Not mortgagee in good faith; effect of notice of lis pendens - G.R. No. 165338

G.R. No. 165338

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No circumstances were present in Sorensen’s petition which would warrant the liberal application of the rules to serve the needs of justice.

In claiming that the CA erred in dismissing her petition, Sorensen alleges that the appellate court glossed over the merits of her certiorari petition. She maintains that as an innocent mortgagee for value, she has the superior right to remain in custody of the owner’s copy of TCT No. 117531. She insists that she merely relied on the four corners of said TCT which at the time of the transaction did not contain any annotation of lis pendens.

We are not impressed. True, when a mortgagee relies upon what appears on the face of a Torrens title and lends money in all good faith on the basis of the title in the name of the mortgagor, only thereafter to learn that the latter’s title was defective, being thus an innocent mortgagee for value, his or her right or lien upon the land mortgaged must be respected and protected.[86] The rationale for this ruling is, if the rule were otherwise public confidence in the certificate of title would be impaired as everyone dealing with property registered under the Torrens system would have to inquire on the regularity of its issuance.

Such is not the case in the present controversy however. As borne out by the records, Mahinay’s Notice of Lis Pendens was duly annotated on the original copy of TCT No. 117531 as early as August 17, 1994. On the other hand, the Real Estate Mortgage upon which Sorensen based her alleged superior right was executed only on October 27, 1994 and inscribed at the back of said title only on the following day, October 28, 1994. The prior registration of Mahinay’s Notice of Lis Pendens bound thewhole world,[87] including Sorensen. It charged her with notice that the land being offered to her as security for the loan is under litigation and that whatever rights she may acquire by virtue of the Real Estate Mortgage are subject to the outcome of the case.[88] More importantly, it also gave Mahinay a preferential right over subsequent liens and encumbrances annotated on the title.[89] “It is settled that in this jurisdiction the maximprior est in tempore, potior est in jure (he who is first in time is preferred in right) is followed in land registration.[90] Having registered his instrument ahead of Sorensen’s Real Estate Mortgage, Mahinay’s Notice of Lis Pendens takes precedence over the said Real Estate Mortgage.

The claim of Sorensen that the owner’s copy of TCT No. 117531 does not contain any adverse annotation at the time the owners transacted with her is of no moment. Being in the nature of involuntary registration, the annotation of the Notice of Lis Pendens on the original copy of TCT No. 117531 on file with the Registry of Deeds is sufficient to bind third parties. It affects the whole world even if the owner’s copy does not contain the same annotation. The reason for this ruling was explained in Yu v. Court of Appeals:[91]

The annotation of a notice of lis pendens at the back of the original copy of the certificate of title on file with the Register of Deeds is sufficient to constitute constructive notice to purchasers or other persons subsequently dealing with the same property. It is not required that said annotation be also inscribed upon the owner's copy because such copy is usually unavailable to the registrant; it is normally in the hands of the adverse party, or as in this case, in the hands of a stranger to the suit.

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Third persons like the respondent-spouses should not be satisfied with merely examining the owner's copy of the certificate of title. They should examine the original on file with the Register of Deeds for they are all constructively notified of pending litigations involving real property through notices of lis pendens annotated therein.

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