclosure. The RTC ruled for respondent, declaring the mortgage void and the foreclosure proceedings invalid, a decision affirmed by the Court of Appeals.

ISSUE

Whether or not the Cunanans are bound by the notice of lis pendens which was ordered cancelled by the RTC, and consequently, whether they are mortgagees in good faith.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The Cunanans are bound by the notice of lis pendens. At the time the mortgage deed was executed on July 20, 2001, the lis pendens annotation was still subsisting on the title, as it was only cancelled by the Register of Deeds on July 23, 2001. The earlier RTC orders directing cancellation did not immediately nullify the lis pendens, as under Section 77 of P.D. No. 1529, a notice of lis pendens is deemed cancelled only upon registration of a certificate from the clerk of court stating the final disposition of the case in favor of the defendant. Furthermore, the Cunanans cannot be considered mortgagees in good faith. The principle that one need only rely on the face of a Torrens title does not apply when the party has actual knowledge of facts that would impel a reasonably prudent man to inquire. The Cunanans were aware of the pending litigation (Civil Case No. 01-098) involving the property, as the dismissal order was not yet final and was subsequently reconsidered. Their knowledge of the litigation and its pendency made them mortgagees in bad faith. Therefore, the mortgage was void, and the subsequent foreclosure proceedings were likewise invalid.