F&E DE CASTRO CORPORATION, ELISA DE CASTRO AND FEDERICO DE CASTRO, PETITIONERS, VS. ERNESTO G. OLASO AND AMPARO M. OLASO, RESPONDENTS.

F and E De Castro Corporation versus Olaso

The Case

This is a petition for review on certiorari brought by F and E De Castro Corporation, together with Elisa De Castro and Federico De Castro, against the spouses Ernesto and Amparo Olaso. The Olasos, buyers of a fully paid subdivision lot, sued to cancel a notice of lis pendens annotated on their certificate of title and to claim damages. The trial court suspended their case pending the outcome of a separate suit between the developer and the subdivision owner. The Supreme Court was asked whether that suspension was proper. The case matters because it draws a clean line between a genuine prejudicial question and a mere similarity of subject matter, and because it protects the fully paid lot buyer's right to a clean title under the Subdivision and Condominium Buyers' Protective Decree.

Procedural History

The Olasos filed a complaint for damages, cancellation of lis pendens, and a writ of preliminary injunction against F and E Corporation, the De Castros, and the Register of Deeds of Calamba, Laguna, before the Regional Trial Court, Branch 93, San Pedro, Laguna. F and E Corporation moved to dismiss and, in the alternative, moved to suspend the proceedings on the ground that the issues in its earlier case against Forfom Development Corporation partook of the nature of a prejudicial question. The trial court granted the suspension, holding that the rights of the Olasos could not be determined until the other case was settled.

The Court of Appeals annulled and set aside that order, ruling that the issues in the developer's case had no bearing on the Olasos' case and that the cancellation of the notice of lis pendens could proceed independently. F and E Corporation's motion for reconsideration was denied. F and E Corporation then elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

Forfom Development Corporation owned the 114-hectare Villa Olympia Subdivision in San Pedro, Laguna. In August 1985, Forfom entered into a Subdivision Project Agreement with F and E Corporation, under which F and E Corporation would finance the development of the subdivision and, as consideration, would be entitled to 40 percent of the developed saleable lots, with the remaining 60 percent staying with Forfom. Supplemental agreements followed for the development of Phases I, I-A, and II. Because F and E Corporation incurred delays, Forfom rescinded the agreements and eventually took over the development and completion of those phases.

F and E Corporation demanded payment for its expenses and its 40 percent share in the developed lots. When Forfom refused, F and E Corporation filed an action for delivery of lot titles, sum of money, and damages. During that case, Elisa De Castro, F and E Corporation's Vice-President and Treasurer, caused the annotation of an affidavit of adverse claim and a notice of lis pendens on certificates of title still registered in Forfom's name. Efforts by Forfom and by individual lot buyers to cancel the encumbrances were rejected.

The Olasos had bought Lot 10, Block 30, Phase IV of the subdivision, and the lot was already registered in their names. In November 2003, they filed their complaint for damages, cancellation of lis pendens, and injunctive relief against F and E Corporation and the De Castros. F and E Corporation moved to dismiss and to suspend the proceedings, invoking the pendency of its case against Forfom.

Issues

• Whether or not the Court of Appeals abused its discretion in ruling against the suspension of the proceedings in the Olasos' case pending the litigation of the developer's case against Forfom.
• Whether or not a prejudicial question existed that justified suspending the Olasos' action.

Applicable Provisions

Presidential Decree Number 957, the Subdivision and Condominium Buyers' Protective Decree, is invoked by the Olasos and weighed by the Court in protecting the fully paid buyer's title. The decision refers to its mandate in these terms:

Presidential Decree No. 957 mandates the subdivision owner and developer to deliver a clean title, free from all liens and encumbrances, to a fully paid lot buyer.

This bears on the case because the Olasos, as fully paid buyers, are entitled to a title free of the annotated notice of lis pendens, a right the suspension would have delayed.

Ruling

The Court denied the petition and found no merit in it. A stay of the Olasos' case to give way to the developer's case was not judicious because there was no prejudicial question. The Court gave three reasons. First, the subject matter or res involved was different: F and E Corporation sought to recover lots in Phases I and I-A, while the Olasos sought to recover their fully paid lot in Phase VI. Second, the parties were different: the developer's case was between F and E Corporation and Forfom, while the Olasos' case was between F and E Corporation as annotator of the notice of lis pendens and the Olasos as fully paid lot buyers. Third, the prayers were different: the Olasos sought cancellation of the annotation on their title, while the developer's case sought delivery of certificates of title over 37 lots and payment of a sum of money and damages.

For these reasons, the proceedings in the Olasos' case could continue independently of the developer's case. The Court agreed with the Court of Appeals that F and E Corporation did not assert a claim of possession or ownership over the sold and unsold lots when it primarily sought to collect its 40 percent share. Its action was clearly a personal action that only incidentally affected the 37 lot titles on which notices of lis pendens were annotated. Thus, any judgment in the developer's case would affect F and E Corporation but not necessarily the Olasos, and a cancellation of the notice of lis pendens in the Olasos' case would have no effect on the merits of the developer's case.

Doctrine

A suspension of proceedings on the ground of a prejudicial question requires that the resolution of one case be determinative of the other. Where the subject matter, the parties, and the prayers are different, no prejudicial question exists, and each case may proceed independently. An action to collect a share in the price of development is a personal action that only incidentally affects the titles on which notices of lis pendens are annotated. Consistent with Presidential Decree Number 957, a fully paid lot buyer is entitled to a clean title, free from all liens and encumbrances, and the cancellation of a notice of lis pendens on that title may proceed without awaiting the outcome of the developer's separate suit.

Disposition

The petition was denied, and the decision of the Court of Appeals annulling the suspension order was upheld, allowing the Olasos' case to proceed.

Remember This

Memorize this line: different subject matter, different parties, and different prayers mean no prejudicial question, so the cases proceed independently. Examiners use this case to test the requisites of a prejudicial question and the fully paid buyer's right to a clean title under the Subdivision and Condominium Buyers' Protective Decree.