FIRST DIVISION

[G.R. No. 114299. September 24, 1999.]

TRADERS ROYAL BANK , petitioner, vs . HON. COURT OF APPEALS,

PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY,
GONZALES respondents.
all surnamed CAPAY and RAMON A. GONZALES,

[G.R. No. 118862. September 24, 1999.]

PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY,

all surnamed CAPAY, and RAMON A. GONZALES , petitioners, vs. SPS.
HONORATO D. SANTOS and MARIA CRISTINA S. SANTOS, SPS.
CECILIO L. PE and JOSEFINA L. PE, FLORA LARON WESCOMBE,
SPS. TELESFORO P. ALFELOR II and LIZA R. ALFELOR, SPS. DEAN
RODERICK FERNANDO and LAARNI MAGDAMO FERNANDO,
REMEDIOS OCA, DEVELOPMENT BANK OF THE PHILIPPINES and
TRADERS ROYAL BANK , respondents.

Gonzalez Sinense Jimenez & Associates for Patria Capay, et al.

Francisco S. Reyes Law Office for non-bank respondents.

SYNOPSIS

On April 26, 1994, Traders Royal Bank led with this Court a petition for review to
set aside the decision of the Court of Appeals decision holding said bank in bad faith when
it sold a property knowing that it was under litigation and without informing the buyer of
said fact. Meanwhile, the buyers of said property moved for a reconsideration of the said
decision. In a resolution dated August 10, 1994, the Court of Appeals granted the motion
for reconsideration and dismissed the complaint as against them. The complainants in the
original action for recovery of possession/ownership led a petition for review seeking to
set aside said resolution. These two petitions for review were later consolidated.
When the subject property was subdivided, none of the six (6) new certi cates of
title issued contained any notice of lis pendens. The buyers of the subdivided properties
therefore could not have been aware that the said properties were the subject of litigation.
They had a right to rely on what appeared on the face of the title of their predecessors-in-
interest, and were not bound to go beyond the same.
The individual complainants cannot invoke that entry of the notice of lis pendens in
the day book is sufficient to constitute registration. In the fifteen years following the notice
of lis pendens, they did not bother to nd out the status of their title. They slept on their
rights. Thus, it is most iniquitous for them to assert ownership over the property that has
undergone several transfers made in good faith and for value and already subdivided into
several lots with improvements introduced thereon by their owners.
However, the Traders Royal Bank took advantage of the absence of the notice of lis
pendens at the back of their certi cate of title and sold the property to an unwary
purchaser. Clearly the bank acted in a manner contrary to morals, good customs and
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 public policy, and should be held liable for damages.

SYLLABUS

1. LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION;

RIGHT OF BUYER TO RELY ON WHAT APPEARED ON FACE OF TITLE; PARTIES NOT
BOUND TO GO BEYOND SAME. — When TRB purchased the property at the foreclosure
sale, the notice of lis pendens that the Capays caused to be annotated on their certi cate
of title was not carried over to the new one issued to TRB. Neither did the certificate of title
of Emelita Santiago, who purchased the property from TRB, contain any such notice. When
Santiago caused the property to be divided, six (6) new certi cates of title were issued,
none of which contained any notice of lis pendens. Santiago then sold the lots to Marcial
Alcantara and his co-owners who next sold each of these to the non-bank respondents.
The non-bank respondents, therefore, could not have been aware that the property in
question was the subject of litigation when they acquired their respective portions of said
property. There was nothing in the certi cates of title of their respective predecessors-in-
interest that could have aroused their suspicion. The non-bank respondents had a right to
rely on what appeared on the face of the title of their respective predecessors-in-interest,
and were not bound to go beyond the same. To hold otherwise would defeat one of the
principal objects of the Torrens system of the land registration, that is, to facilitate
transactions involving lands.
2. ID.; ID.; ID.; ID.; EXERCISE OF DILIGENCE MANIFESTS IN CASE AT BAR. — The
foregoing rule notwithstanding, the non-bank respondents nevertheless physically
inspected the properties and inquired from the Register of Deeds to ascertain the absence
of any defect in the title of the property they were purchasing — an exercise of diligence
above that required by law. AaHDSI

3. REMEDIAL LAW; ACTIONS; LACHES; DEFINED. — Laches has been de ned as

the failure or neglect, for an unreasonable and unexplained length of time, to do that which
by exercising due diligence could nor should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting presumption that the party
entitled to it either has abandoned it or declined to assert it.
4. ID.; ID.; ID.; FAILURE FOR 15 YEARS TO VERIFY STATUS OF TITLE
EXTRAJUDICIALLY FORECLOSED IN FAVOR OF BANK. — Between two innocent persons,
the one who made it possible for the wrong to be done should be the one to bear the
resulting loss. The Capays led the notice of lis pendens way back on March 17, 1967 but
the same was not annotated in TRB's title. The Capays and their counsel Atty. Ramon A.
Gonzales knew in 1968 of the extra-judicial foreclosure sale of the property to TRB and the
consolidation of title in the bank's name following the lapse of the one-year period of
redemption. But in the next fteen (15) years or so, they did not bother to nd out the
status of their title or whether the liens noted on the original certi cate of title were still
existing considering that the property had already been foreclosed. In the meantime, the
subject property had undergone a series of transfers to buyers in good faith and for value.
It was not until after the land was subdivided and developed with the buyers building their
houses on the other lots when the Capays suddenly appeared and questioned the
occupants' titles. At the very least, the Capays are guilty of laches.
5. LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION;
REGISTRY OF DEEDS; ENTRY OF NOTICE OF LIS PENDENS IN DAY BOOK OR PRIMARY
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 ENTRY BOOK; SUFFICIENT NOTICE TO CONSTITUTE REGISTRATION; AVAILABLE TO
PARTIES NOT GUILTY OF LACHES. — Being guilty of laches, the Capays cannot invoke the
ruling in Villasor vs. Camon, Levin vs. Bass and Director of Lands vs. Reyes to the effect
that entry of the notice of lis pendens in the day book (primary entry book) is su cient to
constitute registration and such entry is notice to all persons of such adverse claim.
Certainly, it is most iniquitous for the Capays who, after sleeping on their rights for fteen
years, to assert ownership over the property that has undergone several transfers made in
good faith and for value and already subdivided into several lots with improvements
introduced thereon by their owners.
6. REMEDIAL LAW; ACTIONS; ESTOPPEL; PARTY CANNOT HIDE BEHIND LAW
WHICH IT ITSELF VIOLATED. — Section 25 of the General Banking Act, provides that no
bank "shall hold the possession of any real estate under mortgage or trust, deed, or the
title and possession of any real estate purchased to secure any debt due to it, for a longer
period than ve years.'' TRB, however, admits holding. onto the foreclosed property for
twelve (12) years after consolidating title in its name. The bank is, therefore, estopped
from invoking banking laws and regulations to justify its belated disposition of the
property. It cannot be allowed to hide behind the law which it itself violated.
7. ID.; ID.; LACHES; NEGATED WHERE PARTY PERSISTENTLY PURSUED CASE
TO RECOVER PROPERTY. — We do not nd the Capays guilty of "inaction and negligence"
as against TRB. It may be recalled that upon the commencement of foreclosure
proceedings by TRB, the Capays led an action for prohibition on September 22, 1966
against the TRB before the CFI to stop the foreclosure sale. Failing in that attempt, the
Capays led a supplemental complaint for the recovery of the property. The case reached
this Court. Prescription or laches could not have worked against the Capays because they
had persistently pursued their suit against TRB to recover their property.
8. CIVIL LAW; DAMAGES; PARTY WHICH TOOK ADVANTAGE OF ABSENCE OF
NOTICE OF LIS PENDENS LIABLE THEREFOR WHERE PROPERTY SOLD TO UNWARY
PURCHASER; CASE AT BAR. — TRB cannot feign ignorance of the existence of the lis
pendens because when the property was foreclosed by it, the notice of lis pendens was
annotated on the title. But when TCT No. T-6595 in the name of the Capay spouses was
cancelled after the foreclosure, TCT No. T-16272 which was issued in place thereof in the
name of TRB did not carry over the notice of lis pendens. On the other hand, it is di cult to
believe TRB's assertion that after holding on to the property for more than ten (10) years, it
suddenly realized that it was acting in violation of the General Bank Act. What is apparent
is that TRB took advantage of the absence of the notice of lis pendens at the back of their
certi cate of title and sold the property to an unwary purchaser. This notwithstanding the
adverse decision of the trial court and the pendency of its appeal. TRB, whose timing
indeed smacks of bad faith, thus transferred caused the property without the lis pendens
annotated on its title to put it beyond the Capays' reach. Clearly, the bank acted in a
manner contrary to morals, good customs and public policy, and should be held liable for
damages.
9. ID.; MORTGAGE; PROPERTY TRANSFERRED TO INNOCENT PURCHASERS FOR
VALUE; ORIGINAL OWNER ENTITLED TO PAYMENT OF FAIR MARKET VALUE OF
PROPERTY AT TIME OF SALE WHERE MORTGAGE DECLARED NULL AND VOID. —
Considering, however, that the mortgage in favor of TRB had been declared null and void
for want of consideration and, consequently, the foreclosure proceedings did not have a
valid effect, the Capays would ordinarily be entitled to the recovery of their property.
Nevertheless, this remedy is not now available to the Capays inasmuch as title to said
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 property has passed into the hands of third parties who acquired the same in good faith
and for value. Such being the case, TRB is duty bound to pay the Capays the fair market
value of the property at the time it was sold to Emelita Santiago; the transferee of TRB.

DECISION

KAPUNAN J :
KAPUNAN, p

The present controversy has its roots in a mortgage executed by the spouses
Maximo and Patria Capay in favor of Traders Royal Bank (TRB) pursuant to a loan extended
by the latter to the former. The mortgage covered several properties, including a parcel of
land, the subject of the present dispute. 1 The loan became due on January 8, 1964 and the
same having remained unpaid, TRB instituted extra-judicial foreclosure proceedings upon
the mortgaged property. cda

To prevent the property's sale by public auction, the Capays, on September 22, 1966,
led a petition for prohibition with preliminary injunction (Civil Case No. Q-10453) before
the Court of First Instance (CFI) of Rizal, alleging that the mortgage was void since they did
not receive the proceeds of the loan. The trial court initially granted the Capay's prayer for
preliminary injunction.
On March 17, 1967, the Capays caused to be led in the Register of Deeds of Baguio
City a notice of lis pendens over the disputed property. Said notice was entered in the Day
Book, as well as in the Capays' certificate of title.
Subsequently, the injunction issued by the trial court was lifted thus allowing the
foreclosure sale to proceed. Foreclosure proceedings were initiated and on October 17,
1968, the property was sold to TRB which was the highest bidder at the auction sale. A
sheriff certi cate of sale was issued in its name on the same day. On February 25, 1970,
the property was consolidated in the name of TRB, the sole bidder in the sale. TCT No. T-
6595 in the name of the Capay spouses was then cancelled and a new one, TCT No. T-
16272, 2 was entered in the bank's name. The notice of lis pendens, however, was not
carried over in the certificate of title issued in the name of TRB.
Thereafter, the Capays led with the CFI a supplemental complaint praying for the
recovery of the property with damages and attorney's fees. Trial in Civil Case No. Q-10453
proceeded and, on October 3, 1997, the CFI rendered its decision declaring the mortgage
void for want of consideration. The CFI ordered, among other things, the cancellation of
TCT No. T-16272 in the name of TRB and the issuance of new certi cates of title in the
name of the Capay spouses.
TRB appealed to the Court of Appeals. While the case was pending in the Court of
Appeals, TRB on March 17, 1982 sold the land to Emelita Santiago in whose name a new
certi cate of title, TCT No. 33774, 3 was issued, also, without any notice of lis pendens
annotated thereon. Santiago in turn divided the land into six (6) lots and sold these to
Marcial Alcantara, Armando Cruz and Artemio Sanchez, who became co-owners thereof. 4
Alcantara and his co-owners developed the property and thereafter sold the six (6) lots to
separate buyers who were issued separate titles, again, bearing no notice of lis pendens. 5
On July 30, 1982, the Court of Appeals rendered its decision modifying the decision
of the trial court as to the award of damages but affirming the same in all other respects.
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 For having been led out of time and for lack of merit, the petition for certiorari led
by TRB before this Court 6 was denied in a Resolution dated September 12, 1983. TRB's
motion for reconsideration was similarly denied in a Resolution dated October 12, 1983.
The Court's September 12, 1983 Resolution having become nal and executory on
November 9, 1983, the trial court issued a writ of execution directing the Register of Deeds
of Baguio City to cancel TCT No. T-16272 in the name of TRB, and to issue a new one in the
name of the Capay spouses.
Said writ, however, could not be implemented because of the successive
subsequent transfers of the subdivided property to buyers who obtained separate titles
thereto. Thus, a complaint for recovery of possession/ownership dated 8 June 1985 was
led before the Quezon City Regional Trial Court against TRB and the subsequent
transferees of the property, the respondents in G.R. No. 118862 (hereinafter, "the non-bank
respondents"). Plaintiffs in said case were Patria Capay, her children by Maximo 7 who
succeeded him upon his death on August 25, 1976, and Ramon Gonzales, counsel of the
spouses in Civil Case No. Q-10453 who became co-owner of the property to the extent of
35% thereof as his attorney's fees (collectively, "the Capays"). On March 27, 1991, the trial
court rendered its decision, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs against
the defendants and ordering the Register of Deeds for Baguio to cancel TCT No.
T-36177, Books 198, Page 177 in the names of defendants Spouses Honorato D.
Santos and Maria Cristina Santos; to cancel TCT No. 36707, Book 201, Page 107
in the names of defendant Spouses Cecilio Pe and Jose na L. Pe; to cancel TCT
No. T-36051, Book 198, Page 51 in the name of Flora Laron Wescombe, married
to Kevin Lind Wescombe (now deceased); to cancel TCT No. T-36147, Book 198,
page 147 in the names of Spouses Telesforo P. Alfelor II and Liza R. Alfelor; to
cancel TCT No. T-36730, Book 201, Page 130 in the names of Spouses Dean
Roderick Fernando and Laarni Magdamo Fernando; to cancel TCT No. 37437,
Book 205, Page 37 in the name of Remedios Oca, and issue new ones free from
all liens and encumbrances, together with all the improvements therein in the
names of plaintiffs sharing pro indiviso as follows: 35% to Ramon A. Gonzales,
married to Lilia Y. Gonzales, of legal age, with postal address at 23 Sunrise Hill,
New Manila, Quezon City; 37.92% to Patria B. Capay, of legal age, widow, Filipino;
5.41% each to Ruby Ann Capay, of legal age, Filipino, married to Pokka Vainio,
Finnish citizen; Chona Margarita Capay, of legal age, Filipino, married to Waldo
Flores; Rosario Capay, of legal age, Filipino, married to Jose Cuaycong, Jr.,
Cynthia Capay, of legal age, Filipino, married to Raul Flores; Linda Joy Capay, of
legal age, Filipino, married to Pedro Duran, all with postal address at 37
Sampaguita St., Capitolville Subd., Bacolod City, ordering said defendants to
vacate the premises in question and restoring plaintiffs thereto and for defendant
Traders Royal Bank to pay each of the plaintiffs moral damages in the amount of
P100,000.00, P40,000.00 in exemplary damages and P40,000.00 as attorney's
fees, all with legal interest from the ling of the complaint, with costs against
defendants. Cdpr

SO ORDERED. 8

TRB and the non-bank respondents appealed to the Court of Appeals. In a Decision
promulgated on February 24, 1994 in CA-G.R. CV No. 33920, the appellate court a rmed
the decision of the trial court in toto. 9 It ruled that the non-bank respondents cannot be
considered as purchasers for value and in good faith, having purchased the property
subsequent to the action in Civil Case No. Q-10453 and that while the notice of lis pendens
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 was not carried over to TRB's certi cate of title, as well as to the subsequent transferees'
titles, it was entered in the Day Book which is su cient to constitute registration and
notice to all persons of such adverse claim, citing the case of Villasor vs. Camon, 1 0 Levin
vs. Bass 1 1 and Director of Lands vs. Reyes. 1 2
As regard TRB, the Court of Appeals said that the bank was in bad faith when it sold
the property knowing that it was under litigation and without informing the buyer of that
fact.
On April 26, 1994, TRB led with this Court a petition for review to set aside the CA
decision, docketed herein as G.R. No. 114299, invoking the following grounds:
I.

THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR OF LAW IN PROMULGATING THE DISPUTED DECISION AND
THEREBY DECIDED A QUESTION OF SUBSTANCE WHOLLY CONTRARY TO
SETTLED JURISPRUDENCE AND TOTALLY NOT IN ACCORD WITH APPLICABLE
DECISION OF THIS HONORABLE SUPREME COURT.

II.

THE RESPONDENT HONORABLE COURT OF APPEALS HAS COMMITTED SO

GRAVE AND SERIOUS ERRORS OF LAW IN SANCTIONING A DEPARTURE FROM
THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDING AS TO CALL
FOR THE EXERCISE OF THE POWER OF REVIEW BY THIS HONORABLE SUPREME
COURT.

a) The public respondent has plainly and manifestly acted

whimsically, arbitrarily, capriciously, with grave abuse of discretion, in excess of
jurisdiction tantamount to lack of jurisdiction.

xxx xxx xxx

b) The public respondent erred in not nding that it was not the fault
of petitioner when the notice of lis pendens was not carried over to its new title.

xxx xxx xxx

c) The public respondent erred in not nding that PD No. 1271 had
legally caused the invalidation of the Capay’s property and the subsequent
validation of TRB's title over the same property was effective even as against the
Capays. 1 3

Meanwhile, the non-bank respondents moved for a reconsideration of the Court of

Appeals' decision. Convinced of the movants' arguments, the Court of Appeals in a
Resolution promulgated on August 10, 1994 granted the motion for reconsideration and
dismissed the complaint as against them. The dispositive portion of the resolution states:
ACCORDINGLY, in view of the foregoing disquisitions and nding merit in
the motion for reconsideration, the same is hereby GRANTED. Consequently, the
decision of this Court, promulgated on February 24, 1994, is hereby
RECONSIDERED. The complaint led against defendants-appellants with the
court a quo is hereby ordered DISMISSED, and the certi cate of titles originally
issued to them in their individual names are hereby ordered restored and duly
respected. We make no pronouncement as to costs.

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 SO ORDERED. 14

The Capays thus led with this Court a petition for review, docketed as G.R. No.
118862, to set aside the resolution of the Court of Appeals raising the following errors:
I

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT TUAZON VS. REYES, 48 PHIL. 814 AND RIVERA VS. MORAN, 48
PHIL. 836 ARE NOT APPLICABLE HEREOF, WHILE PINO VS. COURT OF APPEALS,
198 SCRA 436, IS APPLICABLE.

II

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT ATUN VS. MUÑOZ, 97 PHIL. 762 AND LAROZA VS. GUIA, 134
SCRA 34, ARE NOT APPLICABLE.

III

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT LEVIN VS. BASS, 91 PHIL. 419 VILLASOR VS. CAMON, 89 PHIL.
404 AND DIRECTOR OF LANDS VS. REYES, 68 SCRA 73, ARE NOT APPLICABLE
HEREOF.

IV

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT PETITIONERS ARE GUILTY OF LACHES.

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT THERE IS NO DISTINCTION IN THE REGISTRATION OF
VOLUNTARY INSTRUMENTS VIS-A-VIS INVOLUNTARY INSTRUMENTS.

VI

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW

HOLDING THAT RESPONDENTS WHO ARE LAWYERS, RESPONSIBLE CITIZENS
AND WELL-RESPECTED RESIDENTS IN THE COMMUNITY, ARE EXEMPTED
FROM THE EFFECTS OF THE CONSTRUCTIVE NOTICE ARISING FROM
REGISTRATION.

VII

THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF WITH

REGARDS TO TRADERS ROYAL BANK, AFTER THE LATTER HAS PERFECTED ITS
APPEAL TO THE SUPREME COURT.

VIII

THE COURT OF APPEALS PALPABLY ERRED IN NOT RULING ON THE COUNTER-

ASSIGNMENT OF ERROR THAT:

B) THE LOWER COURT ERRED IN NOT HOLDING THAT

DEFENDANTS ARE BOUND BY THE DECISION IN CIVIL CASE NO. Q-10453.
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 Subsequently, G.R. No. 118862 was consolidated with G.R. No. 114299, pursuant to
this Court's Resolution dated July 3, 1996. 1 5
The consolidated cases primarily involve two issues: (1) who, as between the
Capays and the non-bank respondents, has a better right to the disputed property, and (2)
whether or not TRB is liable to the Capays for damages.
On the first issue, we rule for the non-bank respondents.
I
First, when TRB purchased the property at the foreclosure sale, the notice of lis
pendens that the Capays caused to be annotated on their certi cate of title was not
carried over to the new one issued to TRB. Neither did the certi cate of title of Emelita
Santiago, who purchased the property from TRB, contain any such notice. When Santiago
caused the property to be divided, six (6) new certi cates of title were issued, none of
which contained any notice of lis pendens. Santiago then sold the lots to Marcial Alcantara
and his co-owners who next sold each of these to the non-bank respondents. The non-
bank respondents, therefore, could not have been aware that the property in question was
the subject of litigation when they acquired their respective portions of said property.
There was nothing in the certi cates of title of their respective predecessors-in-interest
that could have aroused their suspicion. The non-bank respondents had a right to rely on
what appeared on the face of the title of their respective predecessors-in-interest, and
were not bound to go beyond the same. To hold otherwise would defeat one of the
principal objects of the Torrens system of land registration, that is, to facilitate
transactions involving lands. cdll

The main purpose of the Torrens system is to avoid possible con icts of
title to real estate and to facilitate transactions relative thereto by giving the
public the right to rely upon the face of a Torrens certi cate of title and to
dispense with the need of inquiring further, except when the party concerned has
actual knowledge of facts and circumstances that should impel a reasonably
cautious man to make such further inquiry. Where innocent third persons, relying
on the correctness of the certi cate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the total cancellation of
the certi cate. The effect of such an outright cancellation would be to impair
public con dence in the certi cate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance as to
whether the title has been regularly or irregularly issued by the court. Every person
dealing with registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property.

The Torrens system was adopted in this country because it was believed to
be the most effective measure to guarantee the integrity of land titles and to
protect their indefensibility once the claim of ownership is established and
recognized. If a person purchases a piece of land on the assurance that the
seller's title thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all. This would not only be unfair to him. What is
worse is that if this were permitted, public con dence in the system would be
eroded and land transactions would have to be attended by complicated and not
necessarily conclusive investigations and proof of ownership. The further
consequence would be that land con icts could be even more numerous and
complex than they are now and possibly also more abrasive, if not even violent.
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 The Government, recognizing the worthy purposes of the Torrens system, should
be the rst to accept the validity of titles issued thereunder once the conditions
laid down by the law are satisfied. 1 6

Second, the foregoing rule notwithstanding, the non-bank respondents nevertheless

physically inspected the properties and inquired from the Register of Deeds to ascertain
the absence of any defect in the title of the property they were purchasing — an exercise of
diligence above that required by law.
Thus, respondent Aida Fernando Meeks, who bought Lot 5 for her son Dean,
testified:
Q How did you come to live in Baguio City, particularly in Km. 2.5 San Luis,
Baguio City?

A In one of my visits to my sister who has been residing here for twelve (12)
years now, I got interested in buying a property here.

Q How did you come to know of this property at Asin Road where you now
reside?

A My sister, Ruth Ann Valdez, sir.

Q When this particular property was bought by you, when was that?

A I do not remember the exact date, but it was in early 1984, sir.

Q At the time when you went to see the place where you now reside, how did
it look?

A This particular property that I bought was then a small one (1)-room
structure, it is a two (2)-storey one (1) bedroom structure.

Q What kind of structure with regards to material?

A It is a semi-concrete structure, sir.

Q And aside from this two (2)-storey one (1)-room structure, how did the
surrounding area look like at the time you visited?

A There were stone walls from the road and there were stone walls in front of
the property and beside the property.

Q At the time you went to see the property with your agent, rather, your sister
Ruth Ann Valdez, did you come to know the owner?

A We did because at the time we went there, Mr. Alcantara was there
supervising the workers.

Q And who?

A Amado Cruz, sir.

Q After you saw this property, what else did you do?

A My first concern then was am I buying a property with a clean title.

Q In regards to this concern of yours, did you find an answer to this concern
of yours?

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 A At first, I asked Mr. Alcantara and I was answered by him.

Q What was his answer?

A That it was a property with a clean title, that he has shown me the mother
title and it is a clean title.

Q Aside from being informed that it is a property with a clean title, did you do
anything to answer your question?

A Yes, sir.

Q What did you do?

A Well, the first step I did was to go to the Land Registration Office.

Q Are you referring to the City Hall of Baguio?

A Yes, the City Hall of Baguio.

Q And what did you do in the Registry of Deeds?

A We looked for the title, the original title, sir.

Q When you say we, who was your companion?

A Mr. Alcantara and my present husband, sir.

Q The three (3) of you?

A Yes, sir.

Q What title did you see there?

A We saw the title that was made up in favor of Amado Cruz, sir.

Q And what was the result of your looking up for this title in the name of
Amado Cruz?

A We had to be reassured that it was a genuine one, so we asked Atty.

Diomampo who heads the office. We showed him a copy of that title and
we were also reassured by him that anything that was signed by him was
as good as it is.

Q Did this Atty. Diomampo reassure you that the title was good?

A He did.

Q After your conversation with the Register of Deeds, what did you do?

A The second step we did was to confer with our lawyer, a friend from RCBC
Binondo, Manila, this is Atty. Nelson Waje.

Q What is your purpose in going to this lawyer?

A We wanted an assurance that we were getting a valid title just in case we

think of buying the property.

Q What was the result of your conference with this lawyer?

A He was absolutely certain that that was a valid title.

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 Q Mrs. Meeks, after looking at the place, going to the Register of Deeds,
looking at the title and seeing your lawyer friend, what decision did you
finally make regarding the property?

A We wanted more reassurances, so we proceeded to Banaue, as advised by

that same lawyer, there is another office of the Bureau of Lands. I cannot
recall the office but it has something to do with registration of the old.

Q What is your purpose in going to this Office in Banaue?

A I wanted more reassurances that I was getting a valid title.

Q What was the result of your visit to the Banaue Office?

A We found the title of this property and there was reassurance that it was a
clean title and we saw the mother title under the Hilario family.

Q Mrs. Meeks, when you say Banaue, what particular place is this Banaue?

A It is in Banaue Street in Quezon City, sir.

Q And when you saw the title to this property and the mother title, what was
the result of your investigation, the investigation that you made?

A We were reassured that we were purchasing a valid title, we had a genuine

title.

Q When you were able to determine that you had a valid, authentic or genuine
title, what did you do?

A That is when I finally thought of purchasing the property. 17

Telesforo Alfelor II, the purchaser of Lot 4, narrated going through a similar routine:
Q How did you come to know of this place as Asin Road where you are
presently residing?

A It was actually through Mrs. Flory Recto who is presently the Branch
Manager of CocoBank. She informed my wife that there is a property for
sale at Asin road, and she was the one who introduced to us Mr. Alcantara,
sir.
Q When you were informed by Mrs. Recto and when you met with Mr.
Alcantara, did you see the property that was being offered for sale?
A Yes, sir.

Q When did you specifically see the property, if you can recall?
A I would say it is around the third quarter of 1983, sir.

Q When you went to see the place, could you please describe what you saw at
that time?
A When we went there the area is still being developed by Mr. Alcantara. As a
matter of fact the road leading to the property is still not passable
considering that during that time it was rainy season and it was muddy, we
fell on our way going to the property and walked to have an ocular
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 inspection and physical check on the area, sir. LLjur

xxx xxx xxx

Q What was the improvement, if any, that was in that parcel which you are
going to purchase?

A During that time, the riprap of the property is already there, the one-half of
the riprap sir.
Q Do you know who was making this improvement at the time that you went
there?
A I would understand that it was Marcial Alcantara, sir.

Q After you saw the place and you saw the riprap and you were in the course
of deciding to purchase this property, what else did you do?

A First, I have to consider that the property is clean.

Q How did you go about determining whether the title of the property is
clean?

A Considering that Marcial Alcantara is a real estate broker, I went to his

office and checked the documents he has regarding the property.

Q And what was the result of your checking as to whether the title of the
property is clean?

A He showed me the copy of the title and it was clean, sir.

Q Aside from going to Mr. Alcantara to check up the title of the property, what
else did you do?

A Well, the next thing is I requested his wife to accompany me to the Bureau
of Lands or rather the Registry of Deeds, sir.

Q What registry of Deeds are you referring to?

A The Registry of Deeds of Baguio City, sir.

Q And were you able to see the Register of Deeds regarding what you would
like to know?

A Yes, and we were given a certification regarding this particular area that it
was clean, sir.
Q What Certification are you referring to?

A It is a Certification duly signed by the employee of the Registry of Deeds

Adelina Tabangin, sir.

Q Do you have a copy of that Certification?

A Yes, I have, sir. 1 8

The testimonies of Honorato Santos 19 and Josefina Pe 20 were to the same effect.
The non-bank respondents' predecessor-in-interest, Marcial Alcantara, was no less
thorough:
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 Q And will you give a brief description of what you do?

A I normally acquire land, quite big tract of land and subdivide it into smaller
lots and sold it to some interested parties.
Q Specifically, Mr. Alcantara, will you please inform the Court in what place in
Baguio have you acquired and subdivided and sold lots?
A Dominican Hill, Leonila Hill, Crystal Cave and Asin Road, sir.

Q You mentioned Asin Road, what particular place in Asin Road are you
referring?

A That property I bought from Emelita Santiago, sir.

Q When you say you bought it from Emelita Santiago, how did you come to
know that Emelita Santiago is disposing of the property?

A Because of the father, he is the one who offered me the property, sir,
Armando Gabriel.

Q Is he also a resident of Baguio?

A He is from Buyagan, La Trinidad, sir.

Q How did you come to know of this Armando Gabriel wanting to sell a
property in Asin?

A He approached me in the house, sir. He has acquired a title from the

Traders Royal Bank.
Q Can you inform the Honorable Court when you had this conversation with
Armando Gabriel on the sale of the property at Asin Road?
A Later part of March, 1983, sir.

Q Now, when this Armando Gabriel informed you that he wants his property
to be sold, what did you do?
A I went to the place with the agent, sir.

Q When you say you went to the place with the agent, what place?
A Kilometer 2, Asin Road, sir.
Q And when you went there to see the place, did you actually go there to see
the place?

A By walking, I parked my car a kilometer away, sir.

Q Is it my understanding that when you went to see the property there were no
roads?
A None, sir.

xxx xxx xxx

Q Mr. Alcantara, when you went to see this place at Asin Road last week of
March, 1983, will you please briefly describe how this place looked like at
that time?
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 A The place was mountainous, grassy, there were cogon trees, some of the
roads were eroding already, so we cannot possibly enter the property, sir.
Q At the time you entered the place, was there any visible sign of claim by
anyone?
A None, sir.

Q In terms of fence in the area?

A There is no such, sir.

xxx xxx xxx

Q Aside from looking or going to the property, what else did you do to this
property prior to your purchase?

A I investigated it with the Register of Deeds, sir.

Q What is your purpose in investigating it with the Register of Deeds?

A To see if the paper is clean and there are no encumbrances, sir.

Q To whom did you talk?

A To Atty. Ernesto Diomampo, sir.

Q And when you went to the Registry of Deeds to investigate and check, did
you have occasion to talk with Atty. Diomampo?
A Yes, sir.

Q And what was the result of your talk with Atty. Diomampo?
A The papers are clean except to the annotation at the back with the road
right of way, sir.
Q After making this investigation with the Register of Deeds and talking with
Atty. Diomampo, what else transpired?

A We bought the property, sir.

Q After purchasing the property from Emelita Santiago, could you please tell
the Honorable Court what you did with that deed of sale?
A We registered it with the Register of Deeds for the Certificate of Title
because at that time when we bought the property, Emelita Santiago had it
subdivided into six (6) lots, sir.
Q Is it our understanding that prior to your purchase the property was
subdivided into six (6) parcels?
A Yes, sir.

Q Could you please inform the Honorable Court if you have any buyers in the
subdivision of this property prior to your purchase?
A Yes, I have.

Q This subdivision of this property, to what office was it brought for action?

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 A Bureau of Lands, San Fernando, La Union, sir.
Q Now, Mr. Alcantara, at the time that you had this property subdivided by the
owner, could you please inform the Court if there was any claim by any
other party opposing the subdivision or claiming the property?
A None, sir.

Q When the Deed of Sale was executed and you said that you presented it to
the Register of Deeds and after the subdivision already, what action did the
Register of Deeds have regarding the matter?

A They approved it and registered it already in six (6) titles, sir.

Q In whose names?

A One (1) title under my name, Amado Cruz and Dr. Sanchez, sir.
Q Initially, Mr. Alcantara, you said that you are the sole purchaser of this
entire area of One Thousand Five Hundred Ninety One (1,591) Square
Meters. Now, you are informing this Honorable Court that one Amado Cruz
and one Dr. Sanchez were also issued two (2) titles. Could you explain how
these titles came into their possession?
A Actually, two (2) are our co-owners, sir.

Q So, is it our understanding that the Deed of Sale from Emelita Santiago is
in favor of these two (2) Atty. Cruz and Dr. Sanchez?
A Yes, sir. 21

Third, between two innocent persons, the one who made it possible for the wrong to
be done should be the one to bear the resulting loss. 2 2 The Capays led the notice of lis
pendens way back on March 17, 1967 but the same was not annotated in TRB's title. The
Capays and their counsel Atty. Ramon A. Gonzales knew in 1968 of the extra-judicial
foreclosure sale of the property to TRB and the consolidation of title in the bank's name
following the lapse of the one-year period of redemption. But in the next fteen (15) years
or so, they did not bother to nd out the status of their title or whether the liens noted on
the original certi cate of title were still existing considering that the property had already
been foreclosed. In the meantime, the subject property had undergone a series of
transfers to buyers in good faith and for value. It was not until after the land was
subdivided and developed with the buyers building their houses on the other lots when the
Capays suddenly appeared and questioned the occupants' titles. At the very least, the
Capays are guilty of laches. Laches has been de ned as the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence
could nor should have been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting presumption that the party entitled to it either has
abandoned it or declined to assert it. 2 3
Verily, the principle on prescription of actions is designed to cover
situations such as the case at bar, where there have been a series of transfers to
innocent purchasers for value. To set aside these transactions only to
accommodate a party who has slept on his rights is anathema to good order. cdrep

Independently of the principle of prescription of actions working against

petitioners, the doctrine of laches may further be counted against them, which
latter tenet finds application even to imprescriptible actions. . . . 2 4
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 In De La Calzada-Cierras vs. Court of Appeals, 2 5 we held:
While it is true that under the law it is the act of registration of the deed of
conveyance that serves as the operative act to convey the land registered under
the Torrens System ( Davao Grains, Inc. vs. Intermediate Appellate Court, 171
SCRA 612), the petitioners cannot invoke said dictum because their action to
recover Lot 4362 is barred by the equitable doctrine of laches.
The act of registering the conveyance to Rosendo was constructive notice
to the whole world of the fact of such conveyance (Heirs of Maria Marasigan vs.
Intermediate Appellate Court, 152 SCRA 253).
But the petitioners' complaint to recover the title and possession of Lot
4362 was led only on July 21, 1981, twelve (12) years after the registration of
the sale to Rosendo. The petitioners failed and neglected for an unreasonably
long time to assert their right, if any, to the property in Rosendo's possession.

Being guilty of laches, the Capays cannot invoke the ruling in Villasor vs. Camon,
Levin vs. Bass and Director of Lands vs. Reyes 2 6 to the effect that entry of the notice of lis
pendens in the day book (primary entry book) is su cient to constitute registration and
such entry is notice to all persons of such adverse claim. Certainly, it is most iniquitous for
the Capays who, after sleeping on their rights for fteen years, to assert ownership over
the property that has undergone several transfers made in good faith and for value and
already subdivided into several lots with improvements introduced thereon by their
owners.
In the same vein, the cases cited by the Capays in their rst two (2) assignment of
errors do not help them any, as the transferees in said cases were not innocent purchasers
for value and in good faith. In Tuazon vs. Reyes and Siochi , 2 7 where the land involved
therein was sold by Petronilo David to Vicente Tuazon, it was with a deed containing the
recital that the land was in dispute between the vendor and Roberto Siochi. Tuazon, who
was merely subrogated to the rights of the vendor was aware of the dispute and,
furthermore, David did not warrant the title to the same. In Rivera vs. Moran, 2 8 Rivera
acquired interest in the land before the nal decree was entered in the cadastral
proceedings. Rivera, the transferee, was aware of the pending litigation and, consequently,
could not have been considered a purchaser in good faith. Similarly, in Atun, et al. vs.
Nunez, et al. 2 9 and Laroza vs. Guia, 3 0 the buyers of the property at the time of their
acquisition knew of the existence of the notice of lis pendens. In contrast to the cited
cases, the non-bank respondents in the case at bar acquired their respective portions of
the land with clean title from their predecessors-in-interest.
II
We come now to TRB's liability towards the Capays.
The Bank unconvincingly tries to wash its hands off the present controversy, and
attempts to shift the blame on the Capays, thus:
xxx xxx xxx

23. The petitioner Bank, during all the time that it was holding the title
for over fourteen (14) years that there was no legal impediment for it to sell said
property, Central Bank regulations require that real properties of banks should not
be held for more than five (5) years;

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 24. The fault of the Register of Deeds in not carrying over the Notice of
Lis Pendens to the new title of the petitioner Bank should not be absorbed by the
latter considering that in all good faith, it was not aware of the existence of said
annotation during all the time that said title was in its possession for almost
fourteen (14) years before the property was sold to Emelita G. Santiago . . . . 3 1

TRB concludes that "(t)he inaction and negligence of private respondents, allowing
ownership to pass for almost 15 years constitute prescription of action and/or laches." 32
Section 25 of the General Banking Act, 3 3 provides that no bank "shall hold the
possession of any real estate under mortgage or trust, deed, or the title and possession of
any real estate purchased to secure any debt due to it, for a longer period than ve years."
TRB, however, admits holding on to the foreclosed property for twelve (12) years after
consolidating title in its name. The bank is, therefore, estopped from invoking banking laws
and regulations to justify its belated disposition of the property. It cannot be allowed to
hide behind the law which it itself violated.
TRB cannot feign ignorance of the existence of the lis pendens because when the
property was foreclosed by it, the notice of lis pendens was annotated on the title. But
when TCT No. T-6595 in the name of the Capay spouses was cancelled after the
foreclosure, TCT No. T-16272 which was issued in place thereof in the name of TRB did
not carry over the notice of lis pendens.
We do not nd the Capays guilty of "inaction and negligence" as against TRB. It may
be recalled that upon the commencement of foreclosure proceedings by TRB, the Capays
led an action for prohibition on September 22, 1966 against the TRB before the CFI to
stop the foreclosure sale. Failing in that attempt, the Capays led a supplemental
complaint for the recovery of the property. The case reached this Court. Prescription or
laches could not have worked against the Capays because they had persistently pursued
their suit against TRB to recover their property. prLL

On the other hand, it is di cult to believe TRB's assertion that after holding on to the
property for more than ten (10) years, it suddenly realized that it was acting in violation of
the General Bank Act. What is apparent is that TRB took advantage of the absence of the
notice of lis pendens at the back of their certi cate of title and sold the property to an
unwary purchaser. This notwithstanding the adverse decision of the trial court and the
pendency of its appeal. TRB, whose timing indeed smacks of bad faith, thus transferred
caused the property without the lis pendens annotated on its title to put it beyond the
Capay's reach. Clearly, the bank acted in a manner contrary to morals, good customs and
public policy, and should be held liable for damages. 3 4
Considering, however, that the mortgage in favor of TRB had been declared null and
void for want of consideration and, consequently, the foreclosure proceedings did not have
a valid effect, the Capays would ordinarily be entitled to the recovery of their property.
Nevertheless, this remedy is not now available to the Capays inasmuch as title to said
property has passed into the hands of third parties who acquired the same in good faith
and for value. Such being the case, TRB is duty bound to pay the Capays the fair market
value of the property at the time it was sold to Emelita Santiago, the transferee of TRB.
WHEREFORE, the decision of the Court of Appeals dated February 24, 1994 in CA-
G.R. CV No. 33920, as modi ed by its Resolution dated August 10, 1994 is hereby
AFFIRMED. In addition, Traders Royal Bank is ordered to pay the Capays the fair market
value of the property at the time it was sold to Emelita Santiago.
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 This Decision is without prejudice to whatever criminal, civil or administrative action
against the Register of Deeds and/or his assistants that may be taken by the party or
parties prejudiced by the failure of the former to carry over the notice of lis pendens to the
certificate of title in the name of TRB.
SO ORDERED.
Davide, Jr., C.J., Puno, Pardo and Santiago, JJ., concur.

Footnotes

1. Said piece of land had been registered in the name of the Capay spouses since
December 14, 1959 under TCT No. T-6595 (Exh. "J"), and is more accurately described as
follows:
A parcel of land (Lot 27-A-2-A of the subdivision plan (LRC) Psd-24029, being a
portion of Lot 27-A-2, described on plan LRC Psd-23299, LRC (GLRO) Record No.-Civ.
Res. 211), situated in the Res. Sec. 'L', Baguio City, Island of Luzon. Bounded on the SE.,
point 3 to 4, by Lot 27-C, (LRC) Psd-10738; on the SW., points 4 to 5, by Lot 27-C (LRC)
Psd-10738, and points 5 to 1 by Lot 27-A-2-B of the Subdivision plan; and on the NW.,
and NE., points 1 to 3, by Lot 27-A-2-B of the subdivision plan. . . . containing an area of
ONE THOUSAND FIVE HUNDRED AND NINETY ONE (1,591) SQUARE METERS, more or
less.

2. Exhibit "K."
3. Exhibit "L."

4. TSN, March 29, 1989, p. 12.

5. Lot 27-A-2-A-1 with an area of 225 sq. meters was sold to Honorato Santos, who was
issued TCT No. T-36177 (Exhibit "M"). The Santoses later mortaged said lot to the
Development Bank of the Philippines.
Lot 27-A-2-A-2 with an area of 290 sq. meters was sold to Cecilio Pe, who was issued
TCT No. 36707 (Exhibit "N").
Lot 27-A-2-A-3 with an area of 330 sq. meters was sold to Flora Laron Escumbre, who
was issued TCT No. T-36051 (Exhibit O").

Lot 27-A-2-A-4 with an area of 280 sq. meters was sold to Telesforo Alfelor II who was
issued TCT No. T-36147 (Exhibit "P"). The Alfelors later mortgaged the same to the
Development Bank of the Philippines.
TCT No. T-36730 (Exhibit "Q") covering Lot 27-A-2-A-5 with an area of 235 sq. meters
was issued to Dean Roderick Fernando.

Lot 27-A-2-A-6 with an area of 231 sq. meters was sold to Remedios Oca. TCT No. T-
37437 (Exhibit "R") was issued to the latter.

6. G.R. No. 62744.

7. Namely, Ruby Ann, Margarita, Rosario, Cynthia, Linda Joy, all surnamed Capay.

8. Branch 74, presided by Judge Leonardo M. Rivera.

9. Rollo, G.R. No. 118862, pp. 49-57.
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 10. 89 Phil. 404 (1951).
11. 91 Phil. 419 (1952).

12. 68 SCRA 177 (1975).

13. Rollo, G.R. No. 114299, pp. 14-17.
14. Rollo, G.R. No. 118862, p. 63.
15. Id., at 240.
16. Tenio-Obsequio vs. Court of Appeals, 230 SCRA 550 (1994).
17. TSN, March 29, 1989, pp. 22-26.

18. TSN, March 30, 1989, pp. 3-4, 6-7.

19. Id., at 22-23.
20. TSN, June 1, 1989, pp. 4-5.
21. TSN, March 29, 1989, pp. 5-6; 8-9; 10-12.

22. Bacaltos Coal Mines vs. Court of Appeals, 245 SCRA 460 (1995).
23. Republic vs. Sandiganbayan, 255 SCRA 438 (1996); Catholic Bishops of Balanga vs.
Court of Appeals, 264 SCRA 181 (1996).
24. Buenaventura vs. Court of Appeals, 216 SCRA 819 (1992).
25. 212 SCRA 390 (1992).
26. See Notes 10, 11, and 12.

27. 48 Phil. 844 (1926).

28. 48 Phil. 836 (1976).

29. 97 Phil. 762 (1955).

30. 143 SCRA 341 (1985).

31. Rollo, G.R. No. 114299, p. 75.

32. Ibid.
33. Republic Act No. 337, as amended.
34. Article 21, Civil Code. cdrep

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