Traders Royal Bank vs.

Court of Appeals,
Patria Capay, et al G.R. No. 118862, Sept. 24,
1999 (315 SCRA 190)
"Torrens System"
"latches"

Facts:
A
parcel
of
land
owned
by
the
spouses
Capay
was mortgage to
and
subsequently extrajudicially foreclosed by Traders Royal Bank (TRB). To prevent property
sale in public auction, the Capays filed a petition for preliminary injunction alleging the
mortgage was void because they did not receive the proceeds of the loan. A notice of lis pendens
(suit pending) was filed before the Register of Deeds with the notice recorded in the Day Book.
Meanwhile, a foreclosure sale proceeded with the TRB as the sole and winning bidder. The
Capays title was cancelled and a new one was entered in TRBs name without the notice of lis
pendens carried over the title. The Capays filedrecovery of the property and damages. Court
rendered a decision declaring the mortgage was void for want of consideration and thus
cancelled TRBs title and issued a new cert. of title for the Capays.
Pending its appeal before the court, TRB sold the land to Santiago who subsequently subdivided
and sold to buyers who were issued title to the land. Court ruled that the subsequent buyers
cannot be considered purchasers for value and in good faith since they purchase the land after it
became a subject in a pending suit before the court. Although the lis pendens notice was not
carried over the titles, its recording in the Day Book constitutes registering of the land and
notice to all persons with adverse claim over the property. TRB was held to be in bad faith upon
selling the property while knowing it is pending for litigation. The Capays were issued the cert.
of title of the land in dispute while TRB is to pay damages to Capays.
Issue:
1.
Who has the better right over the land in dispute?
2.

Whether or not TRB is liable for damages

Ruling:
The court ruled that a Torrens title is presumed to be valid which purpose is to avoid conflicts of
title to real properties. When the subsequent buyers bought the property there was no lis
pendens annotated on the title. Every person dealing with a registered land may safely rely on
the correctness of the title and is not obliged to interpret what is beyond the face of the
registered title. Hence the court ruled that the subsequent buyers obtained the property from a
clean title in good faith and for value. On one hand, the Capays are guilty of latches. After they
filed the notice for lis pendens, the same was not annotated in the TRB title. They did not take
any action for 15 years to find out the status of the title upon knowing the foreclosure of the
property. In consideration to the declaration of the mortgage as null and void for want of

consideration, the foreclosure proceeding has no legal effect. However, in as much as the Capays
remain to be the real owner of the property it has already been passed to purchasers in good
faith and for value. Therefore, the property cannot be taken away to their prejudice. Thus, TRB
is duty bound to pay the Capays the fair market value of the property at the time they sold it
to Santiago.