G.R. No. 140337; September 27, 2007
AKE HERNUDD, GOSTA JANSBO, HANS BRYNGELSSON, PETER LOFGREN and JORDANA HOLDINGS CORPORATION, for itself and on behalf of San Remo Development Corp., Inc., Petitioners, vs. LARS E. LOFGREN, LIZA SALCEDO-LOFGREN, LEOSYL SALCEDO and SAN REMO DEVELOPMENT CORP., INC., Respondents.

FACTS

Petitioners, Swedish nationals forming the Swedish Investors Group (SIG), entered into a Joint Venture Agreement and Contract with respondent San Remo Development Corporation, Inc. (SRDC) and the HILO partnership. The agreements established a 50/50 joint venture for a golf resort project in Cebu, with SIG and HILO extending substantial loans to SRDC. The Joint Venture Contract explicitly stated that loan repayment and profit sharing would be regulated by their agreement and that loans “shall be repaid from company earnings or from sale of the corporate stock” and “shall be repaid in proportion to disposed assets.” Petitioners later filed a complaint for sum of money, alleging that respondent spouses Lofgren, who controlled SRDC, were fraudulently transferring its assets, including parcels of land, to a new corporate entity to render SRDC insolvent and unable to repay the loans. A notice of lis pendens was annotated on the tax declarations of SRDC’s lands.
Respondents moved to cancel the notice of lis pendens, arguing the complaint was a simple collection suit not affecting title to land. The Regional Trial Court granted the motion, ruling the action was purely for collection. Petitioners elevated the case via certiorari to the Court of Appeals, which affirmed the cancellation. Petitioners then filed this Petition for Review before the Supreme Court.

ISSUE

Whether the trial court committed grave abuse of discretion in ordering the cancellation of the notice of lis pendens.

RULING

The Supreme Court granted the petition and ordered the reinstatement of the notice of lis pendens. The Court clarified that a notice of lis pendens is proper in an action that directly affects title to or possession of real property. The determinative factor is not the formal title of the complaint but the nature of the issues and the reliefs sought as gleaned from the allegations.
The Court held that petitioners’ complaint, while ostensibly for sum of money, was not a simple collection case. The allegations of fraudulent asset-stripping and the specific terms of the Joint Venture Contract, which tied loan repayment to the disposition of corporate assets (specifically land), meant that the resolution of the case would necessarily involve determining rights over the specific real properties of SRDC. The relief sought would affect the title to these lands, as any satisfaction of the monetary claim would likely involve these assets. Consequently, the action was one “affecting the title or the right of possession of real property” under Section 14, Rule 13 of the Rules of Court, making the annotation of lis pendens appropriate. The trial court’s contrary finding constituted a grave abuse of discretion.