G.R. No. 119088 ; June 30, 2000
ZAIDA RUBY S. ALBERTO, petitioner, vs. COURT OF APPEALS, EPIFANIO J. ALANO, CECILIA P. ALANO, YOLANDA P. ALANO, and NATALIA REALTY, INC., respondents.

FACTS

Petitioner Atty. Zaida Ruby S. Alberto entered into a contingent fee retainer agreement with respondent spouses Epifanio and Cecilia Alano to represent them in an SEC case for the recovery of corporate assets. The agreement entitled Alberto to 10% of any real estate awarded and a monetary fee. During the pendency of the case, the Alanos settled with the opposing parties without Alberto’s knowledge and moved to dismiss the SEC case. The Alanos received 35 hectares of land from the settlement but refused to pay Alberto’s fees. Alberto secured a final judgment declaring her entitled to 3.5 hectares and a monetary award, which constituted an attorney’s lien on the properties.
Upon execution, Alberto discovered that prior to the dismissal of the SEC case, the Alanos had sold over 23 hectares of the settlement land to their daughter, Yolanda Alano. Alberto filed a second amended complaint to annul the deed of sale as a simulated transaction to defraud her of her fees and caused the annotation of a notice of lis pendens on the titles. The trial court dismissed the complaint for insufficiency of cause of action, and the Court of Appeals affirmed, ruling that the sale was executed before Alberto’s collection case was filed and that she was not a party to the deed.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of the second amended complaint for insufficiency of cause of action and in ordering the cancellation of the notice of lis pendens.

RULING

Yes, the Supreme Court reversed the Court of Appeals. On the dismissal, the Court held that in a motion to dismiss based on failure to state a cause of action, the test is the sufficiency of the allegations in the complaint, assuming them to be true. Alberto’s complaint adequately alleged that the deed of sale was simulated to frustrate her vested right to the contingent fee, constituting a cause of action for annulment. The timing of the sale, executed days before the Alanos moved to dismiss the SEC case, supported the allegation of fraud. The trial court erred in considering extraneous matters, like the date of the filing of the prior collection case, which are irrelevant at the motion to dismiss stage.
Regarding the lis pendens, the Court ruled that its cancellation was improper. A notice of lis pendens is a mere warning to prospective purchasers and does not require prior proof of the applicant’s interest in the property; it only requires that an affirmative relief affecting title is claimed in the action. Alberto’s action for annulment of the deed of sale directly affected title to the properties, making the annotation appropriate. The rules on lis pendens are to be liberally construed to protect a party’s rights pending litigation, not to defeat substantial justice on technicalities. The case was remanded for trial.