FIRST DIVISION

[G.R. No. 104769. March 3, 2000]

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. COURT OF APPEALS, SOLID HOMES, INC.,
INVESTCO, INC., and REGISTER OF DEEDS OF MARIKINA, respondents.

[G.R. No. 135016. March 3, 2000]

SOLID HOMES, INC., petitioner, vs. INVESTCO, INC. substituted by AFP MUTUAL BENEFIT
ASSOCIATION, INC., respondent.

Facts:

Prior to September 7, 1976, Investco, Inc. was the owner of six (6) parcels of raw land, located in Quezon
City and Marikina (Metro Manila, now a City), registered under titles in the names of its predecessors-in-
interests, Angela Perez-Staley and Antonio Perez, Jr.

On September 7, 1976, Investco, Inc. agreed to sell the six (6) parcels of land to Solid Homes for
P10,211,075.00, payable in installments from July 22, 1977 to January 22, 1983. Among other terms, the
parties agreed that Solid Homes would pay the amount of P100,000.00 as down payment upon
execution of the contract; that Solid Homes would pay P1,942,215.00 as additional down payment on
July 22, 1977, October 22, 1977, and January 22, 1978; and that Solid Homes would pay the balance of
P8,188.860.00 in ten (10) semi-annual installments for a period of five (5) years, with interest at twelve
(12%) percent per annum. The first installment was due on July 22, 1978. Paragraph 2 of the contract
stipulates that:

"Should the (Vendee) fail to pay any of the installments on the due date thereof, he shall pay interest on
the installment due at the rate of 1% per month for a total period of only two months or pro rata
thereof, and should the (Vendee) still fail to pay the installment due including interest after the grace
period of two months, the entire balance of the purchase price agreed upon shall become immediately
due and demandable, and the (Vendee) shall pay the same within a period of thirty (30) days from the
expiration of the grace period, without the need for judicial action on the part of the (Vendor)."

The parties further agreed that Solid Homes would evict the squatters in the property or obtain a waiver
from them, that it would cause the original titles to be cancelled and new ones issued in the name of
Investco, Inc. and that Investco, Inc. would contribute one-half of the expenses in clearing the property
of occupants, in an amount not exceeding P350,000.00. On or about March 28, 1979, the Register of
Deeds of Marikina issued in favor of Investco, Inc. Transfer Certificate of Title Nos. 36518, 36680, 36681,
36682, 36683 and 36684 covering the Marikina portion of the property. The contract of sale to Solid
Homes was not registered with the Registry of Deeds of Marikina nor annotated on the original titles
issued in the name of Investco, Inc.

However, after paying the amount of P2,042,215.00 corresponding to the downpayment, and the
amount of P4,084,430.00 representing the first four (4) semi-annual installments and a portion of the
fifth installment, Solid Homes made no further payment to Investco, Inc. after February 19, 1981. The
postdated checks issued by Solid homes to Investco, Inc. intended for the remaining installments were
dishonored, leaving a balance of P4,300,282.91 due under the contract in Investco, Inc.s favor.

On March 13, 1981, Investco, Inc. and its predecessors-in-interests Angela Perez-Staley and Antonio
Perez, Jr. filed with the Court of First Instance of Rizal, Pasig, Branch 26 an action for specific
performance and damages against Solid Homes, Inc.[4] In the complaint, Investco, Inc. and co-plaintiffs
sought to collect from Solid Homes, Inc. the sum of P4,800,282.91 representing the balance on the
purchase price due under the contract, reimbursement of P350,000.00 representing Investco, Inc.s
contribution to the expenses for eviction of squatters and the further sum of P99,559.00 for science and
transfer taxes, and actual and moral damages, including attorneys fees.

On April 20, 1981, Solid Homes filed with the trial court an answer to Investco, Inc.s complaint alleging
that the purchase price under the contract was "not yet due" and that the former, in fact, exceeded the
installment payments due thereon. Solid Homes prayed for dismissal of Investco, Inc.s complaint, and
interposed a counterclaim for the refund of its excess payments, moral damages in the sum of
P500,000.00, and attorneys fees of P20,000.00 "or in the sum equivalent to 10% of whatever amount is
awarded in favor of defendant."[5]

On September 20, 1984, Solid Homes filed with the Register of Deeds of Marikina a notice of lis
pendens with reference to Civil Case No. 40615 requesting that the same be annotated on the titles in
Investco, Inc.s name. On the same date, the notice of lis pendens was recorded as Entry No. 117191 of
the primary Entry Book, Volume 14 of the Office of the Register of Deeds of Marikina, Metro Manila.

However, the notice of lis pendens was not actually annotated on the titles in the name of Investco, Inc.

On February 14, 1985, the trial court rendered judgment in favor of Investco, Inc. ordering solid Homes
to pay plaintiffs P4,800,282.91, representing the balance of the purchase price due under the contract,
with interest thereon from February 23, 1981 until paid; P99,559.00 representing science and transfer
taxes advanced by Investco to Solid Homes and P250,000.00 as attorneys fees and expenses of
litigation.[6]

On May 27, 1985, the trial court ordered the original record transmitted to the appellate court in view of
Solid Homes filing of a notice of appeal.[7]

In the meantime, on April 23, 1984, Investco, Inc. offered to sell the property to AFP Mutual Benefit
Association, Inc. for P27,079,767.00, subsequently reduced to P24,000,000.00, payable in installments.
Investco, Inc. furnished AFP MBAI with certified true copies of the titles covering the Marikina property.

In June, 1984, AFP MBAI verified the titles with the Register of Deeds of Marikina, Metro Manila and
found that copies of the titles that Investco, Inc. gave were genuine and faithful reproductions of the
original titles on file with the Register of Deeds. AFP MBAI noted that there were no liens or
encumbrances annotated on the titles.

Moreover, AFP MBAI, through its Real Estate Committee, made an ocular inspection of the property
sometime in June and July, 1984 "to determine the nature of the property and its (metes) and bounds."
During the inspection, AFP MBAI found that the Investco, Inc. property was underdeveloped raw land
"which is mostly cogonal, (with) few trees and shrubs x x x and bounded on one side by the Marikina
River."[8] AFP MBAI confirmed the presence of squatter shanties numbering about twenty (20) to thirty
(30). Except for a foot path used by the squatters, there was no development on the property.

After determining that the Investco property was suitable for the housing project of the Armed Forces of
the Philippines and that the titles covering the same were "clean" and "genuine," AFP MBAI agreed to
purchase the same from Investco, Inc. for the price of P24,000,000.00, payable in installments for a
period of one (1) year.

On October 10, 1984, Investco, Inc. executed a "Deed of Absolute Sale" conveying the property to AFP
MBAI for the price of P24,000,000.00, payable in installments until October 10, 1985.[9] Among other
terms, Investco, Inc. warranted to AFP MBAI that "it has good and valid title over the properties subject
of (the) sale and (that it ) shall hold (AFP MBAI) free from any adverse claim of whatever nature and
from liens an encumbrances of third parties."[10]

In November, 1984, AFP MBAI again verified the records of the Register of Deeds of Marikina, Metro
Manila and confirmed "(t)he absence of any lis pendens, adverse claims or any liens or encumbrance
(on) the originals of the title(s) x x x." AFP MBAI also inquired from the Malacaang Legal Office, the Land
Registration Commission, and the Metropolitan Trial Court of Marikina if there were cases and other
problems concerning the property, but found no case involving either Investco, Inc. or the property
pending with said court and offices.[11] AFP MBAI also obtained a certification from the Clerk of the
Metropolitan Trial Court of Marikina that Investco, Inc. "has no pending case before (that) court."[12]

In April, 1985, AFP MBAI completed its payments of the purchase price.

On April 26, 1985, the Register of Deeds of Marikina issued Transfer Certificates of Title Nos. N-104941,
N-104942, N-104943, N-104944, N-104945 and N-104946 in the name of AFP MBAI. The titles issued
were "clean" and contained no annotation of any lien, encumbrance, or adverse claim by a third party.

On November 28, 1985, Solid Homes commenced action[13] before the Regional Trial Court, Marikina,
against the Register of Deeds, AFP MBAI and Investco, Inc. for "annotation of lis pendens and damages"
with temporary restraining order and preliminary injunction. In its verified complaint, Solid Homes
prayed that (a) the Register of Deeds be ordered to annotate on the titles registered in the name of
Investco, Inc. the notice of lis pendens dated September 19, 1984 in relation to civil Case No. 40615, and
to carry over the same to the titles in the name of AFP MBAI; (b) alternatively, to declare AFP MBAI as a
buyer in bad faith, bound by the judgment to be rendered in Civil Case No. 40615; and (c) AFP MBAI and
Investco, Inc. be ordered to pay Solid Homes jointly and severally, unspecified amount of actual, moral
and exemplary damages, as well as attorney fees of P100,000.00 plus "ten (10%) percent of the total
amount to be awarded to plaintiff." Solid Homes also prayed for an order to enjoin provisionally the
Register of Deeds from registering any deed affecting the titles in derogation of solid Homes rights
under the contract executed between itself and Investco, Inc.

In due time, AFP MBAI and Investco, Inc. filed with the trial court an answer to the complaint. After pre-
trial and trial, on April 25, 1990, the trial court rendered decision holding that:

"Accordingly, judgment is hereby rendered as follows:

2. Declaring defendant AFP MBAI as a buyer in bad faith and accordingly bound by the final judgment in
Civil Case No. 40615, RTC, Pasig, now CA-G.R. No. 13400.

3. Ordering defendant Investco, Inc. to pay plaintiff nominal damages in the amount of P200,000.00 and
exemplary damages in the amount of P100,000.00.

4. Ordering defendant AFP Mutual Benefit Association, Inc., to pay plaintiff the amount of P50,000.00 as
nominal damages and P50,000.00 as exemplary damages.

5. Ordering defendants Investco and AFP MBAI to pay attorneys fees of P50,000.00 jointly and severally.

6. Dismissing the counterclaim of defendants.

7. Ordering private defendants to pay treble costs.

8. On the cross-claim of defendant AFP MBAI against defendant Investco, Inc., ordering the latter to
reimburse the former the amount of P11,000.00 paid pursuant to the Deed of Absolute Sale presented
for registration, Exhibit "7".

"SO ORDERED."[14]

Aggrieved thereby, AFP MBAI appealed the decision to the Court of Appeals.[15]

On November 29, 1992, the Court of Appeals rendered decision the dispositive portion of which is
quoted in the opening paragraph of this decision.

On December 24, 1991, AFP MBAI filed with the Court of Appeals a motion for reconsideration of the
decision, which Solid Homes opposed. On March 17, 1991, the Court of Appeals denied the motion.[16]

Hence, this petition.[17]

Issue: Whether Solid Homes is entitled to the annotation of its notice of lis pendens on the titles of
Investco, Inc. and AFP Mutual Benefit Association, Inc., in relation to Civil Case No. 40615 of the Regional
Trial Court, Pasig and thereby be bound by the final judgment therein.

Held: Basically, Solid Homes complaint was one for "annotation of lis pendens and other matters with
prayer for restraining order and writ of preliminary injunction" against Investco, Inc. AFP MBAI and the
Register of Deeds of Marikina, to cause the annotation of lis pendens in the titles of Investco, Inc. and
AFP MBAI. Actually, therefore, the suit is to compel the Register of Deeds of Marikina to annotate the
notice of lis pendens on the titles of AFP MBAI with a claim for damages against Investco, Inc. and AFP
MBAI for depriving Solid Homes of its rights to the property as provided under the contract to buy and
sell. In its verified complaint, Solid Homes alleged that "the act of defendant Register of Deeds in not
causing the annotation of the lis pendens on the titles then registered in the name of defendant
Investco, Inc. and in issuing titles in the name of defendant AFP Mutual Benefit Association, Inc., without
carrying over the proper annotation of lis pendens are contrary to law".[18] On the basis of this allegation,
it prayed for an order directing the Register of Deeds of Marikina "to cause the annotation" of the notice
of lis pendens on the old and new titles.

Obviously, the Register of Deeds obligation to annotate the notice of lis pendens is one that arises from
law.[19] Hence, the action is actually one for mandamus to compel the performance of a clear legal
duty.[20] There is no such action as one for "annotation of lis pendens," as Solid Homes sought in its
complaint.

"Lis pendens is a Latin term which literally means a pending suit or a pending litigation while 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 said property does so at his own risk, or that he
gambles on the result of the litigation over the said property. It is but a signal to the intending buyer or
mortgagee to take care or beware and to investigate the prospect or non-prospect of the litigation
succeeding before he forks down his money."[21]

A notice of lis pendens is not and can not be sought as a principal action for relief. "The notice is but an
incident to an action, an extra-judicial one to be sure. It does not affect the merits thereof. It is intended
merely to constructively advise, or warn, all people who deal with the property that they so deal with it
at their own risk, and whatever rights they may acquire in the property in any voluntary transaction are
subject to the results of the action, and may well be inferior and subordinate to those which may be
finally determined and laid down therein."[22] The notice of lis pendens--that real property is involved in
an action--is ordinarily recorded without the intervention of the court where the action is pending.[23] As
a settled rule, notice of lis pendens may be annotated only where there is an action or proceeding in
court which affects title to or possession of real property.[24]

Under Presidential Decree No. 1529, known as the "Property Registration Decree of 1978", the Register
of Deeds may deny registration of the notice of lis pendens, which denial may be appealed by the
applicant en consulta (Section 10, paragraph 2) to the Commissioner of Land Registration.[25] Section 117
of P.D. No. 1529 provides:

"When the Register of Deeds is in doubt with regard to the proper step to be taken or memorandum to
be made in pursuance of any deed, mortgage or other instrument present to him for registration, or
where any party in interest does not agree with the action taken by the Register of Deeds with reference
to any such instrument, the question shall be submitted to the Commissioner of Land Registration by
the Register of Deeds, or by the party in interest thru the Register of Deeds.

"Where the instrument is denied registration, the Registration of Deeds shall notify the interested party
in writing, setting forth the defects of the instrument or legal grounds relied upon, and advising him that
if he is not agreeable to such ruling, he may, without withdrawing the documents from the Registry,
elevate the matter by consulta within five days from receipt of notice of the denial of registration to the
Commissioner of Land Registration.

The Register of Deeds shall make a memorandum of the pending consulta on the certificate of title
which shall be cancelled motu proprio by the Register of Deeds after final resolution or decision thereof,
or before resolution, if withdrawn by petitioner.
"The Commissioner of Land Registration considering the consulta and the records certified to him after
notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum
to be made. His resolution of ruling in consultas shall be conclusive and binding upon all Register of
Deeds, provided, that the party in interest who disagrees with the final resolution, ruling or order of the
Commissioner relative to consultas may appeal to the Court of Appeals within the period and in the
manner provided in Republic Act No. 5434."

Here, the Register of Deeds of Marikina denied the annotation of the notice of lis pendens on the ground
that the complaint in Civil Case No. 40615 was for collection of a sum of money and did not involve the
titles to or possession of the subject property.[26] If Solid Homes did not agree with the denial of the
Register of Deeds, it could appeal the same en consulta to the Commissioner of Land Registration.[27] The
resolution of the Commissioner may then be appealed to the Court of Appeals, which has exclusive
jurisdiction to decide the same, "within the period and in the manner provided in Republic Act No.
5434."[28]

In its questioned decision, the Court of Appeals held that the action filed by Investco, Inc. against Solid
Homes "is not exclusively for payment of the unpaid installments on the purchase price of the subject
properties and damages, but also one for rescission of the contract to sell and to buy the subject
properties executed by defendant Investco, Inc. in favor of (Solid Homes) which necessarily involves
delivery of possession and ownership of the same."[29]

We do not agree. This ruling conflicts with the final decision of the Supreme Court on the case.[30] What
is more, in determining the nature of plaintiffs (Investco, Inc.) action in Civil Case No. 40615 and
defendant Solid Homes counterclaim thereto, the Court of Appeals went beyond the allegations in the
complaint and ventured into speculation and conjecture. There is nothing in Investcos complaint in Civil
Case No. 40615 that even remotely suggests that Investco, Inc. has rescinded the contract, or that it
sought the rescission of the sale as an alternative remedy. Specific performance and rescission are
alternative remedies which a party may not avail himself of at the same time.[31]

The nature of an action is determined by the allegations of the complaint.[32]

Investcos complaint was an action for collection of sums of money, damages and attorneys fees[33] to
recover from Solid Homes unpaid installments on the purchase price of the subject property. To
emphasize, the case was an action for collection of unpaid installments on the purchase price subject
real property. In such case, the annotation of a notice of lis pendens on the titles of the property was
not proper as the action was in personam.[34]

Consequently, the doctrine of lis pendens is inapplicable to this case. The Register of Deeds of Marikina
correctly denied the annotation of the notice of lis pendens on the titles of Investco, Inc. and the AFP
MBAI.[35]

Even on the basis of Solid Homes counterclaim, which is disregarded in determining the nature of the
action, notice of lis pendens is improper as the counterclaim was also for sums of money--alleged excess
payment and for damages--not one affecting title to or possession of real property. Such counterclaim
did not convert the nature of the action into a real action involving title to or possession of subject
property.
The rule that "all persons dealing with property covered by Torrens Certificate of title are not required
to go beyond what appears on the face of the title"[36] applies herein with full vigor. In the absence of
anything to excite suspicion, the buyer is not obligated to look beyond the certificate to investigate the
titles of the seller appearing on the face of the certificate.[37]

"Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the
burden of proof."[38] Here, Solid Homes alleged that Investco, Inc. and AFP MBAI "confederated with
each other in entering into the aforementioned sale in order to deprive herein plaintiff (Solid Homes) of
its rights over subject properties under the Contract to Sell and to Buy..."[39] However, Solid Homes
adduced no evidence to prove such allegation of bad faith.

The conclusion is inevitable that contrary to the holding of the Court of Appeals, AFP MBAI was a
purchaser in good faith and for value, and, consequently, acquired valid and indefeasible titles to the
Investco, Inc. property.

Resultantly, we find the appeal via certiorari of solid Homes[40] without merit. Its objective was to
compel AFP MBAI to execute a deed of transfer of the titles to parcels of land originally covered by the
agreement to buy and sell between Solid Homes, Inc. and Investco, Inc. and for Solid Homes to pay AFP
MBAI, in substitution of Investco, Inc. the amount of P4,800,282.91 with interest thereon at one per
cent per month from March 22, 1982, until paid. Thus, if Solid Homes would succeed in its scheme in the
case, it would unjustly enrich itself enormously, acquiring subject property now worth billions of
pesos[41] for the measly sum of P4,800,282.91 with interest at one per cent a month from March 22,
1982, which it was unable to pay Investco, Inc. in the first place.

Solid Homes claim is predicated on the assumption that AFP MBAI is a transferee pendente lite of
Investco, Inc. of the subject parcels of land and bound by the result of the suit.[42] Such claim is not
factually or legally correct. In the absence of a valid notice of lis pendens annotated in the titles, AFP
MBAI is a buyer in good faith and for value, and thus, acquired clean and valid titles to the property in
question.

WHEREFORE, the Court:

(1) In G. R. No. 104769, GRANTS the petition, and SETS ASIDE the Court of Appeals decision in CA-G.R.
CV No. 27398 and, in lieu thereof, renders judgment:

(a) dismissing the complaint in Civil Case No. 52999 of the Regional Trial Court, Pasig Branch 165;

(b) ordering the Register of Deeds of Marikina to cancel the notice of lis pendens annotated on Transfer
Certificates of Title Nos. N-104941, N-104942, N-104943, N-104944, N-104945 and N-104946 of the
Register of Deeds for Marikina, Metro Manila;

(c) Ordering respondent Solid Homes, Inc. to pay AFP MBAI P300,000.00 as attorneys fees and expenses
of litigation; and costs.

(2) In G.R. No. 135016, DENIES the petition, for lack of merit.

With costs against Solid Homes, Inc.

SO ORDERED.