GR 167098; (March, 2008) (Digest)
G.R. No. 167098 ; March 28, 2008
PHILIPPINE VETERANS BANK, Petitioner, vs. BENJAMIN MONILLAS, Respondent.
FACTS
Respondent Benjamin Monillas executed a deed of sale for his share of an inherited property to his brother Ireneo in 1973, based on a representation that it was for securing a loan. Ireneo transferred the title, subdivided the land, and in 1978, mortgaged 22 of the resulting lots to petitioner Philippine Veterans Bank (PVB). In 1981, Benjamin sued Ireneo to annul the 1973 deed. While that case was pending, PVB foreclosed the mortgage in 1984 and became the highest bidder. It was only in March 1985 that Benjamin caused the annotation of a notice of lis pendens on the titles concerning his pending case against Ireneo.
The RTC later declared the 1973 deed void, a decision which became final in 1991. PVB’s titles to the foreclosed properties were issued in 2002. Benjamin then filed a new case in 2003 against PVB and the Register of Deeds, seeking to cancel the mortgage, foreclosure, and PVB’s titles. The RTC ruled in favor of Benjamin, declaring all transactions and titles in PVB’s name null and void. The court held PVB was bound by the outcome of the earlier case because of the annotated lis pendens, which gave PVB knowledge of an impediment to its interest.
ISSUE
Whether a prior registered mortgage and a concluded foreclosure sale prevail over a subsequent annotation of a notice of lis pendens on the property titles.
RULING
The Supreme Court ruled in favor of PVB, reversing the RTC. The legal logic is anchored on the principle of priority in registration under the Torrens system. A prior registered lien, such as PVB’s mortgage registered in 1978, creates a preference. The subsequent annotation of the notice of lis pendens in 1985 cannot defeat the rights of the mortgagee or the purchaser at the foreclosure sale derived from that prior valid registration. To rule otherwise would render the prior registration nugatory.
The Court clarified that a notice of lis pendens operates prospectively, affecting only transactions subsequent to its annotation. It does not have retroactive effect to invalidate prior registered rights. PVB’s rights as mortgagee and later as purchaser at the foreclosure sale, which occurred before the lis pendens annotation, were thus protected. The Court also found PVB to be a mortgagee in good faith, as it had no knowledge of any infirmity in Ireneo’s title at the time the mortgage was constituted. Consequently, the mortgage, foreclosure, and PVB’s titles were declared valid.