G.R. No. L-26878 December 27, 1972
ALEJANDRA CUARTO VDA. DE LUNA, et al., plaintiffs-appellees, vs. SEVERIANO VALLE, et al., defendants-appellants.

FACTS

The case involves a parcel of agricultural land in Sariaya, Quezon. On December 1, 1928, spouses Nicasio Valle and Maxima Abril executed a private deed of sale with pacto de retro in favor of Sotero de Luna for P3,334.00, with a five-year repurchase period. The vendee, Sotero de Luna, immediately took possession. The vendors obtained a decree of registration on January 31, 1931, but the corresponding Original Certificate of Title (OCT No. O-11568) was only issued on January 13, 1965. The vendors never exercised their right of repurchase. In 1936, Sotero de Luna filed a suit (Civil Case No. 3897) to compel the Valle spouses to acknowledge the private deed before a notary public for registration purposes. This suit was dismissed on the ground of prescription. A motion for reconsideration remained unresolved for decades.
After the OCT was issued in 1965, the heirs of the Valle spouses executed a “Deed of Extra-judicial Partition with Absolute Sale,” adjudicating the land to themselves and subsequently selling it to spouses Domingo Villota and Elena Pabelonia. Upon learning of this, the heirs of Sotero de Luna filed the present suit to have the deed declared void, the OCT cancelled, and a new title issued in their favor. They also caused a notice of lis pendens to be annotated on the OCT on April 19, 1965. The deed of partition and sale was later registered on May 17, 1965, resulting in the issuance of Transfer Certificates of Title (TCTs) in the names of the Valle heirs and then the Villota spouses, both bearing the lis pendens annotation.

ISSUE

The primary issues are: (1) whether the dismissal of the 1936 suit (Civil Case No. 3897) constitutes res judicata or estoppel by judgment barring the present action; and (2) whether the subsequent purchasers, the Villota spouses, are purchasers in good faith and for value entitled to protection under the land registration law.

RULING

The Supreme Court affirmed the lower court’s decision, ordering the reconveyance of the property to the heirs of Sotero de Luna. On the first issue, the Court ruled that res judicata or estoppel by judgment does not apply. Civil Case No. 3897 was an action to compel the formal acknowledgment of a private instrument under the Old Civil Code, dismissed solely on prescription grounds. The present suit is an action to enforce the contractual stipulations of the sale with pacto de retro. There is no identity of causes of action or subject matter between the two cases. Estoppel by judgment requires that the point was actually and directly in issue and determined in the prior suit, which is not present here.
On the second issue, the Court held that the Villota spouses are not innocent purchasers for value protected by the Land Registration Act. Good faith protection under the law extends only to purchasers from the registered owner. At the time of the sale to them, the Valle heirs were not yet the registered owners; they only became so after complying with Rule 74 requirements on May 17, 1965. Crucially, by that date, the lis pendens had already been annotated on the OCT (on April 19, 1965). This annotation charged the Villota spouses with constructive notice of the pending litigation, binding them to any judgment against their transfer