FBM CONSTRUCTION AND AGRO-INDUSTRIAL CORP., PLAINTIFF-APPELLANT, VS. PIO BARRETTO REALTY DEVELOPMENT INC. AND REGISTER OF DEEDS OF ANTIPOLO CITY, DEFENDANTS-APPELLEES.

FBM Construction versus Pio Barretto Realty

The Case

This is an appeal by FBM Construction and Agro-Industrial Corporation against Pio Barretto Realty Development Incorporated and the Register of Deeds of Antipolo City, arising from a complaint for quieting of title with a prayer for preliminary injunction. FBM bought three parcels of land from Honor Moslares and now claims to be a buyer in good faith and for value, while Pio Barretto insists that the titles of Moslares were void and that notices of lis pendens stood annotated on them. The case matters because it fixes the rule on what a notice of lis pendens does to a subsequent purchaser, and how the final judgment in the litigation announced by that notice binds the buyer who came later.

Procedural History

FBM filed its complaint for quieting of title with prayer for preliminary injunction before the Regional Trial Court of Antipolo City, Branch 73. The trial court, after hearing, rendered judgment dismissing the case, with costs against FBM. FBM then brought the matter to the Supreme Court by appeal, assigning as errors the trial court's findings that it was not a buyer in good faith and for value, its disregard of FBM's evidence on the condition of the titles, its supposed failure to apply Article 19 of the Civil Code, and its application of res judicata in favor of Pio Barretto.

Facts

Sometime in 1995, Honor Moslares offered to sell to FBM three parcels of land in Antipolo covered by Transfer Certificates of Title numbered 273837, 273838 and 273751, for a total of 25,000,000 pesos. FBM first bought the lot covered by Transfer Certificate of Title numbered 273838 for 10,000,000 pesos, and a new title was issued in its name. For the two remaining lots, the parties agreed that Moslares would execute a special power of attorney authorizing FBM to obtain a loan from the Rizal Commercial Banking Corporation, the proceeds of which would be applied to the purchase price. FBM obtained the loan and paid Moslares, but Moslares demanded more money and executed the deed of sale over the two remaining lots only in January 1999, after which new titles were issued in FBM's name.

Pio Barretto, for its part, caused the annotation of a notice of lis pendens on the titles of Moslares on July 12, 1995, in connection with a case it had filed against Moslares, and a second notice on January 12, 1996, in connection with a petition for certiorari then pending before the Court of Appeals. The first case was dismissed, but the second reached the Supreme Court and was decided in favor of Pio Barretto on June 28, 2001. When that decision became final, Pio Barretto asked the Register of Deeds to cancel the titles and issue new ones in its name.

FBM then filed this action for quieting of title, claiming it had verified the titles with the Registry of Deeds and found them clean, and that it was an innocent purchaser for value. Pio Barretto answered that the titles of Moslares were void, that the notices of lis pendens were already annotated when FBM bought, and that FBM's titles were void in view of the Supreme Court decision in its favor.

Issues

• Whether or not FBM is a buyer in good faith and for value.
• Whether or not the trial court erred in applying the principle of res judicata in this case.

Applicable Provisions

Article 19 of the Civil Code provides:

Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

FBM invoked this provision to argue that Pio Barretto should not be allowed to profit from its own conduct, but the Court found no basis to apply it against Pio Barretto.

Ruling

On the first issue, the Court held that FBM is not a buyer in good faith and for value. A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, serving as a warning that one who acquires an interest over the property does so at his own risk, or that he gambles on the result of the litigation over it. The filing of the notice charges all strangers with notice of the particular litigation referred to therein, and any right they may thereafter acquire is subject to the outcome of that litigation. The Court found that the notices of lis pendens were already annotated on the titles of Moslares before FBM bought, and that these annotations were carried over to the new titles issued in FBM's name. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim that he acted in good faith.

On the second issue, the Court held that the trial court did not err in applying res judicata. The Supreme Court decision of June 28, 2001, declaring Pio Barretto the absolute owner of the properties, had become final and executory, and it bound FBM, whose titles were derived from Moslares and were declared void by that decision. FBM's claim that Pio Barretto had already sold the properties in 1990 could not prevail against the final judgment.

Doctrine

A notice of lis pendens is an announcement to the whole world that the property is in litigation, and it charges every stranger with notice of that litigation. One who buys registered land while such a notice stands annotated buys at his own risk and is bound by the final judgment in the litigation announced. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim good faith. Where the titles of the seller are later declared void by a final judgment, the titles derived from that seller by a subsequent purchaser are likewise void, and res judicata bars relitigation of the ownership already settled.

Disposition

The Supreme Court denied the appeal and affirmed the dismissal of FBM's complaint, with costs against FBM.

Remember This

Memorize this line: a notice of lis pendens is an announcement to the whole world that the property is in litigation, and one who acquires an interest in it does so at his own risk. Examiners use this case to test good faith of a registered-land buyer and the binding effect of a final judgment on a purchaser whose title traces from the losing party.