BISAYA LAND TRANSPORTATION COMPANY INC., PETITIONER-APPELLEE, VS. MIGUEL CUENCO, RESPONDENT-APPELLANT.

In 1959 the Solicitor General, in representation of the Republic,
filed a petition for quo warranto against the Bisaya Land Transportation Co., Inc., seeking its forcible
dissolution on the ground that it had committed and was continuing to commit
acts amounting to a forfeiture of its franchise rights and privileges.  The petition was docketed as special civil
case No. 39766, Court of First Instance of Manila.  Impleaded with the corporation as respondents were its officers, namely,
Miguel Cuenco, Manuel Cuenco,
Lourdes Cuenco, Jose P. Velez, Federico A. Reyes and
Jesus P. Velez.  Alleged in nine
separate causes of action, were numerous violations of law and of the articles
of incorporation, transactions and activities beyond the corporate powers,
fraudulent machinations and channeling of funds and properties for
extra-corporate purposes, and acts of mis­management on the part of the
co-respondents above-mentioned.  The petitioner prayed that during the pendency of the case a receiver be
appointed for the assets of the corporation.

Miguel Cuenco filed his individual
answer to the petition, admitting the allegations therein insofar as the
offending acts of the corporation and of the other indivi­dual respondents were
concerned but disclaiming any parti­cipation in such acts by him.  He joined in the prayer for dissolution as
well as for the appointment of a receiver, and at the same time filed a
cross-claim “in his own behalf as bonafide stockholder
and as director . . . for the benefit of cross-respondent corporation.”
In the eighteen causes of action constituting the cross-claim Miguel Cuenco at­tributed to the individual cross-respondents, as
members of the board of directors of the corporation, the commission of acts which “offend the law of its
creation as well as several applicable statutes, rules and regulations adopted
by the Republic of the Philippines.”  On the cross-claim he prayed that said
individual cross-respondents be ordered to return and/or reimburse to the
Corporation different sums of money aggregating several million pesos, such
return and/or reimburs­ment being, according to him,
“a condition precedent to the receipt of said cross-respondents of any
share in the liquida­ting dividends of the cross-respondent corporation once
its dissolution is decreed by the court.”

On August 31, 1959
Miguel Cuenco, as cross-claimant, filed notice of lis pendens with
the Register of Deeds for the City of Cebu,
covering real properties of the Bisaya Land
Transportation Co., Inc., with transfer certificates of title Nos. 4293 and
3425.  On November 17, 1959 the corporation went to the Court of First Instance of Cebu
and in the original land registration records of said properties filed a petition
for the cancellation of the notice of lis pendens, making Miguel Cuenco the
party-respondent.  The latter presented
his written opposition, and after hearing the court (Hon. Jose S. Rodriguez
presiding), in its decision rendered September 29, 1960, held the annotation of
lis pendens to
be irregular and unwarranted and so ordered its cancellation.  It is from that decision that the present
appeal has been taken.

The subject of lis pendens is dealt with expressly in Rule 14
(formerly Rule 7), Section 24 of the Rules of Court, and indirectly in Section
79 of the Land Registration Act.  They
provide:

“SEC. 24. Notice of lis pendens.- In an action
affecting the title or the right of possession of real property, the plaintiff,
at the time of filing the com­plaint, and the defendant, at the time of filing
his answer, when affirmative relief is claimed in such answer, or at any time
afterwards, may record in the office of the registrar of deeds of the province
in which the property is situated a notice of the pendency
of the action, containing the names of the parties and the object of the action
or defense, and a description of the pro­perty in that province affected
thereby.  From the time only of filing
such notice for record shall a purchaser, or incum­brancer
of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency
against parties designated by their real names.

The notice of lis pendens hereinabove mentioned
may be cancelled only upon or­der of the court, after proper showing that the
notice is for the purpose of molesting the adverse party, or that it is not
necessary to protect the rights of the party who caused it to be recorded.”

“SEC. 79.- No action to recover possession of real estate, or
to quiet title thereto or to remove clouds upon the title thereof, or for the
partition or other proceeding of any kind in court affecting the title to real
estate or the use and occupation thereof or the buildings thereon, and no
judgment or decree, and no proceeding to vacate or reverse any judgment or
decree, shall have any effect upon registered land as against persons other
than parties thereto, un­less a memorandum stating the institu­tion of such
action or proceeding and the court wherein the same is pending and the date of
the institution thereof, containing also a reference to the num­ber of the
certificate of title of the land affected, and the volume and page of the
registration book where it is entered, shall be filed and registered.  This section shall not apply to attach­ments,
levies or execution, or to pro­ceedings far the probate of wills or for
administration of estates of deceased persons in the Court of First Instance;
provided, however, That in case of notice of the pendency
of the action has been duly registered it shall be sufficient to register the
judgment or decree in such action within sixty days after the rendi­tion
thereof.”

Section 24 of Rule 14 authorizes a notice of lis
pendens to be filed by the plaintiff, as well as by the defendant when affirmative
relief is claimed in his answer.  In
either case the action must affect the title or the right of possession of real
property.  The same requirement is
prescribed in Sec­tion 79 of the Land Registration Act.

The crux of the question here is whether or not the petition for
quo warranto filed by the Solicitor General for the
dissolution of the appellee corporation affects the
latter’s title or right of possession to the real pro­perties subject of the lis pendens.  In none of the nine causes of action included
in the Solicitor General’s peti­tion below is there any allegation which puts
in issue such title or right of possession. 
The only issue raised is the propriety of the dissolution of the
corporation upon the grounds set forth in the petition.  To be sure, dissolution of a corporate entity
would result in the liquidation of its assets and the termination of its title
to and right to pos­sess its properties, but this does not mean that they are
affected by the action in the sense which would justify the notation of lis pendens.

A notice of lis pendens is intended for third persons, such as
purchasers or incumbrancers of the pro­perty in
litigation, to the end that the transactions entered into by them subsequent to
the notation may be subject to whatever judgment may be rendered.  The very purpose of this procedural remedy
circumscribes its availability to real actions, that is, actions where the
title to or possession of real property is directly affected.  Thus, for instance, a purchaser of property
involved in an action may lose the same to the winning party therein by virtue
of the notice of lis pendens
made prior to the purchase.  This result
could not conceivably arise in the present case.  Neither the Repub­lic nor respondent
cross-claimant Miguel Cuenco lays any claim of right
or title to the lands covered by the notice: 
they admit ownership thereof by the corporation; indeed the cross-claim is for the latter’s benefit and
against the other individual cross-respondents, who likewise do not claim any
right or title to the said properties. 
As far as the cross-claim is concerned it merely prays that the
cross-respondents be ordered to reimburse the corporation certain sums of money
allegedly realized by them as a result
of their fraudulent transactions.  The
title to or right to possess the properties subject of the lis
pendens is nowhere in issue.

The fact that in case the petitioning corporation is dissolved
its assets will be liquidated and distributed among the stockholders, after
paying off the creditors, and that part of those assets as of the present
consists of the pro­perties now in question, does not convert this proceeding
into a real action involving the title to these properties so as to justify the
notation of lis pendens.  The
rights of the stockholders to the assets will arise only after dissolution of
the corporation, and even then they cannot individually lay claim to any
particular property or any part thereof as
their own except as a result
of the liquidation.  They have therefore
no title or possessory right to protect by the
notice.

Appellant cites the case of Register of Deeds vs. Magdalena
Estate, Inc., G. R. No. L-9102, May
22, 1959.  The citation is
not in point.  The main issue there
involved the power and jurisdiction of the Court of First Instance of Manila,
Branch IV, to order the registered owner of real property to surrender his copy
of the certificate of title so that a notice of lis
pendens may be annotated thereon, considering
that at the time the power and jurisdiction of said court with respect to
“consultas” from Registers of Deedg had been trans­ferred by Republic Act No. 1151 to the
Land Registration Com­missioner.  The
decision dealt but briefly on the question of whether or not the notation of lis pendens was proper.  This Court held that it was, on the ground
that “the complaint… involves a real action and not a personal one,” since the
plaintiffs claimed that they were entitled to 25 per cent of all the assets of
the defendant corporation, including the pro­perties covered by the notice of lis pendens.  There is no similar claim or
pretension in the present case.  The appellee corporation is admittedly the owner of the
properties, and un­til it is dissolved and liquidated no question as to the
title to or possession thereof will arise vis-a-vis
the stockholders as such.

Wherefore,
the decision appealed from is affirmed, with costs.

Reyes, J.B.L., (Acting C.J.), Dizon, Bengzon, J.P., Zaldivar, Sanchez,
and Angeles, JJ.,
concur.