SPOUSES ROY PO LAM and JOSEFA ONG PO LAM, Petitioners. vs.

COURT OF APPEALS and FELIX LIM now JOSE LEE, Respondents Doctrine: While the doctrine of lis pendens is frequently spoken of as one of implied or constructive notice, according to many authorities, the doctrine is not founded on any idea of constructive notice .The basis of the doctrine of lis pendens is public policy and convenience, under the view that once a court has taken cognizance of controversy, it should be impossible to interface with consummation of the judgement by any ad interim transfer, encumbrance, or change of possession. Nature: Motion for Reconsideration of the 1999 Decision of the SC (Spouses Po Lam v. CA) Date: 6 December 2000 Ponente: Melo, J. Facts:

2 prime commercial lots (Lots 1557 & 1558) located in Legaspis commercial district were sold by Lim Kok Chiong to Legaspi Avenue Hardware Company (LAHCO). However, Felix Lim, Lim KoK Choings brother, filed a complaint against LAHCO and Kok Chiong with the CFI of Albay to annul the deeds of sale on the ground that he (Felix) had inherited the lands from his foster parents. Felix then filed a notice of lis pendens over the 2 lots with the Register of Deeds of Albay. Case against KoK Chiong was dropped, but LAHCO remained as defenant. Trial court declared LAHCO as absolute owner, and ordered the cancellation of the lis pendens inscribed in the titles. Lis pendens in TCT 2580 (for Lot 1557) was cancelled, but lis pendens on TCT 2581 for Lot 1558 remained subsisting because LAHCO gave the owners duplicate copy of TCT to Continental Bank pursuant to a mortgage contract with the latter. Felix appealed adverse decision to the CA. During the pendency of the appeal, however, LAHCO sold the lots to Spouses Po Lam. 4 years later, the Spouses Po Lam had the notice of lis pendens on TCT no 2580 and 2581 cancelled. The TCTs were then replaced with new ones. In the meantime, Spouses Po Lam leased the building on Lot 1557 to Jose Lee for one year. When the period of the lease was over, the spouses allowed him to stay and accepted monthly payments. However, one day the payments stopped because Felix Lim had offered to sell to Jose Lee the property. A case for unlawful detainer was then filed against Lee. Felix subsequently assigned all his rights in the lots to Jose Lee, who substituted him. MeTC: the Po Lam spouses to be the lawful owners. RTC: spouses Roy Po Lam and Josefa Ong Po Lam are transferees pendente lite and not purchaser in good faith. CA affirmed. SC (1st case, 1999): As to Lot 1558, Po Lam spouses could not be deemed buyers in good faith. The annotation of lis pendens on TCT No. 2581 which covers Lot 1558, served as notice to them that the said lot is involved in a pending litigation. RULE: one who deals with property subject of a notice of lis pendens cannot invoke the right of a purchaser in good faith. As to Lot 1557, the notice of lis pendens of which was already cancelled at the time of the sale, Spouses are still not in good faith. The reason for this is based on the circumstances, the fact that the two lots were under litigation together and were both sold to them, and yet 1558 had a notice while the other had a cancelled one should have sufficiently alerted them that the title of 1557 was defective. Hence, not a buyer in good faith because they willfully refused to believe that such defect exists.

Issue: Were Spouses Po Lim were purchasers in good faith or transferees pendente lite?

Held: Purchasers in good faith.

The sole basis of the Court for holding spouses as purchasers in bad faith is the subsistence of the notice of lis pendens in the TCT of Lot 1558, and since 1558 was sold together with 1557, spouses were held in bad faith even though notice in 1557 already cancelled. it must be pointed out that even if a notice of lis pendens on TCT No. 2581 (Lot No. 1558) was still subsisting at the time petitioners bought the property from LAHCO, there also was a court order ordering that the annotation be cancelled, as in fact, it was cancelled on May 20, 1974. A possessor in good faith has been defined as "one who is unaware that there exists a flaw, which invalidates his acquisition of the thing. While Spouses bought Lot 1558 from LAHCO while a notice of lis pendens was still annotated thereon, there was also existing a court order canceling the same. Hence, petitioners cannot be considered as being "aware of a flaw, which invalidates their acquisition of the thing "since the alleged flaw, the notice of lis pendens, was already being ordered cancelled at the time of the purchased. On this ground alone, petitioners can already be considered buyers in good faith. Notice of lis pendens here in above mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the right of the party who caused it to be recorded. Lis Pendens literally means a pending suit or a pending litigation; and the doctrine of lis pendens has been defined as the jurisdiction, power, or control which a court acquires over property involved in a suit, pending the continuance of the action. 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 said property does so at his own risk, or that he gambles on the result of the litigation over the said property. Any right they may thereafter acquire on the property is subject to the eventuality to the suit. The filing of a notice of lis pendens in effect (1) keeps the subject matter of the litigation within the power of the court until the entry of the final judgement so as to prevent the defeat of the latter by successive alienations; and (2) binds a purchaser of the land subject of the litigation to the judgement or decree that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not; but (3) does not create a nonexistent or right or lien. While the doctrine of lis pendens is frequently spoken of as one of implied or constructive notice, according to many authorities, the doctrine is not founded on any idea of constructive notice .The basis of the doctrine of lis pendens is public policy and convenience, under the view that once a court has taken cognizance of controversy, it should be impossible to interface with consummation of the judgement by any ad interim transfer, encumbrance, or change of possession. And since the doctrine rests on public policy, not notice, upon the cancellation of the notice of lis pendens, the Po Lam spouses cannot then be considered as having constructive notice of any defect in the title of LAHCO as to make them transferees pendente lite and purchasers in bad faith. To hold otherwise would render nugatory the cancellation of the notices of lis pendens inscribed on TCT No. 2581 despite its subsequent cancellation. While the notice of lis pendens is duly recorded and as long as it remains uncancelled, he litigant can rest secure that he would not lose the property or any part of it during litigation. Conversely, cancellation of the notice of pendency terminates the effects of such notice. Therefore, with the cancellation of the notices of lis pendens on TCT No. 2580 and 2580, the effects of such notice were terminated, resulting in the Po Lam spouses not being bound thereby. In fine, they cannot be considered transferee pendente lite and

purchasers in bad faith