SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF APPEALS, and NEAL B.

CHRISTIAN, respondents.
DECISION

the petitioner corporation to pay Christian the amount of $100,000 representing the principal obligation
covered by the promissory notes dated 7 August 1996 and 14 March 1997, plus interest of 6% per
month thereon until fully paid, with all interest payments already paid by the defendant to the plaintiff
to be deducted therefrom.

DAVIDE, JR., C.J.:

The trial court ratiocinated in this wise:

May a complaint that lacks a cause of action at the time it was filed be cured by the accrual of a cause
of action during the pendency of the case? This is the basic issue raised in this petition for the Courts
consideration.

(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292 of the Civil Code,
there is an implied novation only if the old and the new obligation be on every point incompatible with
one another.

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor L. Infante
and Rodney David Hegerty, its president and vice-president, respectively, obtained from private
respondent Neal B. Christian loans evidenced by three promissory notes dated 7 August 1996, 14 March
1997, and 14 July 1997. Each of the promissory notes is in the amount of US$50,000 payable after
three years from its date with an interest of 15% per annum payable every three months. [1] In a letter
dated 16 December 1998, Christian informed the petitioner corporation that he was terminating the
loans and demanded from the latter payment in the total amount of US$150,000 plus unpaid interests in
the total amount of US$13,500. [2]

The test of incompatibility between the two obligations or contracts, according to an imminent author, is
whether they can stand together, each one having an independent existence. If they cannot, they are
incompatible, and the subsequent obligation novates the first (Tolentino, Civil Code of the Philippines,
Vol. IV, 1991 ed., p. 384). Otherwise, the old obligation will continue to subsist subject to the
modifications agreed upon by the parties. Thus, it has been written that accidental modifications in an
existing obligation do not extinguish it by novation. Mere modifications of the debt agreed upon
between the parties do not constitute novation. When the changes refer to secondary agreement and
not to the object or principal conditions of the contract, there is no novation; such changes will produce
modifications of incidental facts, but will not extinguish the original obligation. Thus, the acceptance of
partial payments or a partial remission does not involve novation (id., p. 387). Neither does the
reduction of the amount of an obligation amount to a novation because it only means a partial remission
or condonation of the same debt.

On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City,
Branch 59, a complaint for a sum of money and damages against the petitioner corporation, Hegerty,
and Atty. Infante. The complaint alleged as follows: On 7 August 1996, 14 March 1997, and 14 July
1997, the petitioner, as well as its president and vice-president obtained loans from him in the total
amount of US$150,000 payable after three years, with an interest of 15% per annum payable quarterly
or every three months. For a while, they paid an interest of 15% per annum every three months in
accordance with the three promissory notes. However, starting January 1998 until December 1998,
they paid him only an interest of 6% per annum, instead of 15% per annum, in violation of the terms of
the three promissory notes. Thus, Christian prayed that the trial court order them to pay him jointly and
solidarily the amount of US$150,000 representing the total amount of the loans; US$13,500
representing unpaid interests from January 1998 until December 1998; P100,000 for moral
damages; P50,000 for attorneys fees; and the cost of the suit. [3]
The petitioner corporation, together with its president and vice-president, filed an Answer raising as
defenses lack of cause of action and novation of the principal obligations. According to them, Christian
had no cause of action because the three promissory notes were not yet due and demandable. In
December 1997, since the petitioner corporation was experiencing huge losses due to the Asian
financial crisis, Christian agreed (a) to waive the interest of 15% per annum, and (b) accept payments of
the principal loans in installment basis, the amount and period of which would depend on the state of
business of the petitioner corporation. Thus, the petitioner paid Christian capital repayment in the
amount of US$750 per month from January 1998 until the time the complaint was filed in February
1999. The petitioner and its co-defendants then prayed that the complaint be dismissed and that
Christian be ordered to pay P1 million as moral damages; P500,000 as exemplary damages;
and P100,000 as attorneys fees.[4]
In due course and after hearing, the trial court rendered a decision [5] on 5 May 2000 declaring the first
two promissory notes dated 7 August 1996 and 14 March 1997 as already due and demandable and that
the interest on the loans had been reduced by the parties from 15% to 6% per annum. It then ordered

In the instant case, the Court is of the view that the parties merely intended to change the rate of
interest from 15% per annum to 6% per annum when the defendant started paying $750 per month
which payments were all accepted by the plaintiff from January 1998 onward. The payment of the
principal obligation, however, remains unaffected which means that the defendant should still pay the
plaintiff $50,000 on August 9, 1999, March 14, 2000 and July 14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the promissory notes was due and
demandable. As of this date however, the first and the second promissory notes have already matured.
Hence, payment is already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint which states no cause of
action may be cured by evidence presented without objection. Thus, even if the plaintiff had no cause of
action at the time he filed the instant complaint, as defendants obligation are not yet due and
demandable then, he may nevertheless recover on the first two promissory notes in view of the
introduction of evidence showing that the obligations covered by the two promissory notes are now due
and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be held personally liable
for the obligations contracted by the defendant corporation it being clear that they merely acted in
representation of the defendant corporation in their capacity as General Manager and President,
respectively, when they signed the promissory notes as evidenced by Board Resolution No. 1(94) passed
by the Board of Directors of the defendant corporation (Exhibit 4). [6]

In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners appeal and
affirmed in toto the decision of the trial court, holding as follows:

IV.
WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS OF CONTRACT WHICH HAS BEEN
NOVATED STILL PREVAIL?[10]

In the case at bench, there is no incompatibility because the changes referred to by appellant Swagman
consist only in the manner of payment. . . .

The petitioner harps on the absence of a cause of action at the time the private respondents complaint
was filed with the trial court. In connection with this, the petitioner raises the issue of novation by
arguing that its obligations under the three promissory notes were novated by the renegotiation that
happened in December 1997 wherein the private respondent agreed to waive the interest in each of the
three promissory notes and to accept US$750 per month as installment payment for the principal loans
in the total amount of US$150,000. Lastly, the petitioner questions the act of the Court of Appeals in
considering Hegerty and Infante as appellants when they no longer appealed because the trial court had
already absolved them of the liability of the petitioner corporation.

Appellant Swagmans interpretation that the three (3) promissory notes have been novated by reason of
appellee Christians acceptance of the monthly payments of US$750.00 as capital repayments
continuously even after the filing of the instant case is a little bit strained considering the stiff
requirements of the law on novation that the intention to novate must appear by express agreement of
the parties, or by their acts that are too clear and unequivocal to be mistaken. Under the circumstances,
the more reasonable interpretation of the act of the appellee Christian in receiving the monthly
payments of US$750.00 is that appellee Christian merely allowed appellant Swagman to pay whatever
amount the latter is capable of. This interpretation is supported by the letter of demand dated
December 16, 1998 wherein appellee Christian demanded from appellant Swagman to return the
principal loan in the amount of US$150,000 plus unpaid interest in the amount of US$13,500.00
...

On the other hand, the private respondent asserts that this petition is a mere ploy to continue delaying
the payment of a just obligation. Anent the fact that Hegerty and Atty. Infante were considered by the
Court of Appeals as appellants, the private respondent finds it immaterial because they are not affected
by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act or
omission by which a party violates the right of another. Its essential elements are as follows:

Appellant Swagman, likewise, contends that, at the time of the filing of the complaint, appellee Christian
ha[d] no cause of action because none of the promissory notes was due and demandable.

1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is
created;

Again, We are not persuaded.

2. An obligation on the part of the named defendant to respect or not to violate such right; and
...
In the case at bench, while it is true that appellant Swagman raised in its Answer the issue of
prematurity in the filing of the complaint, appellant Swagman nonetheless failed to object to appellee
Christians presentation of evidence to the effect that the promissory notes have become due and
demandable.
The afore-quoted rule allows a complaint which states no cause of action to be cured either by evidence
presented without objection or, in the event of an objection sustained by the court, by an amendment of
the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed., p. 108). [8]
Its motion for reconsideration having been denied by the Court of Appeals in its Resolution of 4
December 2003,[9] the petitioner came to this Court raising the following issues:
I.
WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS HAS BECOME FINAL
AND EXECUTORY, MAY THE RESPONDENT COURT OF APPEALS STILL STUBBORNLY CONSIDER THEM AS
APPELLANTS WHEN THEY DID NOT APPEAL?
II.

WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE LOWER COURT VALID?

III.
MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF THE LOWER COURT
WHICH IS INVALID DUE TO LACK OF CAUSE OF ACTION?

3. Act or omission on the part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages or other appropriate relief. [11]
It is, thus, only upon the occurrence of the last element that a cause of action arises, giving the plaintiff
the right to maintain an action in court for recovery of damages or other appropriate relief.
It is undisputed that the three promissory notes were for the amount of P50,000 each and uniformly
provided for (1) a term of three years; (2) an interest of 15 % per annum, payable quarterly; and (3) the
repayment of the principal loans after three years from their respective dates. However, both the Court
of Appeals and the trial court found that a renegotiation of the three promissory notes indeed happened
in December 1997 between the private respondent and the petitioner resulting in the reduction not
waiver of the interest from 15% to 6% per annum, which from then on was payable monthly, instead
of quarterly. The term of the principal loans remained unchanged in that they were still due three years
from the respective dates of the promissory notes. Thus, at the time the complaint was filed with the
trial court on 2 February 1999, none of the three promissory notes was due yet; although, two of the
promissory notes with the due dates of 7 August 1999 and 14 March 2000 matured during the pendency
of the case with the trial court. Both courts also found that the petitioner had been religiously paying
the private respondent US$750 per month from January 1998 and even during the pendency of the case
before the trial court and that the private respondent had accepted all these monthly payments.
With these findings of facts, it has become glaringly obvious that when the complaint for a sum of
money and damages was filed with the trial court on 2 February 1999, no cause of action has as yet
existed because the petitioner had not committed any act in violation of the terms of the three

promissory notes as modified by the renegotiation in December 1997. Without a cause of action, the
private respondent had no right to maintain an action in court, and the trial court should have therefore
dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the modified terms of the three
promissory notes and that the payment of the principal loans were not yet due when the complaint was
filed, the trial court did not dismiss the complaint, citing Section 5, Rule 10 of the 1997 Rules of Civil
Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised
by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure to amend does not affect the result of
the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with
liberality if the presentation of the merits of the action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance to enable the amendment to be made.
According to the trial court, and sustained by the Court of Appeals, this Section allows a complaint that
does not state a cause of action to be cured by evidence presented without objection during the trial.
Thus, it ruled that even if the private respondent had no cause of action when he filed the complaint for
a sum of money and damages because none of the three promissory notes was due yet, he could
nevertheless recover on the first two promissory notes dated 7 August 1996 and 14 March 1997, which
became due during the pendency of the case in view of the introduction of evidence of their maturity
during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil Procedure in order that
the actual merits of a case may be determined in the most expeditious and inexpensive manner without
regard to technicalities, and that all other matters included in the case may be determined in a single
proceeding, thereby avoiding multiplicity of suits. [12] Section 5 thereof applies to situations wherein
evidence not within the issues raised in the pleadings is presented by the parties during the trial, and to
conform to such evidence the pleadings are subsequently amended on motion of a party. Thus, a
complaint which fails to state a cause of action may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of action in fact exists at the
time the complaint is filed, but the complaint is defective for failure to allege the essential facts. For
example, if a complaint failed to allege the fulfillment of a condition precedent upon which the cause of
action depends, evidence showing that such condition had already been fulfilled when the complaint
was filed may be presented during the trial, and the complaint may accordingly be amended thereafter.
[13]
Thus, inRoces v. Jalandoni,[14] this Court upheld the trial court in taking cognizance of an otherwise
defective complaint which was later cured by the testimony of the plaintiff during the trial. In that case,
there was in fact a cause of action and the only problem was the insufficiency of the allegations in the
complaint. This ruling was reiterated in Pascua v. Court of Appeals.[15]
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied
by an amended or supplemental pleading alleging the existence or accrual of a cause of action while the

case is pending.[16] Such an action is prematurely brought and is, therefore, a groundless suit, which
should be dismissed by the court upon proper motion seasonably filed by the defendant. The
underlying reason for this rule is that a person should not be summoned before the public tribunals to
answer for complaints which are immature. As this Court eloquently said in Surigao Mine Exploration
Co., Inc. v. Harris:[17]
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at
all there must be some cause of action at the commencement of the suit. As observed by
counsel for appellees, there are reasons of public policy why there should be no needless haste in
bringing up litigation, and why people who are in no default and against whom there is yet no cause of
action should not be summoned before the public tribunals to answer complaints which are groundless.
We say groundless because if the action is immature, it should not be entertained, and an action
prematurely brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals which are
thereby regarded as abandoned (Reynes vs. Compaa General de Tabacos [1912], 21 Phil. 416; Ruyman
and Farris vs. Director of Lands [1916], 34 Phil., 428) and that the complaint and answer having been
superseded by the amended complaint and answer thereto, and the answer to the original complaint
not having been presented in evidence as an exhibit, the trial court was not authorized to take it into
account. (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.) But in none of these cases or in any other case
have we held that if a right of action did not exist when the original complaint was filed, one could be
created by filing an amended complaint. In some jurisdictions in the United States what was termed an
imperfect cause of action could be perfected by suitable amendment (Brown vs. Galena Mining &
Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this is virtually permitted in
Banzon and Rosauro vs. Sellner ([1933], 58 Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62
Phil., 683); and recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no cause
of action whatsoever cannot by amendment or supplemental pleading be converted into a
cause of action: Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting
cause of action at the time his action is commenced, the defect cannot be cured or remedied
by the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not permissible.
(Emphasis ours).
Hence, contrary to the holding of the trial court and the Court of Appeals, the defect of lack of cause of
action at the commencement of this suit cannot be cured by the accrual of a cause of action during the
pendency of this case arising from the alleged maturity of two of the promissory notes on 7 August 1999
and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner corporation argues the existence of
novation based on its own version of what transpired during the renegotiation of the three promissory
notes in December 1997. By using its own version of facts, the petitioner is, in a way, questioning the
findings of facts of the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are final and conclusive and
cannot be reviewed on appeal to the Supreme Court[18] as long as they are borne out by the record or
are based on substantial evidence.[19] The Supreme Court is not a trier of facts, its jurisdiction being
limited to reviewing only errors of law that may have been committed by the lower courts. Among the

exceptions is when the finding of fact of the trial court or the Court of Appeals is not supported by the
evidence on record or is based on a misapprehension of facts. Such exception obtains in the present
case.[20]

In sum, based on our disquisition on the lack of cause of action when the complaint for sum of money
and damages was filed by the private respondent, the petition in the case at bar is impressed with
merit.

This Court finds to be contrary to the evidence on record the finding of both the trial court and the Court
of Appeals that the renegotiation in December 1997 resulted in the reduction of the interest from 15%
to 6% per annum and that the monthly payments of US$750 made by the petitioner were for the
reduced interests.

WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of the Court of
Appeals in CA-G.R. CV No. 68109, which affirmed the Decision of 5 May 2000 of the Regional Trial Court
of Baguio, Branch 59, granting in part private respondents complaint for sum of money and damages,
and its Resolution of 4 December 2003, which denied petitioners motion for reconsideration are hereby
REVERSED and SET ASIDE. The complaint docketed as Civil Case No. 4282-R is hereby DISMISSED for
lack of cause of action.

It is worthy to note that the cash voucher dated January 1998 [21] states that the payment of US$750
represents INVESTMENT PAYMENT. All the succeeding cash vouchers describe the payments from
February 1998 to September 1999 as CAPITAL REPAYMENT. [22] All these cash vouchers served as
receipts evidencing private respondents acknowledgment of the payments made by the petitioner: two
of which were signed by the private respondent himself and all the others were signed by his
representatives. The private respondent even identified and confirmed the existence of these receipts
during the hearing. [23] Significantly, cognizant of these receipts, the private respondent applied these
payments to the three consolidated principal loans in the summary of payments he submitted to the
court.[24]

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E. RUBIO, THE
HEIRS OF LUZ R. BALOLOY, namely, ALEJANDRINO R. BALOLOY and BAYANI R.
BALOLOY, Petitioners,
vs.
RUFINA LIM, Respondent.
DECISION

Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal shall not be
deemed to have been made until the interest has been covered. In this case, the private respondent
would not have signed the receipts describing the payments made by the petitioner as capital
repayment if the obligation to pay the interest was still subsisting. The receipts, as well as private
respondents summary of payments, lend credence to petitioners claim that the payments were for the
principal loans and that the interests on the three consolidated loans were waived by the private
respondent during the undisputed renegotiation of the loans on account of the business reverses
suffered by the petitioner at the time.

AZCUNA, J.:

There was therefore a novation of the terms of the three promissory notes in that the interest was
waived and the principal was payable in monthly installments of US$750. Alterations of the terms and
conditions of the obligation would generally result only in modificatory novation unless such terms and
conditions are considered to be the essence of the obligation itself. [25] The resulting novation in this case
was, therefore, of the modificatory type, not the extinctive type, since the obligation to pay a sum of
money remains in force.

Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with
preliminary injunction and issuance of [a hold-departure order] from the Philippines against Ignacio E.
Rubio. Respondent amended her complaint to include specific performance and damages.

Thus, since the petitioner did not renege on its obligation to pay the monthly installments conformably
with their new agreement and even continued paying during the pendency of the case, the private
respondent had no cause of action to file the complaint. It is only upon petitioners default in the
payment of the monthly amortizations that a cause of action would arise and give the private
respondent a right to maintain an action against the petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included its President Infante and
Vice-President Hegerty as appellants even if they did not appeal the trial courts decision since they
were found to be not personally liable for the obligation of the petitioner. Indeed, the Court of Appeals
erred in referring to them as defendants-appellants; nevertheless, that error is no cause for alarm
because its ruling was clear that the petitioner corporation was the one solely liable for its obligation. In
fact, the Court of Appeals affirmed in toto the decision of the trial court, which means that it also upheld
the latters ruling that Hegerty and Infante were not personally liable for the pecuniary obligations of the
petitioner to the private respondent.

This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court of
Appeals (CA) dated October 26, 1998 and January 11, 1999, respectively, in CA-G.R. CV No. 48282,
entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."
The facts2 appear as follows:

In her amended complaint, respondent averred inter alia that she bought the hereditary shares
(consisting of 10 lots) of Ignacio Rubio [and] the heirs of Luz Baloloy, namely: Alejandrino, Bayani, and
other co-heirs; that said vendors executed a contract of sale dated April 10, 1990 in her favor; that
Ignacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the amount
of P102,169.86 and P450,000, respectively; that it was agreed in the contract of sale that the vendors
would secure certificates of title covering their respective hereditary shares; that the balance of the
purchase price would be paid to each heir upon presentation of their individual certificate[s] of [title];
that Ignacio Rubio refused to receive the other half of the down payment which is P[100,000]; that
Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title covering his
share on the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to
perform the delivery of the two certificates of title covering their share in the disputed lots; that
respondent was and is ready and willing to pay Ignacio Rubio and the heirs of Luz Baloloy upon
presentation of their individual certificates of title, free from whatever lien and encumbrance;
As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already been
sold by Ignacio Rubio to respondent, it is alleged that a simulated deed of sale involving said lots was
effected by Ignacio Rubio in her favor; and that the simulated deed of sale by Rubio to Escueta has
raised doubts and clouds over respondents title.

In their separate amended answers, petitioners denied the material allegations of the complaint and
alleged inter alia the following:
For the heirs of Luz Baloloy (Baloloys for brevity):
Respondent has no cause of action, because the subject contract of sale has no more force and effect as
far as the Baloloys are concerned, since they have withdrawn their offer to sell for the reason that
respondent failed to pay the balance of the purchase price as orally promised on or before May 1, 1990.
For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity):

IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against
[petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] and the Register of Deeds. The counterclaim of
[petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is ordered to return to the
[respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at the rate of six percent (6%) per
annum from April 10, [1990] until the same is fully paid. Without pronouncement as to costs.
SO ORDERED.4
On appeal, the CA affirmed the trial courts order and partial decision, but reversed the later decision.
The dispositive portion of its assailed Decision reads:

Respondent has no cause of action, because Rubio has not entered into a contract of sale with her; that
he has appointed his daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virginia
Rubio Laygo Lim (Lim for brevity) who was the one who represented him in the sale of the disputed lots
in favor of respondent; that theP100,000 respondent claimed he received as down payment for the lots
is a simple transaction by way of a loan with Lim.

WHEREFORE, upon all the foregoing premises considered, this Court rules:

The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court declared the
Baloloys in default. They then filed a motion to lift the order declaring them in default, which was denied
by the trial court in an order dated November 27, 1991. Consequently, respondent was allowed to
adduce evidence ex parte. Thereafter, the trial court rendered a partial decision dated July 23, 1993
against the Baloloys, the dispositive portion of which reads as follows:

2. the Decision dismissing [respondents] complaint is REVERSED and SET ASIDE and a new one is
entered. Accordingly,

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and against
[petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners]
Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an [Absolute] Deed of Sale
over their hereditary share in the properties covered by TCT No. 74392 and TCT No. 74394, after
payment to them by [respondent] the amount ofP[1,050,000] or consignation of said amount in Court.
[For] failure of [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale
over their hereditary share in the property covered by TCT No. T-74392 and TCT No. T-74394 in favor of
[respondent], the Clerk of Court is ordered to execute the necessary Absolute Deed of Sale in behalf of
the Baloloys in favor of [respondent,] with a consideration of P[1,500,000]. Further[,] [petitioners]
Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral
damages in the amount of P[50,000] and P[20,000] for attorneys fees. The adverse claim annotated at
the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as the shares of Alejandrino Baloloy and
Bayani Baloloy are concerned[,] [is] ordered cancelled.

1. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders
dated July 4, 1994 and Supplemental Petition dated July 7, 1994 is DISMISSED. The Order appealed from
is AFFIRMED.

a. the validity of the subject contract of sale in favor of [respondent] is upheld.

b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of
the purchase price by [respondent] within 30 days from the receipt of the entry of judgment of this
Decision.
c. the contracts of sale between Rubio and Escueta involving Rubios share in the disputed properties is
declared NULL and VOID.
d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount of P[20,000]
as moral damages and P[20,000] as attorneys fees.
3. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED.
SO ORDERED.5

With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.

Petitioners Motion for Reconsideration of the CA Decision was denied. Hence, this petition.

SO ORDERED.3

The issues are:

The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and supplemental
petition dated July 7, 1994. This was denied by the trial court in an order dated September 16, 1994.
Hence, appeal to the Court of Appeals was taken challenging the order denying the petition for relief.

Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court
rendered its assailed Decision, as follows:

THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT
FILED BY THE BALOLOYS.
II

THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING
MORAL DAMAGES AND ATTORNEYS FEES IN FAVOR OF RESPONDENT RUFINA L. LIM CONSIDERING THAT:

The amount encashed by Rubio represented not the down payment, but the payment of respondents
debt. His acceptance and encashment of the check was not a ratification of the contract of sale.

A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGO-LIM AND
RUFINA LIM.

Third, the contract between respondent and Virginia is a contract to sell, not a contract of sale. The real
character of the contract is not the title given, but the intention of the parties. They intended to reserve
ownership of the property to petitioners pending full payment of the purchase price. Together with taxes
and other fees due on the properties, these are conditions precedent for the perfection of the sale. Even
assuming that the contract is ambiguous, the same must be resolved against respondent, the party who
caused the same.

B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO
SELL AND NOT A CONTRACT OF SALE.
C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL
THEREBY WARRANTING THE CANCELLATION THEREOF.
D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE
WITH IGNACIO E. RUBIO.
III
THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS VALID.
IV
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS COUNTERCLAIMS.
Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.
Petitioners argue, as follows:
First, the CA did not consider the circumstances surrounding petitioners failure to appear at the pre-trial
and to file the petition for relief on time.
As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect, because
petitioner Bayani was in the United States. There was no service of the notice of pre-trial or order.
Neither did the former counsel of record inform him. Consequently, the order declaring him in default is
void, and all subsequent proceedings, orders, or decision are void.
Furthermore, petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of
Bayani at the pre-trial conference.
Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize Virginia to
transact business in his behalf pertaining to the property. The Special Power of Attorney was constituted
in favor of Llamas, and the latter was not empowered to designate a substitute attorney-in-fact. Llamas
even disowned her signature appearing on the "Joint Special Power of Attorney," which constituted
Virginia as her true and lawful attorney-in-fact in selling Rubios properties.
Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but also the
nature and extent of the formers authority. Besides, Virginia exceeded the authority for failing to
comply with her obligations under the "Joint Special Power of Attorney."

Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the right to sell
his properties to Escueta who exercised due diligence in ascertaining ownership of the properties sold to
her. Besides, a purchaser need not inquire beyond what appears in a Torrens title.
The petition lacks merit. The contract of sale between petitioners and respondent is valid.lawphil.net
Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys answer to
the original complaint and amended complaint, the allegations relating to the personal circumstances of
the Baloloys are clearly admitted.
"An admission, verbal or written, made by a party in the course of the proceedings in the same case,
does not require proof."6 The "factual admission in the pleadings on record [dispenses] with the need x x
x to present evidence to prove the admitted fact." 7 It cannot, therefore, "be controverted by the party
making such admission, and [is] conclusive" 8 as to them. All proofs submitted by them "contrary thereto
or inconsistent therewith should be ignored whether objection is interposed by a party or not." 9 Besides,
there is no showing that a palpable mistake has been committed in their admission or that no admission
has been made by them.
Pre-trial is mandatory.10 The notices of pre-trial had been sent to both the Baloloys and their former
counsel of record. Being served with notice, he is "charged with the duty of notifying the party
represented by him."11 He must "see to it that his client receives such notice and attends the pretrial."12 What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of
As In Default dated December 11, 1991 is the belated receipt of Bayani Baloloys special power of
attorney in favor of their former counsel, not that they have not received the notice or been informed of
the scheduled pre-trial. Not having raised the ground of lack of a special power of attorney in their
motion, they are now deemed to have waived it. Certainly, they cannot raise it at this late stage of the
proceedings. For lack of representation, Bayani Baloloy was properly declared in default.
Section 3 of Rule 38 of the Rules of Court states:
SEC. 3. Time for filing petition; contents and verification. A petition provided for in either of the
preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of
the judgment, final order, or other proceeding to be set aside, and not more than six (6) months after
such judgment or final order was entered, or such proceeding was taken; and must be accompanied
with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts
constituting the petitioners good and substantial cause of action or defense, as the case may be.

There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day period is
reckoned from the time the party acquired knowledge of the order, judgment or proceedings and not
from the date he actually read the same."13 As aptly put by the appellate court:

A contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other contracting party.

The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former
counsel of record of the Baloloys received a copy of the partial decision dated June 23, 1993 on April 5,
1994. At that time, said former counsel is still their counsel of record. The reckoning of the 60 day period
therefore is the date when the said counsel of record received a copy of the partial decision which was
on April 5, 1994. The petition for relief was filed by the new counsel on July 4, 1994 which means that 90
days have already lapsed or 30 days beyond the 60 day period. Moreover, the records further show that
the Baloloys received the partial decision on September 13, 1993 as evidenced by Registry return cards
which bear the numbers 02597 and 02598 signed by Mr. Alejandrino Baloloy.

Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he
received was a loan, not the down payment for the sale of the subject properties. His acceptance and
encashment of the check, however, constitute ratification of the contract of sale and "produce the
effects of an express power of agency." 20 "[H]is action necessarily implies that he waived his right of
action to avoid the contract, and, consequently, it also implies the tacit, if not express, confirmation of
the said sale effected" by Virginia Lim in favor of respondent.

The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a
petition for relief from judgment[,] included in its petition the two Orders dated May 6, 1994 and June
29, 1994. The first Order denied Baloloys motion to fix the period within which plaintiffs-appellants pay
the balance of the purchase price. The second Order refers to the grant of partial execution, i.e. on the
aspect of damages. These Orders are only consequences of the partial decision subject of the petition
for relief, and thus, cannot be considered in the determination of the reglementary period within which
to file the said petition for relief.
Furthermore, no fraud, accident, mistake, or excusable negligence exists in order that the petition for
relief may be granted.14 There is no proof of extrinsic fraud that "prevents a party from having a trial x x
x or from presenting all of his case to the court" 15 or an "accident x x x which ordinary prudence could
not have guarded against, and by reason of which the party applying has probably been impaired in his
rights."16 There is also no proof of either a "mistake x x x of law"17 or an excusable negligence "caused
by failure to receive notice of x x x the trial x x x that it would not be necessary for him to take an active
part in the case x x x by relying on another person to attend to the case for him, when such other
person x x x was chargeable with that duty x x x, or by other circumstances not involving fault of the
moving party."18
Article 1892 of the Civil Code provides:
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but
he shall be responsible for the acts of the substitute:

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits.
"The doctrine of estoppel applicable to petitioners here is not only that which prohibits a party from
assuming inconsistent positions, based on the principle of election, but that which precludes him from
repudiating an obligation voluntarily assumed after having accepted benefits therefrom. To countenance
such repudiation would be contrary to equity, and would put a premium on fraud or
misrepresentation."21
Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the title to the
subject properties passed to the latter upon delivery of the thing sold, but there is also no stipulation in
the contract that states the ownership is to be reserved in or "retained by the vendor until full payment
of the price."22
Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to
discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first
buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.23 Even the argument that a purchaser need not inquire beyond what
appears in a Torrens title does not hold water. A perusal of the certificates of title alone will reveal that
the subject properties are registered in common, not in the individual names of the heirs.
Nothing in the contract "prevents the obligation of the vendor to convey title from becoming
effective"24 or gives "the vendor the right to unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period."25Petitioners themselves have failed to deliver their individual certificates of
title, for which reason it is obvious that respondent cannot be expected to pay the stipulated taxes, fees,
and expenses.

(1) When he was not given the power to appoint one x x x.

Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor
of his daughter Patricia Llamas, it is clear that she is not prohibited from appointing a substitute. By
authorizing Virginia Lim to sell the subject properties, Patricia merely acted within the limits of the
authority given by her father, but she will have to be "responsible for the acts of the subagent,"19 among which is precisely the sale of the subject properties in favor of respondent.

"[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as:
(1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or
its equivalent."26 Ignacio Rubio, the Baloloys, and their co-heirs sold their hereditary shares for a price
certain to which respondent agreed to buy and pay for the subject properties. "The offer and the
acceptance are concurrent, since the minds of the contracting parties meet in the terms of the
agreement."27

Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she
executed in favor of respondent is not void, but simply unenforceable, under the second paragraph of
Article 1317 of the Civil Code which reads:

In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the price and
as proof of the perfection of the contract. 28 It constitutes an advance payment to "be deducted from the
total price."29

Art. 1317. x x x

Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to
the vendee upon actual or constructive delivery thereof." 30 In the present case, there is actual delivery
as manifested by acts simultaneous with and subsequent to the contract of sale when respondent not
only took possession of the subject properties but also allowed their use as parking terminal for
jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery.
Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having
sold them to respondent. "[I]n a contract of sale, the vendor loses ownership over the property and
cannot recover it until and unless the contract is resolved or rescinded x x x." 31 The records do not show
that Ignacio Rubio asked for a rescission of the contract. What he adduced was a belated revocation of
the special power of attorney he executed in favor of Patricia Llamas. "In the sale of immovable
property, even though it may have been stipulated that upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made upon him
either judicially or by a notarial act."32
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R.
CV No. 48282, dated
October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED
SPS. FELICIDAD M. ALVENDIA and JESUS F. ALVENDIA, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ELSIE LIGOT-TELAN in her capacity as
Presiding Judge of the Regional Trial Court of Bulacan, Third Judicial Region, Branch VIII, the
PROVINCIAL SHERIFF OF BULACAN, and BONIFACIO BONAMY, respondents.
G.R. No. L-72373 January 22, 1990
BONIFACIO BONAMY, petitioner,
vs.
HON. EDGARDO L. PARAS, in his capacity as Associate Appellate Justice and Chairman, HON.
VICENTE V. MENDOZA, in his capacity as Associate Appellate Justice and Member, and HON.
LUIS A. JAVELLANA, in his capacity as Associate Appellate Justice and Member of the Fourth
Special Cases Division of the Intermediate Appellate Court; FELICIDAD M. ALVENDIA and
JESUS F. ALVENDIA, respondents.
Lesaca, Villasor, Espiritu, Orlina & Ferrer for petitioners in 72138.

decision of the then Intermediate Appellate Court (IAC) dismissing their petition docketed therein as ACG.R. No. SP-04423, entitled "Alvendia et al. v. Telan etc., et al."
In G.R. No. 72373, a petition for certiorari and prohibition was filed by Bonifacio Bonamy, seeking to
annul and set aside: [a] Resolution II dated September 11, 1985 granting the motion filed by the
spouses Alvendia to pay Bonifacio Bonamy the amount of the judgment in cash, and [b] Resolution I
dated October 8, 1985 denying Bonamy's motion for reconsideration of the aforesaid resolution both
issued by the Fourth Special Cases Division in said AC-G.R. No. SP-04423.
Although no appeal was ever filed in G.R. No. 72138, the same was ordered consolidated with G.R. No.
72373 in the resolution of February 3, 1986 of the First Division of this Court.
The instant petitions trace their genesis to a simple collection suit, Civil Case No. 5182-M 1 filed on
September 12, 1977, by Bonifacio Bonamy against the spouses Jesus F. Alvendia and Felicidad M.
Alvendia before the then Court of First Instance (CFI) of Bulacan, 5th Judicial District, Branch VI, for the
sum of P107,481.50 representing construction materials which the Alvendias had purchased on credit
from Bonamy.
After the Alvendias had filed a "Motion to Dismiss" dated October 31, 1977 which was opposed by
Bonamy on November 16, 1977 and an "Answer with Affirmative and Negative Defenses and
Counterclaim" dated December 1, 1977, both parties submitted to the trial court on January 6, 1978 a
"Compromise Agreement" providing, among other things:
xxx xxx xxx
(1) That defendants do hereby acknowledge the in debtedness of their family corporation, Dona Felisa
Village and Housing Corporation, in the amount of P107,481.50, representing the cost of construction
materials bought on credit from plaintiff from June 20 to August 12, 1975 and jointly with said family
corporation, do hereby bind themselves to pay said obligation out of the first release or releases of
funds from the Government Service Insurance System (GSIS) for housing units and lots sold by the said
corporation to members of the GSIS provided, however, that the P47,000.00 previously assigned to
Wells and Pu shall be first satisfied before applying such GSIS release to satisfaction of said
indebtedness to the herein plaintiff;
(2) That the plaintiff and defendants shall thereby join hands in asking the GSIS to expedite the releases
of the funds due to said corporation; and
(3) That for and in consideration of this agreement the plaintiff and defendants hereby waive any and all
further claims monetary or otherwise against each other regarding the subject matter of this case.

De Guzman, Florentino & Associates for Bonifacio Bonamy.

xxx xxx xxx

FERNAN, C.J.:
In G.R. No. 72138, the spouses Felicidad M. Alvendia and Jesus F. Alvendia filed an urgent motion for
extension of time to file an appeal by certiorari from the denial of their motion for reconsideration of the

On the same date, the trial court, finding the aforesaid compromise agreement not to be contrary to
laws, morals, good customs public policy and public order, approved and adopted the same as the
decision in the case. 3

Subsequently, Bonamy moved for execution of judgment, alleging that the Alvendias "have not
submitted any finished project with the GSIS, thereby preventing the full realization of the aforesaid
decision." 4
On December 6, 1979, over the objection of the Alvendias, the court ordered the issuance of the writ
prayed for. The Alvendias did not move for reconsideration nor did they elevate the matter to the higher
courts. 5

In a nutshell, the spouses argued as follows:[1] that the writ and the alias writ of execution levied upon
properties not referred to in the judgment by compromise; [2] the writs made only the Alvendias liable,
when under the "agreement" their family corporation was also supposed to be liable; [3] the writ was
premature because the Compromise Agreement contained a condition which had not yet been fulfilled,
namely, the release of a loan from the GSIS; [4] the fishpond, owned by the government though leased
to the Alvendias, cannot be a proper subject of a levy on execution; and [5] the leasehold rights
possessed by the Alvendias had already expired before the issuance of the order. 9

In a motion dated April 23,1980, Bonamy sought the issuance of an alias writ of execution, the first writ
having been returned unsatisfied. He admitted though in the same motion that he received P20,000.00
in cash from the Alvendias sometime in January 1980 and an additional amount of P4,000.00 by way of
proceeds of the sale of the Alvendias vehicle. 6

In its Decision dated February 27, 1985, the IAC dismissed the aforesaid petition. The pertinent portion
is hereunder quoted, thus:

Pursuant to the alias writ issued by the Court on May 2,1980, the Bulacan provincial sheriff levied on the
Alvendias "leasehold rights" over a fishpond (lease application no. V-1284 (EV-87) Lot I PSU-141243),
located at Baluarte, Bulacan, Bulacan.

Firstly, we note that after the questioned writ of possession had been issued, no motion for
reconsideration was filed to give the respondent judge an opportunity to correct any error that may
have been committed.

On January 15, 1981, a certificate of sale over said leasehold right was executed by the Sheriff in favor
of Bonamy.

Secondly, the orders complained of and which are attached to the petition are not certified true copies,
in violation of the requirements under the rules of court

More than a year later, or on February 2, 1982, the spouses moved for the quashal and annulment of
the writ of execution, levy and sale.

Thirdly, the writ of execution could properly levy on the properties of the Alvendias because their debt
had already matured and remained unpaid despite demands. The judgment does not have to indicate
what specific properties should be levied upon.

A final deed of sale was executed on January 25, 1983 and registered with the Register of Deeds of
Bulacan on April 27, 1983.
In an order dated September 10, 1984, the trial court (now RTC of Bulacan, 3rd Judicial Region, Br. VIII)
denied the spouses' motion to quash and ordered instead the issuance of a writ of possession in
Bonamy's favor, thus:
Premises considered, the pending incidents are hereby resolved, as follows:
(1) The motion to quash or annul the writ of execution is hereby denied;
(2) The sale of the Toyota Land Cruiser is hereby declared null and void, consequently, let the
defendants be restored in the ownership and possession thereof;
(3) The levy and sale of the defendants' rights over Foreshore Lease Application No. V-1284 (EV-87) Lot
1 PSU-141243 is hereby confirmed and declared valid, for which reason, let a writ of possession of the
said premises be issued forthwith. 7
The records show that as per sheriffs return, possession of the fishpond was delivered to Bonamy on
October 8, 1984. 8
In a petition for certiorari and prohibition with prayer for preliminary injunction and temporary
restraining order filed with the Intermediate Appellate Court, (docketed as CA-G.R. No. SP-04423) the
spouses Alvendias sought the annulment of the writ of execution, the levy made upon the leasehold
rights and the writ of possession.

xxx xxx xxx

Fourthly, there could be no execution against the family corporation because it was not a party to the
case, was not a party or signatory to the compromise agreement. Neither was it represented by the
Alvendias.
Fifthly, the issuance of the writs was not premature. There is nothing in the compromise agreement
which says that the release of the GSIS loan was a condition precedent to the payment of the debt.True,
there was an indication by the Alvendias as to where they would obtain the needed financing, but this
did not make the obtaining of the same a suspensive condition which would give rise to the creation of
their obligation. The obligation to pay was admittedly there even before any reference to the GSIS.
Had they desired to make the fund release a condition sine qua non words should have been used to
that effect. Indeed, it is absurd to say that if the GSIS would not release the money the Alvendias would
be excused from the payment of their acknowledged indebtedness.
Sixthly, it is not the fishpond that was levied upon but the leasehold rights of the Alvendias.
Seventhly, if it is really true that the lease had already expired before the writs were issued, this is a
matter that can be raised by the government, not the Alvendias who have already ceased to become
real parties in interest regarding the property.
xxx xxx xxx
WHEREFORE, the instant petition is denied due course, and is hereby DISMISSED. The restraining order
previously issued is hereby lifted. 10

The Alvendias filed an urgent motion for reconsideration. Pending action thereon, the spouses
manifested to the court, thru motion, their willingness to immediately pay to Bonamy the remaining
balance of the judgment sought to be enforced, which they place at P 37,481.50, plus interests due
and/or any amount as the court may determine to be due (the said amount was reached by deducting
from the total sum of P107,481.50: P20,000.00, P4,000.00 representing the value of the Toyota Land
Cruiser and the further amount of P46,000.00 representing the actual value of the Toyota Land Cruiser
minus the amount of P4,000.00 allegedly realized from the execution sale thereof). 11

Hence, this petition for certiorari and prohibition, praying for the annulment of respondent court's
Resolution II of September 11, 1985 and its Resolution I of October 8, 1985, filed with this Court on
October 21, 1985 by Bonamy and docketed as G.R. No. 72373.

On September 11, 1985, the IAC issued two resolutions, denominated as Resolutions I and II.

On February 24, 1986, Bonamy, as private respondent in G.R. No. 72138, filed a manifestation that since
the Alvendias did not file their petition in said case, the proceeding should be ordered dismissed and
that entry of the IAC judgment be ordered.

Resolution I denied the Alvendias' motion for reconsideration for lack of merit, without prejudice to what
was stated in Resolution II hereunder.
Resolution II granted their motion to satisfy the judgment sought to be enforced in cash thereby
directing the parties to submit to the court an agreement duly signed by both parties regarding full
satisfaction of the judgment but only after the total amount involved in said judgment had been
tendered and delivered to Bonamy. 12
The Alvendias then tendered payment to Bonamy in the form of a cashier's check in the amount of
P100,000.00. 13Bonamy refused said tender of payment, and instead moved for a reconsideration of
Resolution II.
In the meantime, the spouses moved for the issuance of a temporary restraining order to prevent or
stop the allegedly unjust enforcement of the questioned writ of execution/possession and to prevent the
sheriff and Bonamy and all persons acting under them from entering and encroaching on the fishpond
area.
On October 2, 1985, the IAC restrained Bonamy and his corespondents therein from enforcing the
questioned Writ of Execution/Possession issued in Civil Case No. 5182-M, as well as from entering and
encroaching further into the subject fishpond. 14
Bonamy moved for the lifting of that order on the averment, among others, that the acts sought to be
restrained had already been executed, Bonamy having been placed in possession on October 8, 1984 by
Deputy Sheriff Rufino I. Santiago of Bulacan by virtue of the Writ of Possession issued in Civil Case No.
5182-M. 15
In an urgent motion for extension of time to file appeal by certiorari (from respondent court's order
denying their motion for reconsideration) spouses Alvendias elevated their case to this Tribunal,
docketed as G.R. No. 72138. Such motion was granted by the Court. A second motion was, however,
denied. Hence, no petition was filed in G.R. No. 72138.
On October 8,1985, the IAC issued three resolutions embodied in a single document: Resolution I
denying Bonamy's motion for reconsideration; IIordering him to comment on the motion for Deposit
filed by the Alvendias; IIIordering the spouses to comment on the Manifestation and Motion to lift
restraining order filed by Bonamy.

As earlier stated, on February 3, 1986, notwithstanding the Alvendias failure to file a petition in G.R. No.
72138, the Court resolved to consolidate the two cases, namely, G.R. Nos. 72138 and 72373, in the
resolution of February 3, 1986, of the First Division of this Court. 16

Upon the Alvendias' failure to comply with the court's order to comment on the aforementioned
manifestation, this Court issued a "show cause" resolution to the spouses.
Pleading absolute good faith and honesty and attributing failure to file the required comment to the
confusing circumstances engendered by the issued resolutions (denying respondents' motion for
reconsideration but granting their motion to satisfy judgment in cash) the Alvendias prayed the Court to
consider instead their urgent petition (to extend time to file appeal) as their sufficient appeal, anchoring
their entreaty on Bonamy's petition which is also pending in this Court and which has, anyway, opened
the entire case for review. This explanation and manifestation of counsel for private respondents was
noted in the resolution of October 15, 1986 of the Second Division of this Court where this case was
eventually referred.*
The petition in G.R. No. 72373 is impressed with merit. The pivotal issue in this case is whether or not
the judgment debtors may successfully ask that they be allowed to pay the judgment debt in cash long
after they have failed to pay or redeem their properties which have been sold in execution.
Bonamy puts forward the averment that respondent court committed grave abuse of discretion in
granting the Alvendias' motion that they be allowed to pay the judgment debt in cash.
He anchors his contention on the fact that there having been a valid levy and sale on execution of the
Alvendias' leasehold rights over the fishpond in question, there is no longer any money judgment to be
satisfied.
He maintains the position that all the questioned writs herein as well as the questioned orders have
already been found by respondent IAC to be proper and legal and had in fact dismissed the petition of
the Alvendias in its decision of February 27, 1985. Since then, he has been in ownership and possession
of the disputed fishpond in Baluarte, Bulacan, and has been exercising all the acts of possession with
respect to the same. 17
Hence, petitioner claims that the assailed resolutions are in effect [a] an annulment of the assailed
Orders and Writs of the Bulacan Regional Trial Court, the Certificate of Sale and the Final Deed of Sale of
the Leasehold Rights over the Foreshore Lands; [b] an extension of the Alvendias' period to redeem the
leasehold rights over said land; and [c] orders directing Bonamy and the Alvendias to enter into a
contract of sale over said leasehold rights for the price of the judgment debt embodied in the
Compromise Agreement. 18

Verily, it is unrefuted that the writs and orders of the lower court sought to be annulled or at least
reopened are already final and executory and in fact already executed.
The judgment which was executed was a compromise judgment, duly approved by the court and
therefore, final and immediately executory. 19 Bonamy was clearly entitled to execution since the
Alvendias failed to pay on time the judgment. Hence, the Bulacan Court ordered the execution thereof
on December 9, 1979. 20
The compromise judgment against the Alvendias had been duly and legally executed and fully satisfied
as of January 15,1981 in accordance with Section 15 of Rule 39 of the Rules of Court when the Bulacan
Sheriff levied on the Alvendias foreshore leasehold rights by selling the same and paying the judgment
creditor Bonamy. The Alvendias had one year within which to redeem said property rights but they failed
to do so. Hence, the Sheriff issued the Final Deed of Sale on January 25, 1983.
As above stated, on certiorari and prohibition in CA-G.R. No. SP-04423, all these orders and writs, taken
up one by one by the Intermediate Appellate Court were found to be legal and proper for which reason,
the petition was dismissed in the decision of February 27, 1985.
In this Court, private respondents moved for extension of time to file a petition for review in G.R. No.
72138 but failed to file the same, thereby foreclosing their right to appeal.
In any event, it is axiomatic that there is no justification in law and in fact for the reopening of a case
which has long become final and which has in fact been executed. 21 Time and again this Court has said
that the doctrine of finality of judgments is grounded on fundamental consideration of public policy and
sound practice that at the risk of occasional error the judgments of courts must become final at some
definite date fixed by law. 22
On the other hand, the Alvendias invoke equity and aver that the IAC acted correctly in granting their
motion to pay the balance of the judgment indebtedness in view of highly exceptional circumstances
such as the supposedly grossly fraudulent irregularities committed by Bonamy and the Special Sheriff of
Bulacan.
It is a settled rule, however, that said Special Sheriff is under the control and supervision of the trial
court which issued the assailed writ of execution to the exclusion of other courts. Accordingly, the court
which rendered the judgment has a general supervisory control over its process of execution and this
power carries with it the right to determine every question of fact and law which may be involved in the
execution. 23 But as earlier stated, private respondents neither moved for reconsideration of the
December 6, 1979 order of the trial court directing the issuance of the writ of execution, nor appealed
the same to the higher courts.
In any event, the Alvendias cannot invoke equity as a ground for reopening the case and making the
payment of the judgment in cash possible. The records show that they had all the opportunity to make
such payments on four occasions but failed. These are: [1] from the time they got the building and
construction materials worth P107,461.50 from the petitioner (from June 26 to August 12, 1975) up to
the time they agreed to a compromise agreement on January 6, 1978; [2] from the compromise
judgment to the time execution was ordered by the respondent court (Order dated December 6, 1979);
[3] from the Execution Order to the Execution Sale (on January 15, 1981); and [4] from the Execution
Sale up to the end of the redemption period, finally ending in the Final Deed of Sale. 24

There is no question therefore, that the Alvendias failed to pay on time the judgment of which the
execution sale was a necessary consequence. They also failed to redeem the property within the
required period despite the fact that the Final Deed of Sale was issued only on January 25, 1983, long
past the aforesaid period; undeniably showing a lack of intention or capability to pay the same.
Instead the offer to pay the judgment in cash was first made by private respondents Alvendias on April
23, 1985 or two months after the decision of respondent Appellate Court on February 27, 1985 and
more than two years after the redemption period had elapsed. More importantly, the offer was made
after Bonamy had introduced improvements on the property worth one million pesos (P1,000,000.00) as
evidenced by irrefutable proof. Of course, the Alvendias claim the same amount as the value of the
fishpond presumably before execution but such claim besides having been raised only on appeal,
specifically after the promulgation of the decision of the Intermediate Appellate Court on February 27,
1985, is unsupported by evidence on record. On the contrary, petitioner Bonamy's pictures of the leased
premises before and after he took possession of the same belie said claim of private respondents. 25
As insisted upon by petitioner, the money judgment against the Alvendias has already been satisfied
and there is no more need to pay, in cash or otherwise. Hence, as ruled by this Court, when judgment
has been satisfied, the same passes beyond review, for satisfaction thereof is the last act and end of the
proceedings. Payment produces permanent and irrevocable discharge. 26
On the other hand, equity has been aptly described as "a justice outside legality"; winch is applied only
in the absence of and never against statutory law or as in this case, judicial rules of procedure. 27 The
rule is "equity follows the law" but where a particular remedy is given by the law and that remedy is
bounded and circumscribed by particular rules, it would be very improper, for the court to take it up
where the law leaves it and to extend it further than the law allows. 28There may be a moral obligation
but if there is no enforceable legal duty, the action for reconveyance must fail. 29 Courts exercising
equity jurisdiction are bound by rules of law and have no arbitrary discretion to disregard them.
Equitable reasons will not control against any well-settled rule of law or public policy. 30
Moreover, it is oft repeated that "He who comes into Equity must come with clean hands." 31 At this
stage, to allow private respondents to pay in cash the balance of the judgment account for which they
offered P100,000.00 to redeem the property on which petitioner has spent one million pesos
(P1,000,000.00) in terms of improvements introduced would be less than fair. If equity is to be applied
at all, it should be applied for the benefit of the petitioner. Thus, this Court in applying equity
jurisprudence in a partition case, ruled that improvements introduced on the property by one who
necessarily and in good faith improved the same and enhanced its value at his own cost, should be
taken into account under the familiar principle that "one who seeks equity must do equity." 32
In resume, the Alvendias, after having allowed the period of redemption to lapse without availing
themselves of the same, and after petitioner had introduced improvements on the property at the
latter's expense, cannot now be allowed to redeem the property sold to the latter thru the expediency of
a motion or manifestation.
As to other matters, there appears to be no cogent reason to disturb the findings and conclusions of the
Intermediate Appellate Court in its decision of February 27, 1985 which has become final and executory
when the Alvendias failed to file their contemplated petition for review on certiorari in G.R. No. 72138. It
has been held that failure to perfect an appeal renders the lower court's judgment final and executory
and a modification of such judgment by the appellate court cannot be allowed. Furthermore, an appellee
who is not also an appellant may also assign errors in his brief where his purpose is to maintain the

judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or
reversed, for, in such case, he must appeal. 33
However, where there is an ambiguity caused by an omission or mistake in the dispositive portion of the
decision, in this case in the questioned "Writ of Possession" issued by the trial court, where the twentythree (23) hectare foreshore land (23.467 hec.), described in the Sheriffs Certificate of Sale and Final
Deed of Sale 34 became a forty-hectare foreshore land (40.63 hec.), 35 it has been held that this Court
may clarify such ambiguity by an amendment even after the judgment had become final. 36
WHEREFORE, the assailed resolutions are hereby SET ASIDE and the decision dismissing the Alvendias'
petition is AFFIRMED save that portion upholding the validity of the writ of possession which contained
an error in property description. Hence, the writ of possession is hereby AMENDED to conform to the
description appearing in the Certificate of Sale and the Final Deed of Sale. Let the restraining order
issued by the Intermediate Appellate Court on October 2, 1985 relative to the enforcement of said writ
be lifted accordingly.
Petitioner is hereby ordered to return to private respondents, the amount of P12,518.50 pesos, which
amount represents the difference between the execution price of P100,000.00 and P 87,481.50, the
latter amount having been arrived at by deducting P20,000.00 from the total amount of indebtedness
which is P107,481.50. 37
In G.R. No. 72138, the petition for review on certiorari of Resolution I of the Intermediate Appellate Court
denying private respondents' motion for reconsideration of its decision of February 27, 1985, not having
been filed, entry of judgment of aforesaid decision may now be made by said Appellate Court
NUNEZ VS. GSIS
The facts are not disputed:
Petitioners are the heirs of Leonilo S. Nuez (Leonilo) who, during his lifetime, obtained three
loans from the GSIS Family Bank, formerly ComSavings Bank which in turn was formerly known as Royal
Savings and Loan Association (the bank).
The first loan, contracted on April 6, 1976 in the amount of P55,900.00, was secured by a
mortgage over a parcel of land covered by TCT NT-139575-A whereon the mortgage was annotated on
April 8, 1976.[1]
The second loan, obtained on July 7, 1976 in the amount of P127,000.00, was secured by
mortgage of properties covered by TCT Nos. NT-143002, 143003 and 139575. [2]
The third loan, obtained also on July 7, 1976 in the amount of P105, 900.00, actually amended the
first loan of P55,900.00 to secure which amended loan the same property covered by TCT No. NT139575-A[3] was mortgaged. The amended loan, no copy of which forms part of the records, was
admitted by the parties during the pre-trial.[4]
On June 30, 1978, when the three loans were maturing, Leonilo purportedly obtained a fourth
loan in the amount of P1,539,135.00 to secure which he executed a Real Estate Mortgage antedated
June 28, 1978 over properties covered by TCT Nos. NT-145734, 143001, 143004, 143005, 143006,
143007.[5]
On the maturity of the three loans or on June 30, 1978, Leonilo executed a Promissory Note[6] in
the amount of
P1,539,135.00, due and payable on December 27, 1978.
The details of the loans secured by Leonilo including the purported fourth loan are shown in the
following table:

Loan

Date
Contracted

First Loan
Second Loan

April 6, 1976
July 7, 1976

P 55,900.00
P127,000.00

June 30, 1978

June 30, 1978

Third Loan
(amended the
first loan)
Fourth Loan

July 7, 1976

P105,900.00

June 30, 1978

P1,539,135.00

December 27,
1978

June 30,
1978

Amount

Maturity

Titled subject of
the Real Estate
Mortgages
NT- 139575-A
NT-143002; NT143003; NT139575
NT-139575-A
NT-145734;
NT-143001;
NT-143004;
NT-143005;
NT-143006;
NT-143007.

More than nineteen (19) years after Leonilos June 30, 1978 Promissory Note matured or
on December 11, 1997, the bank undertook to extrajudicially foreclose [7] the properties covered by TCT
Nos. NT-143002, 143003, 139575 and 139575-A which secured the first two loans.
In its petition for extrajudicial foreclosure, the bank alleged that Leonilo violated the terms and
conditions of the loans secured by the Real Estate Mortgages since June 30, 1978 when he failed,
despite repeated demands, to pay his principal obligations, and interest due thereon from December 27,
1978, up to the time that the petition was filed.[8]
Acting on the banks petition for Extra-judicial Foreclosure of Mortgage, the Ex-Officio Sheriff of Gapan,
Nueva Ecija issued a Notice of Extra-judicial Sale[9] setting the sale of the properties involved at public
auction on January 9, 1998.
The auction took place as scheduled, with the bank as the highest and only bidder in the amount
of P33,026,100.00. A Certificate of Sale[10] was thus issued in favor of the bank.
On September 1, 1999, on petition of the bank, the mortgage over properties covered by TCT Nos.
143001 and 143007, two of the six parcels of land which secured the fourth loan that matured on
December 27, 1978, was extrajudicially foreclosed. At the public auction, the bank was the highest
bidder and a Certificate of Sale[11] dated February 18, 2000 was issued in its name.
Leonilo later filed on June 20, 2000 before the Regional Trial Court (RTC) of Gapan, Nueva Ecija a
complaint against the GSIS Family Bank,[12] docketed as Civil Case No. 2269, for Annulment of
Extrajudicial Foreclosure Sale, Reconveyance and Cancellation of Encumbrances.
In his complaint, Leonilo denied securing a fourth loan but nevertheless alleged that for purposes of
the action, the same shall be assumed to have been validly secured.
Invoking prescription, he citing Articles 1142 [13] and 1144[14] of the Civil Code, Leonilo contended that his
first three loans and the fourth loan matured on June 30, 1978 and December 27, 1978, hence, they
had prescribed on June 28, 1988 and December
25, 1988, respectively.[15] When, on December 11,
1997 and September 1, 1999 then, the bank filed the Petitions for Extrajudicial Foreclosure of Mortgage,
Leonilo concluded that it no longer had any right as prescription had set in.
Leonilo invited the attention of the court to the fact that although six titles secured the purported
fourth loan of P1,539, 135.00, only two, TCT Nos. NT-143001 and NT-143007, were the subject of
foreclosure sale on September 1, 1999 and the mortgage was not annotated on the four other
mortgaged titles, TCT Nos. NT-143004, 143005, 143006 and 145734. [16] Moreover, he pointed out that
the record[17] shows that the Real Estate Mortgage dated June 28, 1978 purportedly securing the fourth
loan was annotated on NT-143001 and NT-143007 subject of the September 1, 1999 foreclosure only on
August 31, 1999 or more than 11 years after the prescriptive period to foreclose had set in.[18]

By Decision dated August 9, 2002, Branch 34 of the Gapan RTC found for Leonilo who died during the
pendency of the trial of the case, hence, his substitution by his heirs - herein petitioners, declaring that
the banks cause of action over the loans had prescribed and, therefore, the proceedings for
extrajudicial foreclosure of real estate mortgages were null and void.
The bank filed a motion for reconsideration[19] on September 20, 2002, the last of the 15-day period
within which it could interpose an appeal, but it did not comply with the provision of Section 4, Rule
15[20] of the Rules of Court on notice of hearing, prompting herein petitioners to file a Motion to Strike
Out Motion for Reconsideration with Motion for the issuance of a writ of execution. [21]
The bank filed an Opposition with Motion to Admit [22] (the Motion for Reconsideration), attributing its
failure to incorporate the notice of hearing to inadvertent deletion from its computer file of standard
clauses for pleadings the required notice of hearing and to the heavy workload of the handling counsel,
Atty. George Garvida.
The trial court denied the banks Motion for Reconsideration by Order [23] of November 18, 2002 and
accordingly ordered it stricken off the record:
After a serious evaluation of the arguments for/and against the instant Motion for
Reconsideration, the Court believes and so-holds that, while it is true that the high Court has
set aside technicality in order not to defeat the ends of justice in appropriate cases, it is
likewise true that litigations at some point of time must end otherwise, litigation of cases will
be endless.
WHEREFORE, given the foregoing, the instant Motion for Reconsideration is hereby DENIED,
for failure to comply with Rule 15, Section 4, of the 1997 Rules on Civil Procedures (sic).
x x x[24]
The bank filed a Notice of Appeal[25] to which petitioners filed a Motion to Dismiss for being filed late,
[26]
which motion was granted by the trial court by Order [27] of February 10, 2003.
The bank thereupon elevated via petition for certiorari [28] the case before the Court of Appeals
(CA) faulting the trial court to have
I.
. . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR
EXCESS OF JURISDICTION IN ISSUING THE HEREIN ASSAILED ORDER DATED 10 FEBRUARY 2003
CONSIDERING THAT THE TRIAL COURT HAD ALREADY LOST JURISDICTION OF THE CASE IN VIEW
OF THE PERFECTION OF THE PETITIONERS APPEAL ON DECEMBER 11, 2002.
II.
. . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR
EXCESS OF JURISDICTION WHEN IT DENIED HEREIN PETITIONERS MOTION FOR
RECONSIDERATION IN ITS ORDER DATED 18 NOVEMBER 2002, THERE BEING STRONG AND
COMPELLING REASONS TO ADMIT SAID MOTION AND TO CONSIDER THE ERRONEOUS
CONCLUSIONS OF FACT AND LAW ON WHICH THE DECISION OF THE TRIAL COURT WAS BASED.
[29]

The bank, which is owned by the Government Service Insurance System, argued that to rigidly
and strictly apply the rules of procedure would result to injustice and irreparable damage to the
government as it stands to lose a substantial amount if not allowed to recover the proceeds of the loans.
[30]

The appellate court, by February 23, 2004 Decision,[31] found for the bank. Citing Labad v.
University of Southeastern Philippines,[32] it ruled that while the right to appeal is a statutory and not a
natural right, it is nevertheless an essential part of the judicial system, hence, courts should be cautious
not to deprive a party of the right to appeal; and in the exercise of its equity jurisdiction, the trial court
should have given the banks Notice of Appeal due course to better serve the ends, and prevent a
miscarriage of justice.
Petitioners Motion for Reconsideration having been denied by Resolution [33] of May 25, 2004, the
present Petition for Certiorari under Rule 65 was filed, raising these issues:
1.
Whether or not the public respondent committed grave abuse of discretion in reversing the
order of the Regional Trial Court denying the notice of appeal and in giving due course to the
notice of appeal.
2.
Whether the private respondent could still appeal a judgment which has become final and
executory.[34]

At the outset, clarification on petitioners mode of appeal is in order. Petitioners and

counsel confuse their petition as one Petition for Review under Rule 45 [35] with a Petition for
Certiorari under Rule 65.[36] For while they treat it as one for Review on Certiorari, they manifest
that it is filed pursuant to Rule 65 of the 1997 Rules of Civil Procedure in relation to Rule
45 of the New Rules of Court.[37]
In Ligon v. Court of Appeals[38] where the therein petitioner described her petition as an appeal
under Rule 45 and at the same time as a special civil action of certiorari under Rule 65 of
the Rules of Court, this Court, in frowning over what it described as a chimera, reiterated that the
remedies of appeal and certiorari are mutually exclusive and not alternative nor successive. [39]
To be sure, the distinctions between Rules 45 and 65 are far and wide. However, the most
apparent is that errors of jurisdiction are best reviewed in a special civil action for certiorari under
Rule 65 while errors of judgment can only be corrected by appeal in a petition for review under Rule 45.
[40]
This Court, however, in accordance with the liberal spirit which pervades the Rules of Court and in
the interest of justice may treat a petition for certiorari as having filed under Rule 45, more so if the
same was filed within the reglementary period for filing a petition for review. [41]
The records show that the petition was filed on time both under Rules 45 and 65. [42]
Following Delsan Transport, the petition, stripped of allegations of grave abuse of discretion, actually
avers errors of judgment which are the subject of a petition for review. [43]
This Court finds the petition impressed with merit. Rule 41 of the 1997 Rules of Civil
Procedure which governs appeals from Regional Trial Courts provides:
SEC. 2. Modes of appeal.
(a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by
the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice
of appeal with the court which rendered the judgment or final order appealed from and serving
a copy thereof upon the adverse party. No record on appeal shall be required except in special
proceedings and other cases of multiple or separate appeals where the law or these Rules so
require. In such cases, the record on appeal shall be filed and served in like manner.
xxx
SEC. 3. Period of ordinary appeal. The appeal shall be taken within fifteen
(15) days from notice of the judgment or final order appealed from. Where a record on appeal
is required, the appellants shall file a notice of appeal and a record on appeal within thirty (30)
days from notice of the judgment or final order. However, on appeal in habeas corpus cases
shall be taken within forty-eight (48) hours from notice of the judgment or final order appealed
from.
The period of appeal shall be interrupted by a timely motion for new trial or
reconsideration. No motion for extension of time to file a motion for new trial or reconsideration
shall be allowed. (Underscoring supplied).
On the other hand, Rule 22 provides for the manner of computing time and the
effect of interruption:
SEC. 1. How to compute time. In computing any period of time prescribed or allowed
by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from
which the designated period of time begins to run is to be excluded and the date of performance
included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday or a legal holiday
in the place where the court sits, the time shall not run until the next working day.
SEC. 2. Effect of interruption. Should an act be done which effectively
interrupts the running of the period, the allowable period after such interruption shall start to
run on the day after notice of the cessation of the cause thereof.
The day of the act that caused the interruption shall be excluded in the
computation of the period. (Emphasis and underscoring supplied).
The requirement of notice under Sections 4 and 5 [44] of Rule 15 in connection with Section 2,
Rule 37 of the Rules of Court is mandatory. [45] Absence of the mandatory requirement renders the
motion a worthless piece of paper which the clerk of court has no right to receive and which the court
has no authority to act upon.[46] Being a fatal defect, in cases of motions to reconsider a decision, the
running of the period to appeal is not tolled by their filing or pendency. [47]

When the bank then filed its Motion for Reconsideration on the last of the 15-day period for
taking an appeal and it was subsequently denied, the bank had only one (1) day from December 9,
2002 when it received a copy of the order denying the motion or until December 10, 2002 within which
to perfect its appeal.[48]
It filed the Notice of Appeal, however, on December 11, 2002, hence, out of time, and the
decision of the trial court had become final and executory.
While Rules may be relaxed when the party invoking liberality adequately explains his
failure to abide therewith, the bank failed to do so.
The explanations[49] proffered by the bank behind its failure to incorporate a notice of
hearing of the Motion for Reconsideration inadvertent deletion from its computer file of the standard
clauses for pleadings during the printing of the finalized draft of the motion and the handling counsels
heavy workload are unsatisfactory.
To credit the foregoing explanations would render the mandatory rule on notice of hearing
meaningless and nugatory as lawyers would simply invoke these grounds should they fail to comply
with the rules.
As to the claim that the government would suffer loss of substantial amount if not allowed
to recover the proceeds of the loans, this Court finds that any loss was caused by respondents own
doing or undoing.
In fine, the failure to timely perfect an appeal cannot simply be dismissed as a mere technicality,
for it is jurisdictional.[50]
Nor can petitioner invoke the doctrine that rules of technicality must yield to the broader
interest of substantial justice. While every litigant must be given the amplest opportunity for the proper
and just determination of his cause, free from the constraints of technicalities, the failure to perfect an
appeal within the reglementary period is not a mere technicality. It raises a jurisdictional problem as it
deprives the appellate court of jurisdiction over the appeal. The failure to file the notice of appeal
within the reglementary period is akin to the failure to pay the appeal fee within the
prescribed period. In both cases, the appeal is not perfected in due time. As we held
in Pedrosa v. Hill, the requirement of an appeal fee is by no means a mere technicality of law or
procedure, but an essential requirement without which the decision appealed from would become final
and executory. The same can be said about the late filing of a notice of appeal. (Emphasis and
underscoring supplied).[51]
Jurisdictional issue aside, upon the ground of prescription, the banks case would just the same fail. An
action to foreclose a real estate mortgage prescribes in ten years. [52] The running of the period,
however, may be interrupted.[53]
A review of the records of the case shows that, as correctly claimed by petitioners, no letter
of demand, court action, or foreclosure proceeding was undertaken prior to December 11, 1997 and
September 1, 1999.
While the bank included in its Formal Offer of Evidence [54] Exhibits E and H which are
the Petitions for Extra-Judicial Foreclosure alleging that repeated demands for payment were made
after Leonilo defaulted and failed to pay the loan obligations, allegations are not proofs. Unless a
demand is proven, one cannot be held in default. [55]
In justifying its failure to file a collection suit, the bank contended that it would have
amounted to a waiver of its right to foreclose. But if early on it opted to foreclose the mortgages, why
it waited until 1997 and 1999, more than nineteen years after the right to do so arose, the bank is
glaringly mute.
Clutching at straws, the bank argues that the applicable provision is Article 1141, [56] not
[57]
Article 1142
of the Civil Code.
Article 1141 of the Civil Code speaks of real actions over immovables or rights.
Article 1142 of the Civil Code speaks of a mortgage action which prescribes in ten years. The strategic
location of Article 1142 immediately right after Article 1141 of the same Code, which speaks of real
actions, indicates that it is an exception to the rule in the previous article.
That an action for foreclosure of mortgage over real property prescribes in ten years is in
fact settled. In Buhat, et al. v. Besana, etc., et al.[58] where an action was instituted on December 6,
1952 for the foreclosure of mortgage over real property to secure an obligation payable on or

before May 31, 1930, this Court affirmed the dismissal of the action by the then Court of First Instance
as the action was filed more than ten years from May 31, 1930 or some 22 years after the obligation
had become due and demandable.
WHEREFORE, the petition is GRANTED. The assailed Court of Appeals decision dated
February 23, 2004 and Resolution dated May 25, 2004 are REVERSED and SET ASIDE. The Decision
dated August 9, 2002 of the Regional Trial Court of Gapan, Nueva Ecija, Branch 34, which had become
final and executory, stands.

CHINA ROAD AND BRIDGE CORPORATION, petitioner, vs. COURT OF APPEALS (Special
Seventh Division) and JADE PROGRESSIVE SAVINGS AND MORTGAGE BANK, respondents.
DECISION
BELLOSILLO, J.:
This is a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure praying for the
nullification of the Resolution of the Court of Appeals (Special Seventh Division) dated 29 October 1998
denying petitioner's Motion to Dismiss Appeal, and itsResolution dated 5 February 1999, denying
reconsideration thereof and for the dismissal of CA-G.R. CV No. 57375.
CHINA ROAD AND BRIDGE CORPORATION (CRBC), petitioner, is a corporation organized under the laws
of the People's Republic of China duly licensed by the Securities and Exchange Commission to do
business in the Philippines. It was awarded by the Philippine Government the contract to construct the
EDSA Shaw
Boulevard Overpass in Mandaluyong, which it subcontracted to Hi-Quality Builders and Traders, Inc. (HIQUALITY), a domestic corporation organized under the laws of the Philippines.
On 17 October 1996 Helen Ambrosio, President of HI-QUALITY, executed a Continuing Suretyship in
favor of Jade Progressive Savings and Mortgage Bank (JADEBANK) binding herself to pay
the "obligations of the Debtor (Hi-Quality) arising from all credit accommodations extended by the Bank
to the Debtor x x x x presently or hereafter owing to the Bank, as appears in the
accounts, books and records of the Bank whether direct or indirect x x x x"
On 10 January 1997, in consideration of a loan of P5,000,000.00, HI-QUALITY executed a Deed of
Assignment in favor of JADEBANK with the approval of CRBC where it assigned to JADEBANK "(a)ll
monthly accomplishment billings, the sums of money, credit, or receivables assigned, be in the position
(sic) of or due or to be due from China Road and Bridge Corporation, arising from the subcontract
agreement in the construction of the EDSA/Shaw Blvd. Overpass Project x x x x" [1]
On 17 January 1997 JADEBANK released to HI-QUALITY P500,000.00 as part of the loan both parties
earlier contracted. As security for the loan, HI-QUALITY executed Promissory Note No. JB BDO 15/97
promising to pay the loan on 3 April 1997. It also indorsed to JADEBANK Check No. 0000270127 issued
by CRBC on 31 March 1997 covering the amount released, drawn on United Coconut Planters Bank
(UCPB), Mandaluyong Branch.
On 7 April 1997 JADEBANK released P250,000.00 for which HI-QUALITY executed Promissory Note No. JB
BDO 181/97 payable on 18 April 1997 and indorsed to JADEBANK Check No. 0000126132 issued by

Helen Ambrosio on 18 April 1997 covering the amount released, drawn on Allied Banking Corporation,
Shaw Boulevard Branch (ALLIEDBANK).
On 21 March 1997 JADEBANK released P250,000.00 for which HI-QUALITY executed Promissory Note No.
JB BDO 150/97 payable on 5 May 1997 and indorsed to JADEBANK ALLIEDBANK Check No. 0000126131
issued by Ambrosio dated 30 April 1997 for the same amount.
On 25 March 1997 JADEBANK released P400,000.00 for which HI-QUALITY executed Promissory Note No.
JB BDO 162/97 payable on 5 May 1997 and indorsed to JADEBANK Check No. 214179 issued by Ambrosio
dated 30 April 1997 for the same amount, drawn on Security Bank Corporation, Pateros Branch
(SECURITYBANK).
On 7 February 1997 JADEBANK released another P400,000.00 for which HI-QUALITY executed Promissory
Note No. JB BDO 33/97 payable on 5 May 1997 and indorsed to JADEBANK UCPB Check No. 270144
issued by CRBC.
On 17 February 1997 JADEBANK released P350,000.00 for which HI-QUALITY executed Promissory Note
No. JB BDO 45/97 payable on 5 May 1997 and indorsed to JADEBANK UCPB Check No. 270147 issued by
CRBC.
Finally, on 21 February 1997 JADEBANK released P250,000.00 for which HI-QUALITY executed Promissory
Note No. JB BDO 75/97 payable on 5 May 1997 and indorsed to JADEBANK UCPB Check No. 270551
issued by CRBC.
All the promissory notes executed by HI-QUALITY provided for twenty-five percent (25%) interest per
annum and a five percent (5%) penalty per month in case of default. The amount of each check
corresponded to the amount released to HI-QUALITY on the day the check was indorsed to JADEBANK.
When JADEBANK deposited the aforementioned checks for payment, they were returned unpaid. The
checks drawn on UCPB were dishonored due to "Stop Payment" orders from the drawer. The
ALLIEDBANK checks were dishonored because the account was closed on 19 February 1997. The
SECURITYBANK check was dishonored because the account had been closed since the second quarter of
1996.
On 9 June 1997, after repeated demands for payment which were unheeded, JADEBANK filed a case for
collection against HI-QUALITY, Helen Ambrosio and CRBC, with an application for a writ of attachment
against their properties. The Complaint included as cause of action the first four (4) checks indorsed by
HI-QUALITY to JADEBANK and alleging among others that the defendants conspired to commit fraudulent
acts in order to induce JADEBANK to grant the loans to HI-QUALITY. Firstly, CRBC issued to HI-QUALITY
the UCPB check for P500,000.00 dated 31 March 1997 without any intention of honoring the
check. JADEBANK alleged that CRBC knew fully well that the check was to be used by HI-QUALITY as
security for the loan from JADEBANK. However, in violation of the Deed of Assignment, CRBC gave to
HI-QUALITY sums of money without notice to or the consent of JADEBANK, thereby releasing funds
supposedly already assigned to JADEBANK for the payment of HI-QUALITY's loans. Secondly, Helen
Ambrosio, as President of HI-QUALITY, issued the checks drawn on SECURITYBANK and ALLIEDBANK
after her accounts with these banks were closed, thus revealing a fraudulent intention not to honor her
obligations even from their inception. She also executed the Suretyship Agreement in favor of
JADEBANK without any intention of fulfilling her obligations.

On 17 June 1997 the trial court[2] issued a Writ of Preliminary Attachment. On the same day, a Notice of
Garnishment was served on UCPB garnishing all the moneys of CRBC in the bank. On 23 June 1997
CRBC filed a Motion for Discharge of Attachment. On the same day a Notice of Levy on Attachment was
also served on CRBC. On 27 June 1997 the preliminary attachment was discharged after CRBC posted a
counter-bond in the amount of P1,962,458.00. On 30 June 1997 JADEBANK filed an Amended
Complaint to include the loans contracted on 7, 17 and 21 February 1997 increasing the total amount
collectible to P3,437,424.42.
On 28 July 1997 CRBC filed a Motion to Dismiss the 30 May 1997 Complaint on the ground of lack of
cause of action. According to CRBC, the Deed of Assignment upon which JADEBANK based its cause of
action against CRBC, was subject to the Sub-Contracting Agreement between CRBC and HI-QUALITY Under these circumstances, until such time as Hi-Quality is able to perform its obligations pursuant to
the Sub-Contract Agreement thereby entitling it to payment for services rendered, China Road has no
liability whatsoever in Hi-Quality's favor. Corollarily, until this happens, Hi-Quality has nothing to assign
in favor of the plaintiff in the form of collectibles/receivables from China Road pursuant to the Deed of
Assignment.[3]
CRBC also denied that the issuance of the checks to HI-QUALITY was for the purpose of facilitating the
loans in favor of the latter, claiming that the checks were for the use of HI-QUALITY alone, and not for
any other purpose. In support of this claim, CRBC asserted that "(n)owhere on the face of the said
check does the name of the plaintiff appear. Neither is it accompanied by any document whatsoever
specifically evincing that the same was intended for delivery to plaintiff." CRBC also denied that it had
been releasing money to HI-QUALITY, claiming that the latter had failed to comply with its obligations to
CRBC.
On 27 August 1997 the lower court granted the Motion to Dismiss the complaint with respect to
CRBC. Its Motion for Reconsideration having been denied on 31 June 1997 JADEBANK appealed to the
Court of Appeals under Rule 41 of the Rules of Court. On 12 August 1997 CRBC filed with the Court of
Appeals a Motion to Dismiss Appeal asserting that "the determination of whether the ultimate facts in
a Complaint state a cause of action against the defendant is a pure question of law and does not involve
any question of fact."[4] According to CRBC, the proper mode of appeal was not by way of ordinary
appeal under Rule 41 but rather by way of a petition for review on certiorari under Rule 45.
On 29 October 1998 the Court of Appeals (Special Seventh Division) issued the
assailed Resolution denying CRBC's Motion to Dismiss, finding the appeal involved both questions of fact
and of law. On 5 February 1999 the appellate court denied reconsideration; hence, this petition.
The only issue that needs to be resolved is whether the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction in denying petitioner's Motion to Dismiss.
In
resolving the issue it is necessary to determine only if private respondent's appeal to the Court of
Appeals involved purely questions of law, in which case the proper mode of appeal would be a petition
for review on certiorari to the Supreme Court under Rule 45; [5] or questions of fact or mixed questions of
fact and law, in which case the proper mode would be by ordinary appeal under Rule 41.
A question of law exists when there is doubt or controversy as to what the law is on a certain state of
facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood of
facts,[6] or when the query necessarily invites calibration of the whole evidence considering mainly the
credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to

each other and to the whole and probabilities of the situation. [7] Ordinarily, the determination of whether
an appeal involves only questions of law or both questions of law and fact is best left to the appellate
court,[8] and all doubts as to the correctness of such conclusions will be resolved in favor of the Court of
Appeals.[9] However, in the instant case, we find that there was grave abuse of discretion on the part of
respondent Court of Appeals, hence, we grant the petition.
The ground for dismissal invoked by petitioner is that the complaint of JADEBANK before the trial court
stated no cause of action, under Sec. 1, par. (g), Rule 16, the 1997 Revised Rules of Civil Procedure. It
is well settled that in a motion to dismiss based on lack of cause of action, the issue is passed upon on
the basis of the allegations assuming them to be true. [10] The court does not inquire into the truth of the
allegations and declare them to be false, otherwise it would be a procedural error and a denial of due
process to the plaintiff. Only the statements in the complaint may be properly considered, and the
court cannot take cognizance of external facts or hold preliminary hearings to ascertain their existence.
[11]
To put it simply, the test for determining whether a complaint states or does not state a cause of
action against the defendants is whether or not, admitting hypothetically the truth of the allegations of
fact made in the complaint, the judge may validly grant the relief demanded in the complaint. [12]
In a motion to dismiss based on failure to state a cause of action, there cannot be any question of fact
or "doubt or difference as to the truth or falsehood of facts," simply because there are no findings of
fact in the first place. What the trial court merely does is to apply the law to the facts as alleged in the
complaint, assuming such allegations to be true. It follows then that any appeal therefrom could only
raise questions of law or "doubt or controversy as to what the law is on a certain state of
facts." Therefore, a decision dismissing a complaint based on failure to state a cause of action
necessarily precludes a review of the same decision on questions of fact. One is the legal and logical
opposite of the other.
In resolving the Motion to Dismiss, the lower court ruled As alleged in the complaint, the plaintiff granted a loan to Hi-Quality Builders and Traders, Inc. (HQ); that
as security of the payment of the loan, HQ assigned all its receivables from China; that China gave HQ a
check for P5,000,000.00 payable to HQ; that in turn HQ gave the check to plaintiff; and that plaintiff
deposited said check which was returned for the reason: "stop payment".
It is clear from the foregoing that there is no cause of action of plaintiff against China. While there is a
"delict" or "wrong" committed, it was not committed against the rights of plaintiff because it alleged
none but against HQ. Therefore, the one that has a cause of action against China is HQ. [13]
The Motion for Reconsideration filed by JADEBANK was resolved by the trial court thuswise (T)he plaintiff has a right in the collection of the loan it granted to Hi-Quality Builders but there is no
corresponding allegation the (sic) China Road has an obligation to pay such loan. All that is alleged is
that China Road agreed that Hi-Quality Builders will assign its receivables from China Road and for that
purpose appointed plaintiff as Attorney-in-fact.
Had there been allegation to the effect that plaintiff, as Attorney-in-fact, of Hi-Quality Builders collected
from China Road and that China Road refused to deliver the money due Hi-Quality Builders then a cause
of action would have arisen.[14]

It is clear from the foregoing that the lower court did not make any finding of fact; rather, as was proper
in a motion to dismiss for this particular ground, it merely assumed the plaintiff's allegations to be
true. It did not evaluate the evidence of the plaintiff nor did it pass upon the truth or falsity of the
plaintiff's allegations. What the lower court did was simply to apply the law as to the facts borne out by
the allegations in the complaint. And it found that even assuming that all the allegations of JADEBANK
were true, it would still not be able to collect from CRBC because based on the same allegations, CRBC
did not have any duty whatsoever to remit money to JADEBANK. Whether this conclusion is correct or
not is a totally separate issue and is not before us for review at this time. What is evident, however, is
that such a conclusion could only raise pure questions of law. It is perplexing to this Court then why
respondent appellate court found that there were questions of fact to be answered in the appeal. It
taxes the imagination how a question of fact can arise from a controversy that does not involve findings
of fact.
JADEBANK in its Appellant's Brief raised the following questions, which it erroneously designated as
questions of fact, in an attempt to place its appeal within the jurisdiction of the Court of Appeals:
4.1.1. Whether or not the amended complaint together with the Annexes attached and forming an
integral part thereof, states a sufficient cause of action against the defendant-appellee;
4.1.2. Whether or not there was an unwarranted reversal of the Honorable Regional Trial Court's Orders
stating that the complaint states a sufficient cause of action;
4.2.1. Whether or not the Motion to Dismiss the complaint can be considered also as a Motion to
Dismiss the Amended Complaint.[15]
We fail to see how these issues raised by JADEBANK could be properly denominated questions of
fact. The test of whether a question is one of law or of fact is not the appellation given to such question
by the party raising the same; rather, it is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise, it is a
question of fact.[16] Applying the test to the instant case, it is clear that private respondent raises pure
questions of law which are not proper in an ordinary appeal under Rule 41, but should be raised by way
of a petition for review on certiorari under Rule 45.
We agree with private respondent that in a motion to dismiss due to failure to state a cause of action,
the trial court can consider all the pleadings filed, including annexes, motions and the evidence on
record.[17] However in so doing, the trial court does not rule on the truth or falsity of such documents. It
merely includes such documents in the hypothetical admission. Any review of a finding of lack of cause
of action based on these documents would not involve a calibration of the probative value of such
pieces of evidence but would only limit itself to the inquiry of whether the law was properly applied
given the facts and these supporting documents. Therefore, what would inevitably arise from such a
review are pure questions of law, and not questions of fact.
It is apparent that JADEBANK, as well as respondent appellate court, confused situations where the
complaint does not allege a sufficient cause of action and where the evidence does not sustain the
cause of action alleged. The first is raised in a motion to dismiss under Rule 16 before a responsive
pleading is filed and can be determined only from the allegations in the initiatory pleading and not
from evidentiary or other matters aliunde. The second is raised in a demurrer to evidence under Rule
33 after the plaintiff has rested his case and can be resolved only on the basis of the evidence he has
presented in support of his claim.[18] The first does not concern itself with the truth and falsity of the

allegations while the second arises precisely because the judge has determined the truth and falsity of
the allegations and has found the evidence wanting.
This is not to say that we automatically agree with the trial court that private respondent failed to allege
a sufficient cause of action. However, the question of whether JADEBANK failed to state a sufficient
cause of action is not before us for review; it may only be resolved when the appropriate mode of review
is availed of JADEBANK's appeal having been improperly brought before the Court of Appeals, it should
be dismissed outright pursuant to Sec. 2 of Rule 50 of the Rules of Court, which provides:
Sec. 2. Dismissal of improper appeal to the Court of Appeals. -- An appeal under Rule 41 taken from the
Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues
purely of law not being reviewable by the said court x x x x
WHEREFORE, the petition for certiorari is GRANTED. The assailed Resolutions of the Court of Appeals
dated 29 October 1998 and 5 February 1999 are REVERSED and SET ASIDE for having been issued
with grave abuse of discretion amounting to lack or excess of jurisdiction.
Accordingly, the appeal in CA-G.R. CV No. 57375, "Jade Progressive Savings and Mortgage Bank v.
China Road and Bridge Corporation," is DISMISSED.

PEOPLE VS BITANGA
AUSTRIA-MARTINEZ, J.:
The Petition for Review on Certiorari[1] before this Court assails the March 31, 2003 Decision[2] and
July 18, 2003 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 68797, [4] which granted a
Petition for Annulment of Judgment under Rule 47 of the February 29, 2000 Decision [5] of the Regional
Trial Court (RTC), Branch 153, Pasig City, in Criminal Case No. 103677.
The facts are not disputed.
On the basis of a complaint lodged by Traders Royal Bank (TRB), [6] an information for estafa was
filed against Rafael M. Bitanga (Bitanga) before the RTC and docketed as Criminal Case No.
103677. Bitanga pleaded not guilty to the offense charged. He was allowed to post bail.
During trial on the merits, the People presented the testimonies of three TRB employees on
how Bitanga duped the bank into accepting three foreign checks for deposit and encashment, which
were however returned to TRB by reason of unlocated accounts.[7]
When it was time for the defense to present his case, however, Bitanga and his counsel failed
to appear and adduce evidence.[8] Upon motion of the public prosecutor, a warrant of arrest was issued
against respondent and his right to adduce evidence was deemed waived. [9]
On February 29, 2000, the RTC promulgated in absentia a Decision finding Bitanga guilty as
charged, thus:
WHEREFORE, judgment is hereby rendered convicting accused Rafael M. Bitanga of the
crime of estafa defined and penalized under Article 315, par. 2 (a) of the Revised Penal Code
and hereby sentences him to suffer imprisonment of four (4) years and two (2) months
of prision correccional as minimum to twenty (20) years of reclusion temporal as maximum with
the necessary penalties provided by law and to indemnify private complainant Traders Royal
Bank the amount of P742,884.00 and to pay the cost.
SO ORDERED.[10]
On January 28, 2002, Bitanga filed with the CA a Petition for Annulment of Judgment with Prayer for
Other Reliefs[11] on the ground that extrinsic fraud was allegedly perpetuated upon him by his counsel of

record, Atty. Benjamin Razon.[12] He alleged that he received copy of the February 29, 2000 RTC Decision
only on December 13, 2001.[13]
The People filed an Answer[14] opposing the Petition.
The CA granted the Petition for Annulment of Judgment in the March 31, 2003 Decision assailed
herein, the decretal portion of which reads:
WHEREFORE, in the light of the foregoing considerations, the petition is hereby
GRANTED. Accordingly, the decision of the Regional Trial Court in Muntinlupa City, Branch 153
being tainted with circumstances constitutive of extrinsic fraud which deprived the petitioner
herein of his day in court is SET ASIDE. Resultantly, Criminal Case No. 103677 is remanded to
the court of origin for further proceedings to give herein petitioner opportunity to present his
evidence in said case and for the trial court to render judgment in accordance with the evidence
adduced. Corollarily, the petitioner may be released and allowed to be on bail unless there are
other valid and legal reasons for his continued detention.
SO ORDERED.[15]
and denied the People's Motion for Reconsideration in its Resolution [16] of July 18, 2003.
The foregoing CA Decision and Resolution are now being questioned by the People (petitioner) on
these grounds:
I
The two previous counsels were not negligent in defending respondent.
II
Assuming without admitting the existence of negligence on the part of the previous counsels,
the same does not constitute extrinsic fraud.
III
The Court of Appeals did not accord the previous counsels their right to procedural due process
of law.
IV
Jumping bail, respondent waived his right to present his evidence. [17]
The Petition for Review is meritorious.
Section 1, Rule 47 of the Rules of Court, limits the scope of the remedy of annulment of
judgment to the following:
Section 1. Coverage. This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.
The remedy cannot be resorted to when the RTC judgment being questioned was rendered in a criminal
case. The 2000 Revised Rules of Criminal Procedure itself does not permit such recourse, for it
excluded Rule 47 from the enumeration of the provisions of the 1997 Revised Rules of Civil Procedure
which have suppletory application to criminal cases. Section 18, Rule 124 thereof, provides:
Sec. 18. Application of certain rules in civil procedure to criminal cases. The provisions
of Rules 42, 44 to 46 and 48 to 56 relating to procedure in the Court of Appeals and in the
Supreme Court in original and appealed civil cases shall be applied to criminal cases insofar as
they are applicable and not inconsistent with the provisions of this Rule.
There is no basis in law or the rules, therefore, to extend the scope of Rule 47 to criminal cases.
As we explained in Macalalag v. Ombudsman,[18] when there is no law or rule providing for this remedy,
recourse to it cannot be allowed, viz.:
Parenthetically, R.A. 6770 is silent on the remedy of annulment of judgments or final orders and
resolutions of the Ombudsman in administrative cases. In Tirol, Jr. v. Del Rosario, the Court has held
that since The Ombudsman Act specifically deals with the remedy of an aggrieved party from orders,
directives and decisions of the Ombudsman in administrative disciplinary cases only, the right to appeal
is not to be considered granted to parties aggrieved by orders and decisions of the Ombudsman in
criminal or non-administrative cases. The right to appeal is a mere statutory privilege and may be
exercised only in the manner prescribed by, and in accordance with, the provisions of law. There must

then be a law expressly granting such right. This legal axiom is also applicable and even more
true in actions for annulment of judgments which is an exception to the rule on finality of
judgments.[19]
The Petition for Annulment of Judgment of the February 29, 2000 Decision of the RTC in Criminal
Case No. 103677 was therefore an erroneous remedy. It should not have been entertained, much less
granted, by the CA.
Even on substantive grounds, the Petition for Annulment of Judgment does not pass muster.
A petition for annulment of judgment is a remedy in equity so exceptional in nature that it may be
availed of only when other remedies are wanting,[20] and only if the judgment sought to be annulled was
rendered by a court lacking jurisdiction or through proceedings attended by extrinsic fraud.[21]
When the ground invoked is extrinsic fraud, annulment of judgment must be sought within four years
from discovery of the fraud, which fact should be alleged and proven. [22] In addition, the particular acts
or omissions constituting extrinsic fraud must be clearly established. [23]
Extrinsic or collateral fraud is trickery practiced by the prevailing party upon the unsuccessful party,
which prevents the latter from fully proving his case. It affects not the judgment itself but the manner in
which said judgment is obtained. [24]
In the present case, respondent Bitanga complained that his own counsel perpetrated fraud upon him
by abandoning his cause. He attributed the following acts and omissions to them:
1.
Atty. Benjamin Razon failed to inform his client of the scheduled hearings for
the receptioon of defense evidence. This resulted in depriving herein petitioner of a chance to
prove his innocence by presenting a valid defense;
2.
He failed to attend the scheduled hearing for reception of petitioners' evidence for
which reason the case was deemed submitted for decision without his evidence;
3.
He never bother to verify what transpired at the hearing he failed to attend, and thus,
was not able to file the necessary pleadings to lift the order considering the case submitted for
decision without petitioners' evidence;
4.
He withdrew his appearance as counsel for the petitioner without getting the express
conformity of his client. Thus, the court appointed a counsel de officio from the Public Attorneys
Office;
5.
The counsel de officio, however, exerted no effort in contacting the petitioner to prepare
him for defense evidence. He simply submitted the case for decision and waived the
presentation of Defense evidence;
6.
After receiving the court a quo's adverse decision, convicting herein petitioner, he did
not notify or inform his clients, herein petitioners; and
7.
He did not appeal the case to the Court of Appeals; or avail themselves of other
remedies under the law.[25]

Disagreeing with the CA, the People maintain that the acts and omissions imputed to said counsels
amounted to mere professional negligence which cannot be equated with extrinsic fraud in the absence
of allegation and evidence of malice.[29] The People point out that it was Bitanga's own act of jumping
bail which did him in, for had he showed up in court when summoned, he would not have lost the right
to present his defense.[30]
The People's arguments are tenable.
Extrinsic fraud is that perpetrated by the prevailing party, not by the unsuccessful party's own counsel.
[31]
As a general rule, counsels ineptitude is not a ground to annul judgment, for the latter's
management of the case binds his client.[32] The rationale behind this rule is that, once
retained, counsel holds the implied authority to do all acts which are necessary or, at least, incidental
to the prosecution and management of the suit in behalf of his client, and any act performed by said
counsel within the scope of such authority is, in the eyes of the law, regarded as the act of the client
himself.[33]
There is an exception to the foregoing rule, and that is when the negligence of counsel had been
so egregious that it prejudiced his clients interest and denied him his day in court. [34] For this exception
to apply, however, the gross negligence of counsel should not be accompanied by his clients own
negligence or malice.[35] Clients have the duty to be vigilant of their interests by keeping themselves up
to date on the status of their case. [36] Failing in this duty, they suffer whatever adverse judgment is
rendered against them. As we held in Tan v. Court of Appeals:[37]
Moreover, annulment of judgment may either be based on the ground that the judgment is void
for want of jurisdiction or that the judgment was obtained by extrinsic fraud. By no stretch of
the imagination can we equate the negligence of the petitioner and his former counsel to
extrinsic fraud as contemplated in the cited rules. Extrinsic fraud refers to any fraudulent act of
the prevailing party in the litigation which is committed outside of the trial of the case, whereby
the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent. The fraud or deceit cannot be of the losing partys
own doing, nor must it contribute to it. The extrinsic fraud must be employed against it by
the adverse party, who, because of some trick, artifice, or device, naturally prevails in the suit.
This Court notes that no such fraud or deceit was properly proved against the private
respondent. Indeed, the petitioner has no reason to protest his own negligence. [38] (Emphasis
supplied)

While it is true that neglect or failure of counsel to inform his client of an adverse
judgment resulting in theloss of his right to appeal will not justify setting aside a judgment that
is valid and regular on its face, this rule is not unbending and admits of exceptions as where
reckless or gross negligence of counsel deprives the client of due process. This Court believes,
and so holds, that the enumerated deplorable acts and omissions of petitioner's counsel on
record, finding no abatement either later from his court-appointed lawyer, taken together, more
than suffice to paint a clear picture of delinquency, gross negligence and recklessness
constitutive of extrinsic fraud.[27]

In the present case, the acts and omissions attributed to counsel amounted to negligence only, which
cannot be considered extrinsic fraud. Moreover, said counsels negligence was caused by Bitanga's act
of jumping bail.
There appears to be no issue about how Atty. Razon represented Bitanga during the presentation of the
evidence of the prosecution. The CA itself noted that during said period, Atty. Razon conducted the
cross-examination and re-cross-examination of the witnesses for the prosecution. [39]
Problems arose only when it was Bitangas turn to present his defense. As noted by the CA,
Atty. Razon failed to attend the hearings scheduled on December 10, 1998, February 18, 1999, April 20,
1999, and May 25, 1999.[40] His absences, however, appear to be justified. When he was required by
the RTC to submit an explanation for his absences, Atty. Razon clarified:
2.
That on May 25, 1999 from 7:00AM to 9:30AM counsel waited for the accused to pick
him up at his residence in order both counsel and accused can go to court together, it being the
defense evidence of the accused, counsel was not even feeling well that morning on account of
his swollen leg;
3.
That the accused never showed up putting counsel in a quandary whether he has been
relieved as counsel for the accused or not. The accused likewise never contacted counsel nor
showed up in person x x x counsel in his residence or office or called up by telephone
x x xcounsel made inquiry at the accused place of business but was informed that
the accused had already vacated the premises leaving no forwarding address where
he can be located or contacted. It is now June and still accused never contacted counsel so
that counsel is left without alternative but to withdraw from the case. [41] (Emphasis added)

Bitanga defends the foregoing view of the CA as consistent with a basic rule in criminal procedure
that every leeway must be given an accused person to defend himself, lest he be wrongfully deprived of
liberty.[28]

The RTC accepted the foregoing explanation of Atty. Razon and allowed him to withdraw his
appearance as counsel even without the conformity of Bitanga whose whereabouts could not be
traced.[42]Moreover, the RTC ordered the arrest ofBitanga and the forfeiture of his cash bond

The CA equated the foregoing behavior of said counsels to extrinsic fraud in that it
impaired Bitanga's right to due process and rendered the proceedings in Criminal Case No. 103677 a
farce. Citing a ruling of the appellate court in Sps. Carlos and Erlinda Ong v. Nieves Jacinto, et al.,
[26]
the CA held:

because of his continued non-appearance. The RTC also considered his right to present
evidence waived.[43]
It is apparent that Bitanga left Atty. Razon in the dark. While said counsel exerted effort to
contact Bitanga, the latter made himself completely scarce: he vacated his old business address
without leaving a forwarding address or informing Atty.Razon about the change; worse, after moving to
a different address, Bitanga did not bother to resume communication with Atty. Razon. Even if said
counsel could have appeared in court without his client, his presence would not have salvaged the case
for he had no witness to present or evidence to submit.
There was therefore no factual or legal basis to the conclusion of the CA that extrinsic fraud
prejudiced the right of Bitanga to present his defense. He has only himself to blame for jumping bail and
leaving his case in disarray.
WHEREFORE, the petition is GRANTED. The March 31, 2003 Decision and July 18, 2003
Resolution of the Court of Appeals are ANNULLED and SET ASIDE.
Upon finality of herein Decision, let the Regional Trial Court, Branch 153, Pasig City be furnished a
copy hereof for execution of its final Decision dated February 29, 2000 in Criminal Case No. 103677
FRAGINAL VS HEIRS OF PARAAL

AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the April 24,
2001 and September 3, 2001 Resolutions[1] of the Court of Appeals (CA) in CA-G.R. SP No. 64174. [2]
The material facts follow.
The heirs of Toribia Belmonte Paraal namely: Felisa Paraal, Abraham Paraal, Pedro Paraal, Irenea
Acabado and Josefa Estoy (Heirs of Toribia Paraal), filed with the Office of the Provincial Agrarian
Reform Adjudicator (PARAD) of the Department of Agrarian Reform Adjudication Board (DARAB),
Camarines Sur, a Complaint for Termination of Tenancy Relationship, Ejectment, and Collection of
Arrear Rentals and Damages,[3] docketed as PARAD Case No. R-0503-306-98, against Valentin
Fraginal, Tomas P. Fraginal and Angelina Fraginal-Quino (Fraginal, et al.).
Fraginal, et al. filed an Answer questioning the jurisdiction of the PARAD on the ground that they are not
tenants of the Heirs of Toribia Paraal, for the land they are tilling is a 1.1408-hectare public agricultural
land within the exclusive jurisdiction of the Department of Environment and Natural Resources. [4]
The PARAD issued a Decision on October 8, 1998 ordering the ejectment of Fraginal, et al., thus:
xxxx
Our perusal of [the] records shows that the defendants so-called documentary evidence as
proof that the landholding cultivated by them is classified as public land contrary to the claims
of herein plaintiffs is a mere scrap of paper. First, although it states that a certain area situated
at Pili, Camarines Sur is declared as alienable and disposable for cropland and other purposes,
yet, it does not specifically state through technical description or whatever the exact area of
coverage, its location as well as the boundaries, hence, we cannot be sure or we have no way of
knowing whether the subject property is part and parcel of that covered area. Second, it states
that the list of occupants or claimants therein is attached to said document, however, a close
scrutiny of the same reveals that it contains only one page without any attachment particularly
the alleged list of claimants. Therefore, there is no proof that defendants are indeed one of the
claimants listed therein. From here it can be inferred that such document was presented merely
to confuse the Board in their attempt to gain favorable judgment. Moreover, we are far from
convinced that defendants other allegations are tenable not only because they are selfserving but also for being irrelevant to the issue at bar. The same allegations and arguments
have been raised or asserted merely to resist the demands of the plaintiffs particularly on their
ejectment from the questioned landholding especially that all the evidence submitted by the
plaintiffs have never been effectively refuted by the defendants.
xxxx
WHEREFORE, premises considered, judgment is hereby rendered as follows:

1)
Ordering the termination of the Agricultural Leasehold Contract (Contrata sa
Pag-Arquila nin Dagang Agricultural) dated January 7, 1997 entered into by and between herein
parties;
2)
Ordering all the defendants, their heirs and assigns to vacate the premises
immediately upon receipt of this decision;
3)
Ordering the defendants to pay plaintiffs the total of 54 cavans of palay at 46
kls. per cavan representing the arrear rentals for the entire year of 1997 until the filing of this
case on June 26, 1998, including succeeding lease rentals as it falls due until they finally vacate
the premises; and
4)
Ordering the defendants to desist from further disturbing [the] herein plaintiffs
in their peaceful possession and cultivation of their landholdings subject of the instant action.
SO ORDERED.[5]
On April 5, 2001, two years from issuance of the PARAD Decision, Fraginal, et al. filed with the CA a
Petition for Annulment of Judgment with Prayer for Issuance of Preliminary Injunction and/or Restraining
Order.[6] They insisted that the PARAD Decision is void as it was issued without jurisdiction.
Unimpressed, the CA dismissed the Petition in its April 24, 2001 Resolution,[7] thus:
A petition for annulment of judgment under Rule 47 of the Revised Rules of Court may be
availed of to have judgments or final orders and resolutions in civil actions of Regional Trial
Courts annulled. Also, Rule 47 requires that recourse thereto may be had only when the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.
The petitioners ratiocinated [sic] this instant recourse for their failure to avail of the
remedy provided for under Rule 65 of the Revised Rules of Court, without fault (Rollo, p. 4).
However, the petition fails to offer any explanation as to how it lost that remedy except for its
claim that they failed to avail of Rule 65 without any fault on their part. And even if We are to
grant it arguendo, Rule 47 being exclusive to judgments and final orders and resolution in civil
actions of Regional Trial Courts is not available to the petitioners.
WHEREFORE, the foregoing premises considered, the instant petition is hereby DENIED
DUE COURSE and ordered DISMISSED. [8]
The CA also denied the Motion for Reconsideration [9] of Fraginal, et al. in the assailed
Resolution[10] dated September 3, 2001.
Hence, the herein Petition.We dismiss the petition for lack of merit.
Petitioners Fraginal, et al. raised these issues:
I.
Whether or not the Honorable Court of Appeals erred in dismissing the petition filed
before it for annulment of judgment of the Department of Agrarian Reform Adjudication Board
(DARAB) that has no jurisdiction over the subject matter as the land is a public agricultural land.
II.
Whether or not the Honorable Court of Appeals erred in holding that Rule 47 of the
Rules of Court pertains only to judgment or final orders and resolutions in civil actions of the
Regional Trial Court.[11]
It is only the second issue which is pivotal.
No doctrine is more sacrosanct than that judgments of courts or awards of quasi-judicial bodies, even if
erroneous, must become final at a definite time appointed by law. [12] This doctrine of finality of
judgments is the bedrock of every stable judicial system. [13]
However, the doctrine of finality of judgments permits certain equitable remedies; [14] and one of them is
a petition for annulment under Rule 47 of the Rules of Court.[15]
The remedy of annulment of judgment is extraordinary in character,[16] and will not so easily and
readily lend itself to abuse by parties aggrieved by final judgments. Sections 1 and 2 of Rule 47 impose
strict conditions for recourse to it, viz.:
Section 1. Coverage.- This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.

Section 2. Grounds for annulment. The annulment may be based only on the grounds of
extrinsic fraud and lack of jurisdiction.
Extrinsic fraud shall not be a valid ground if it was availed of, or could have been availed of, in
a motion for new trial or petition for relief.
The Petition for Annulment of Judgment filed by Fraginal, et al. before the CA failed to meet the
foregoing conditions.
First, it sought the annulment of the PARAD Decision when Section 1 of Rule 47 clearly limits the subject
matter of petitions for annulment to final judgments and orders rendered by Regional Trial Courts in civil
actions.[17] Final judgments or orders of quasi-judicial tribunals or administrative bodies such as the
National Labor Relations Commission,[18] the Ombudsman,[19] the Civil Service Commission,[20] the Office
of the President,[21] and, in this case, the PARAD, are not susceptible to petitions for annulment under
Rule 47.
Speaking through Justice Jose C. Vitug, the Court, in Macalalag v. Ombudsman, ratiocinated:
Rule 47, entitled Annulment of Judgments or Final Orders and Resolutions, is a new provision under
the 1997 Rules of Civil Procedure albeit the remedy has long been given imprimatur by the courts. The
rule covers annulment by the Court of Appeals of judgments or final orders and resolutions in civil
actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or
other appropriate remedies could no longer be availed of through no fault of the petitioner.An action for
annulment of judgment is a remedy in law independent of the case where the judgment sought to be
annulled is rendered. The concern that the remedy could so easily be resorted to as an instrument to
delay a final and executory judgment, has prompted safeguards to be put in place in order to avoid an
abuse of the rule. Thus, the annulment of judgment may be based only on the grounds of extrinsic
fraud and lack of jurisdiction, and the remedy may not be invoked (1) where the party has availed
himself of the remedy of new trial, appeal, petition for relief or other appropriate remedy and lost
therefrom, or (2) where he has failed to avail himself of those remedies through his own fault or
negligence.
xxxx
x x x The right to appeal is a mere statutory privilege and may be exercised only in the manner
prescribed by, and in accordance with, the provisions of law. There must then be a law
expressly granting such right. This legal axiom is also applicable and even more true
in actions for annulment of judgments which is an exception to the rule on finality of
judgments. [22] (Emphasis ours)
Second, Section 1, Rule 47 does not allow a direct recourse to a petition for annulment of judgment if
other appropriate remedies are available, such as a petition for new trial, and a petition for relief from
judgment or an appeal.[23]
The 1994 DARAB New Rules of Procedures, which was applicable at the time the PARAD Decision was
issued, provided for the following mode of appeal:
Rule XIII
Section 1. Appeal to the Board. a) An appeal may be taken from an order, resolution or
decision of the Adjudicator to the Board by either of the parties or both, orally or in writing,
within a period of fifteen (15) days from receipt of the order, resolution or decsion appealed
from, and serving a copy thereof on the adverse party, if the appeal is in writing.
b) An oral appeal shall be reduced into writing by the Adjudicator to be signed by the
appellant, and a copy thereof shall be served upon the adverse party within ten (10) days from
the taking of the oral appeal.
It does not allow for a petition for annnulment of a final PARAD Decision.
While the DARAB Rules provide for an appeal to the DARAB from a decision of the PARAD, Fraginal, et
al. did not avail of this remedy. However, they justified their omission, thus:
9.
Prior to the filing of this instant action, the petitioners, without fault, failed to avail of the
remedy provided under Rule 65 of the Rules of Court, appeal the questioned decision and to file the
corresponding petition for relief from judgment, due to time constraint and want of sources as to when
the questioned decision be appropriately done as they were not assisted by counself from the very
beginning of the proceedings.[24]
Such pretext is unacceptable.

Fraginal, et al., could have appealed to the DARAB even without resources or counsel. They could
have asked for exemption from payment of the appeal fee, as allowed under Section 5, Rule XIII. [25] They
could have also requested for counselde oficio from among DAR lawyers and legal officers, as provided
under Section 3, Rule VII.[26] They appear not to have needed one, considering that they seem to have
adequately fended for themselves as shown by the Answer they prepared, which raised a well-thought
out legal defense.[27] As it were, they neglected to exercise any of these rights and chose to fritter away
the remedy still available to them at that time. Their direct recourse to the CA through a petition for
annulment of the PARAD Decision was therefore ill-fated.
Moreover, there is nothing in Rule XIII that allows a petition for annulment of a final PARAD
Decision. As held in Macalalag, there must be a law granting such right, in the absence of which,
Fraginals petition for annulment of judgment was correctly denied due course by the CA.
With the foregoing disquisition, we find no need to treat the first issue.
WHEREFORE, the petition is DENIED.
GRANDE VS UP
TINGA, J.:
This treats of the Petition for Annulment of Judgment that seeks the annulment of the Decision
of the Court of Appeals in CA- G.R. CV No. 44411 promulgated on 14 December 1999 and the Resolution
issued on 24 February 2000 denying petitioners motion for reconsideration.
The Court of Appeals in its Decision[1] dismissed the appeal interposed by petitioners from the
decision of the Regional Trial Court (RTC) of Quezon City dismissing their complaint for recovery of
ownership and reconveyance of the subject property on the ground of lack of cause of action. The RTC
Decision[2] concluded that the subject property was covered by a Torrens title as early as 1914 and it
was only in 1984, or 70 years after the issuance of the title, that petitioners filed their action for
recovery of ownership and reconveyance. During the interregnum, ownership of the property was
acquired by respondent University of the Philippines as an innocent purchaser for value, so the RTC
found and the appellate court upheld.
Petitioners, through their former counsel, received a copy of the Court of Appeals Decision on 28
December 1998, and a copy of the Resolution denying their motion for reconsideration on 17 March
2000. However, petitioners failed to elevate the rulings of the Court of Appeals to this Court. They claim
that their former counsel had neglected to inform them of the receipt of the Resolution denying their
motion for reconsideration.[3] As a result, the Decision of the Court of Appeals dated 14 December
1999 became final and executory as of 12 April 2000, with the corresponding entry of judgment duly
issued.[4]
It was only on 29 June 2001, more than a year after the appellate courts rulings had become
final, that petitioners filed with this Court the present Petition for Annulment of Judgment, seeking the
nullification of the rulings. Respondent points out that the procedure undertaken by petitioners finds no
sanction under the Rules of Court.
We agree, and add more. Accordingly, we dismiss the petition.
The annulment of judgments, as a recourse, is equitable in character, allowed only in exceptional
cases, as where there is no available or other adequate remedy. [5] It is generally governed by Rule 47 of
the 1997 Rules of Civil Procedure. Section 1 thereof expressly states that the Rule shall govern the
annulment by the Court of Appeals of judgments or final orders and resolutions in civil action of Regional
Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of the petitioner. [6] Clearly, Rule 47 applies only to
petitions for the nullification of judgments rendered by regional trial courts filed with the Court of
Appeals. It does not pertain to the nullification of decisions of the Court of Appeals.
Petitioners argue that although Rule 47 is a newly-established rule, the procedure of annulment of
judgments has long been recognized in this jurisdiction. That may be so, but this Court has no authority
to take cognizance of an original action for annulment of judgment of any lower court. The only original
cases cognizable before this Court are petitions for certiorari, prohibition, mandamus, quo warranto,
habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases
affecting ambassadors, other public ministers and consuls. [7] Petitions for annulment of judgment are
not among the cases originally cognizable by this Court.
Moreover, if what is desired is an appeal from a decision of the Court of Appeals, which petitioners
could have been entitled to under ordinary circumstances, the only mode of appeal cognizable by this
Court is a petition for review on certiorari.[8] That is governed by and disposed of in accordance with

the applicable provisions of the Constitution, laws, Rules 45; 48; Sections 1, 2, and 5 to 11 of Rules 51;
52; and 56.[9] Notably, Rule 47 on annulment of judgments has nothing to do with the provisions which
govern petitions for review on certiorari. Thus, it is totally inappropriate to extend Rule 47 to the review
of decisions of the Court of Appeals. Then too, appeals by certiorari to this Court must be filed within
fifteen (15) days from notice of the judgment or the final order or resolution appealed from. [10] Even if we
were to treat the petition for annulment of judgment as an appeal by certiorari, the same could not be
given due course as it had been filed several months after the Court of Appeals decision had already
lapsed to finality.
Admittedly, this Court has discretionary power to take cognizance of a petition over which it ordinarily
has no jurisdiction if compelling reasons, or the nature and importance of the issues raised, warrant the
immediate exercise of its jurisdiction.[11] Hence, in Del Mar v. Phil. Amusement and Gaming Corp.,[12] the
Court took cognizance of an original petition for injunction after determining that the allegations therein
revealed that it was actually one for prohibition. We, however, cannot adopt that tack for purposes of
this case. Ostensibly, even if the averments in the present petition sufficiently present the existence of
grave abuse of discretion amounting to lack or excess of jurisdiction and on that basis it could be
treated as a special civil action for certiorari under Rule 65, still it could not be given due course since it
was filed way beyond the period for filing such special civil action. Moreover, certiorari can only lie if
there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.
Our ruling in Alabanzas v. Intermediate Appellate Court [13] bears citation. Counsel for private respondent
therein failed to file the appellants brief with the Court of Appeals. The lapse led to the dismissal of the
appeal and the subsequent finality of the lower court judgment. Disallowing the annulment of judgment
sought by private respondent on the ground of negligence of her lawyer, this Court held:
It is well-settled that once a decision becomes final and executory, it is removed from the power or
jurisdiction of the Court which rendered it to further amend, much less revoke it (Turquieza v. Hernando,
97 SCRA 483 [1980]; Heirs of Patriaca v. CA, 124 SCRA 410 [1983]; Javier v. Madamba, Jr., 174 SCRA 495
[1989]; Galindez v. Rural Bank of Llanera, Inc., 175 SCRA 132 [1989]; Olympia International, Inc. v. CA,
180 SCRA 353 [1989]). Decisions which have long become final and executory cannot be annulled by
courts (United CMC Textile Workers Union v. Labor Arbiter, 149 SCRA 424 [1987]) and the appellate court
is deprived of jurisdiction to alter the trial court's final judgment (Carbonel v. CA, 147 SCRA 656 [1987];
Republic v. Reyes, 155 SCRA 313 [1987]).
The doctrine of finality of judgment is grounded on fundamental considerations of public and
sound practice that at the risk of occasional error, the judgments of the courts must become
final at some definite date set by law (Turquieza v. Hernando, supra; H[e]irs of Patriaca v.
CA, supra; Edra v. Intermediate Appellate Court, 179 SCRA 344 [1989]). Reopening of a case
which has become final and executory is disallowed (Philippine Rabbit Bus Lines, Inc. v. Arciaga,
148 SCRA, [sic] 433 [1987]; Edra v. Intermediate Court, supra.). The subsequent filing of a
motion for reconsideration cannot disturb the finality of a judgment and restore jurisdiction
which had already been lost (Pfleider v. Victorino, 98 SCRA 491 [1980]; Heirs of Patriaca v.
CA, supra).
After the judgment has become final, no addition can be made thereto and nothing can be done
therewith except its execution; otherwise, there can be no end to litigation, thus setting at
naught the main role of Courts of Justice, which is to assist in the enforcement of the rule of law
and the maintenance of peace and order, by settling justiciable controversies with finality
(Farescal Vda. de Emnas v. Emnas, 95 SCRA 470 [1980]; Heirs of Patriaca v. CA, supra).
Moreover, it is an equally well-settled rule that the client is bound by his counsel's conduct,
negligence and mistake in handling the case, and the client cannot be heard to complain that
the result might have been different had his lawyer proceeded differently (Vivero v.Santos, 52
O.G. 1424; Tupas v. CA, 193 SCRA 597).
It is only in case of gross or palpable negligence of counsel when the courts must step in and
accord relief to a client who suffered thereby. (Legarda v. CA, 195 SCRA 418). In the present
case, the private respondents have not shown such carelessness or negligence in their lawyer's
discharge of his duties to them as to justify a deviation from the rule that "clients should be
bound by the acts of their counsel, including his mistakes." [14]
Petitioners cite quite a few cases in support of their claim that the purported negligence of their
former counsel sufficiently justifies the annulment of the judgment of the Court of Appeals. We are not

impressed. Only Apex Mining, Inc. v. Court of Appeals[15] involved a petition for annulment of judgment
but the petition therein was regular and in order, assailing as it did a decision of the Regional Trial Court
before the Court of Appeals. Unlike in Apex, the present petition is bereft of mooring under procedural
law. Hence, Apex is not a governing precedent in this case.
It is also worthy of note that the challenge to the decisions of the Court of Appeals and the RTC
ultimately involve questions of fact, even necessitating an examination of the boundaries of the subject
property. Both the RTC and the Court of Appeals arrived at common findings on all decisive factual
issues, and the Court is not wont to engage in another factual review. The original complaint was filed in
1984 and the judgment dismissing the complaint became final and executory in 2001. There is a need to
lay the matter to rest once and for all. Entertaining the present petition, which bears no approbation
under the Rules of Court in the first place, defeats the ends of justice and the principle of finality of
judgment.
A last note. Since the filing of the petition, a collateral issue has arisen between the counsel who
originally filed the petition in behalf of petitioners and the new counsel who subsequently entered his
appearance allegedly in behalf of all petitioners. The former counsel had sought to record a contingent
contract she had earlier forged with petitioners, assuring her of around one-third (1/3) of the value of the
recovery by petitioners in this case as her contingent fee. This motion was opposed by the new
counsel. No action need be taken on the motion, it having been mooted by this Decision. With the
dismissal of the petition and reaffirmance of the final and executory judgment against petitioners, any
inquiry into the contingent fee agreement has become a purely theoretical exercise.
WHEREFORE, the petition is DISMISSED.
COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and ISIDRO
PEREZ, respondents.
DECISION
BELLOSILLO, J.:
COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special
Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact x x x to initiate, institute and file any court action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said
squatters to remove their houses and vacate the premises in order that the corporation may take
material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and
enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights
and interest of the corporation in the aforementioned lots. [1]
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443
before the Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750. [2]
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez,
the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz
the area at present occupied by defendant wherein his house is located is 333 square meters on
the easternmost part of lot 443 and which portion has been occupied by defendant for several
years now;

2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum
of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this
compromise agreement over said portion of 333 square m. of lot 443 which portion will be located
on the easternmost part as indicated in the sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental expenses shall be
shouldered by the defendant. [3]
On 27 November 1985 the Compromise Agreement was approved by the trial court and judgment was
rendered in accordance therewith.[4]
Although the decision became final and executory it was not executed within the 5-year period from
date of its finality allegedly due to the failure of petitioner to produce the owners duplicate copy of Title
No. 37649 needed to segregate from Lot No. 443 the portion sold by the attorney-in-fact, Paz G. VillamilEstrada, to private respondent under the compromise agreement. Thus on 25 January 1993 respondent
filed a complaint to revive the judgment, docketed as Civil Case No. D-10459. [5]
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of
judgment was served upon it that it came to know of the compromise agreement entered into between
Paz G. Villamil-Estrada and respondent Isidro Perez upon which the trial court based its decision of 26
July 1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent transaction, petitioner
sought annulment of the decision of the trial court before respondent Court of Appeals on the ground
that the compromise agreement was void because: (a) the attorney-in-fact did not have the authority to
dispose of, sell, encumber or divest the plaintiff of its ownership over its real property or any portion
thereof; (b) the authority of the attorney-in-fact was confined to the institution and filing of an ejectment
case against third persons/squatters on the property of the plaintiff, and to cause their eviction
therefrom; (c) while the special power of attorney made mention of an authority to enter into a
compromise agreement, such authority was in connection with, and limited to, the eviction of third
persons/squatters thereat, in order that the corporation may take material possession of the entire
lot; (d) the amount of P26,640.00 alluded to as alleged consideration of said agreement was never
received by the plaintiff; (e) the private defendant acted in bad faith in the execution of said agreement
knowing fully well the want of authority of the attorney-in-fact to sell, encumber or dispose of the real
property of plaintiff; and, (f) the disposal of a corporate property indispensably requires a Board
Resolution of its Directors, a fact which is wanting in said Civil Case No. D-7750, and the General
Manager is not the proper officer to encumber a corporate property. [6]
On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of
the grounds for annulment, namely, lack of jurisdiction, fraud or illegality was shown to exist. [7] It also
denied the motion for reconsideration filed by petitioner, discoursing that the alleged nullity of the
compromise judgment on the ground that petitioners attorney in fact Villamit-Estrada was not
authorized to sell the subject property may be raised as a defense in the execution of the compromise
judgment as it does not bind petitioner, but not as a ground for annulment of judgment because it does
not affect the jurisdiction of the trial court over the action nor does it amount to extrinsic fraud. [8]
Petitioner challenges this verdict. It argues that the decision of the trial court is void because the
compromise agreement upon which it was based is void. Attorney-in-fact Villamil-Estrada did not
possess the authority to sell or was she armed with a Board Resolution authorizing the sale of its

property. She was merely empowered to enter into a compromise agreement in the recovery suit she
was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined
to the ejectment of third persons or squatters of x x x lot x x x (No.) 443 x x x for the said squatters to
remove their houses and vacate the premises in order that the corporation may take material
possession of the entire lot x x x x
We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney
was explicit and exclusionary: for her to institute any action in court to eject all persons found on Lots
Nos. 9127 and 443 so that petitioner could take material possession thereof, and for this purpose, to
appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only
insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this
authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property
nor a portion thereof. Neither can a conferment of the power to sell be validly inferred from the specific
authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor
that the compromise entered into shall only be so far as it shall protect the rights and interest of the
corporation in the aforementioned lots. In the context of the specific investiture of powers to VillamilEstrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of
petitioner to physically possess the same, more so when the land was being sold for a price of P80.00
per square meter, very much less than its assessed value of P250.00 per square meter, and considering
further that petitioner never received the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. [9] Thus the authority of an agent to execute a
contract for the sale of real estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. [10] A special power of attorney is necessary to
enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration.[11] The express mandate required by law to enable an
appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or
that includes a sale as a necessary ingredient of the act mentioned. [12] For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in
clear and unmistakable language. When there is any reasonable doubt that the language so used
conveys such power, no such construction shall be given the document. [13]
It is therefore clear that by selling to respondent Perez a portion of petitioners land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is
consequently void. So is the compromise agreement. This being the case, the judgment based thereon
is necessarily void. Antipodal to the opinion expressed by respondent court in resolving petitioners
motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the
jurisdiction of the trial court to render its decision based on the compromise agreement. In Alviar v.
Court of First Instance of La Union,[14] the Court held x x x x this court does not hesitate to hold that the judgment in question is null and void ab
initio. It is not binding upon and cannot be executed against the petitioners. It is evident that the
compromise upon which the judgment was based was not subscribed by them x x x x Neither could
Attorney Ortega bind them validly in the compromise because he had no special authority x x x x
As the judgment in question is null and void ab initio, it is evident that the court acquired no
jurisdiction to render it, much less to order the execution thereof x x x

x x x x A judgment, which is null and void ab initio, rendered by a court without jurisdiction to do
so, is without legal efficacy and may properly be impugned in any proceeding by the party against
whom it is sought to be enforced x x x x
This ruling was adopted in Jacinto v. Montesa,[15] by Mr. Justice J.B.L. Reyes, a much-respected authority
on civil law, where the Court declared that a judgment based on a compromise entered into by an
attorney without specific authority from the client is void. Such judgment may be impugned and its
execution restrained in any proceeding by the party against whom it is sought to be enforced. The
Court also observed that a defendant against whom a judgment based on a compromise is sought to be
enforced may file a petition for certiorari to quash the execution. He could not move to have the
compromise set aside and then appeal from the order of denial since he was not a party to the
compromise. Thus it would appear that the obiter of the appellate court that the alleged nullity of the
compromise agreement should be raised as a defense against its enforcement is not legally
feasible. Petitioner could not be in a position to question the compromise agreement in the action to
revive the compromise judgment since it was never privy to such agreement. Villamil-Estrada who
signed the compromise agreement may have been the attorney-in-fact but she could not legally bind
petitioner thereto as she was not entrusted with a special authority to sell the land, as required in Art.
1878, par. (5), of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to
annul and set aside judgments of Regional Trial Courts. [16] Thus, the Intermediate Appellate Court (now
Court of Appeals) shall exercise x x x x (2) Exclusive original jurisdiction over action for annulment of
judgments of the Regional Trial Courts x x x x However, certain requisites must first be established
before a final and executory judgment can be the subject of an action for annulment. It must either be
void for want of jurisdiction or for lack of due process of law, or it has been obtained by fraud. [17]
Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court
in Civil Case No. D-7750 before the Court of Appeals was proper. Emanating as it did from a void
compromise agreement, the trial court had no jurisdiction to render a judgment based thereon. [18]
It would also appear, and quite contrary to the finding of the appellate court that the highly
reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic
or collateral fraud by reason of which the judgment rendered thereon should have been struck
down. Not all the legal semantics in the world can becloud the unassailable fact that petitioner was
deceived and betrayed by its attorney-in-fact. Villamil-Estrada deliberately concealed from petitioner,
her principal, that a compromise agreement had been forged with the end-result that a portion of
petitioners property was sold to the deforciant, literally for a song. Thus completely kept unaware of its
agents artifice, petitioner was not accorded even a fighting chance to repudiate the settlement so much
so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud
may assume different shapes and be committed in as many different ways and here lies the danger of
attempting to define fraud. For man in his ingenuity and fertile imagination will always contrive new
schemes to fool the unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect
of which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the
court, or where it operates upon matters, not pertaining to the judgment itself, but to the manner in
which it was procured so that there is not a fair submission of the controversy. In other words, extrinsic

fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of
the trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the
case by fraud or deception practiced on him by his opponent. [19] Fraud is extrinsic where the
unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on
him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the
defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where
an attorney fraudulently or without authority connives at his defeat; these and similar cases which show
that there has never been a real contest in the trial or hearing of the case are reasons for which a new
suit may be sustained to set aside and annul the former judgment and open the case for a new and fair
hearing.[20]
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable
with and bound by the knowledge of or notice to his agent received while the agent was acting as
such. But the general rule is intended to protect those who exercise good faith and not as a shield for
unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and
dealings of the agent are such as to raise a clear presumption that he will not communicate to the
principal the facts in controversy.[21] The logical reason for this exception is that where the agent is
committing a fraud, it would be contrary to common sense to presume or to expect that he would
communicate the facts to the principal. Verily, when an agent is engaged in the perpetration of a fraud
upon his principal for his own exclusive benefit, he is not really acting for the principal but is really
acting for himself, entirely outside the scope of his agency. [22] Indeed, the basic tenets of agency rest on
the highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert
his authority to his own personal advantage, and his act in secret hostility to the interests of his
principal transcends the power afforded him.[23]
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals
dated 29 October 1993 and 10 March 1994, respectively, as well as the decision of the Regional Trial
Court of Dagupan City in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET
ASIDE. The Compromise Agreement entered into between Attorney-in-fact Paz G. Villamil-Estrada and
respondent Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its
complaint against private respondent Isidro Perez in Civil Case No. D-7750 for the recovery of
possession of a portion of Lot No. 443.
GUILLERMO MARCELINO, CONRADO ANTONIO, JR. and CONNIE ANTONIO, both minors,
represented by their grandfather co-petitioner, Petitioners, v. THE HON. COURT OF APPEALS,
SEVERINA LACTAOEN, CONCHITA L. MARCELINO, Spouses SIMON MARIAGA and CRISPINA
MARCELINO, GUDING MARCELINO and PEPING CANSINO, Respondents.
Felipe Valdez, for Petitioners.
Romulo S. Ibarra for Respondents.
DECISION
GRIO-AQUINO, J.:
The annulment of the decision dated May 11, 1990 of the Court of Appeals which affirmed the Order of
the Regional Trial Court of Tarlac, Branch 68, dismissing the petitioners complaint for recovery of
possession, surrender of titles, and damages, is sought in this petition for review on certiorari.
The petitioners, Guillermo Marcelino and the late Luciana Marcelino, now represented by their
grandchildren, the minors, Conrado Antonio, Jr. and Connie Antonio, are the only heirs of the late
Silvestre Marcelino and Genoveva Patricio, registered owners of three (3) parcels of land covered by
Original Certificates of Title Nos. 16547, 16829 and 16933, all of the Property Registry of Tarlac.
Even before World War II, the private respondents had been, and still are, in possession of these parcels
of land and the certificates of title thereof.
When the spouses Guillermo Marcelino and Luciana Marcelino were still alive, they demanded the
restitution to them of the physical possession and the Torrens titles of the property by the private

respondents, but the latter refused to give up the same.

In their answer with special and affirmative defenses. the private respondents averred that they are the
lawful occupants and possessors of the parcels of land in question; that the action of the petitioners to
recover the ownership and possession thereof has already prescribed; that said parcels of land were
inherited by them from their parents, Silvino Marcelino and Fermina Arrocena, who bought them in 1935
from Pedro Marcelino, as evidenced by an Absolute Sale of Real Estates, dated May 14, 1935: and that
Pedro Marcelino had purchased these parcels of land from Genoveva Patricio per Doc. No. 16, Page No.
36, Book No. 11, Series of 1930 of the Notarial Register of Notary Public Feliciano Bachini of Camiling,
Tarlac.
On September 14, 1988, the Regional Trial Court of Tarlac dismissed the case on the ground of laches.
The order of dismissal was appealed by the petitioners (then plaintiffs) to the Court of Appeals (CA-G.R.
CV No. 19447).
In a decision dated May 11, 1990, the Court of Appeals upheld the trial courts Order.
After the denial of their motion for reconsideration, the petitioners filed this petition for review under
Rule 45 of the Rules of Court.
Their main arguments are: (1) that the Court of Appeals erred in finding them guilty of laches for failure
to assert their rights to the property for over fifty (50) years, and (2) it exceeded its jurisdiction in
issuing the order of dismissal without a trial on the merits of the case, in violation of their right to due
process.
The petition is unmeritorious.
Laches in a general sense, means the failure or neglect, for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting the presumption that the
party entitled to assert it either has abandoned or declined to assert it (Salomon v. Intermediate
Appellate Court, 135 SCRA 352).chanrobles.com:cralaw:red
In the case at bar, the petitioners admitted in their complaint, that the private respondents had been
occupying the parcels of land in question even before World War II, and that they (private respondents)
have in their possession the titles thereof. For almost 50 years, or until June 20, 1988, no action had
been taken by the petitioners, or their predecessors-in-interest. to recover possession of the land and
the titles thereof.
There is no doubt, therefore, that the petitioners long inaction in asserting their right to the contested
lots bars them from recovering the same (Galloy v. Court of Appeals, 173 SCRA 26). The law serves
those who are vigilant and diligent and not those who sleep when the law requires them to act (Vda. de
Alberto v. Court of Appeals, 173 SCRA 436).
Although the parcels of land in question are registered under the Torrens System, it is nevertheless
settled in this jurisdiction that the ownership of registered land may be lost through laches (Tambot v.
Court of Appeals, 181 SCRA 202). The doctrine of laches or of "stale demands" is based on grounds of
public policy which requires, for the peace of society, the discouragement of stale claims. Unlike the
statute of limitations. laches is not a mere question of time but is principally a question of the inequity
or unfairness of permitting a stale right or claim to be enforced or asserted (Bergado v. Court of Appeals,
173 SCRA 497).
The individual elements of laches were sufficiently and thoroughly discussed by the appellate court in its
decision. We find no need to make any further disquisition on the matter.
Petitioners allegation that they were denied due process when the Regional Trial Court dismissed the
complaint without a trial on the merits, is not well taken for we have ruled more than once that a
decision based on the pleadings and position papers meets the requirements of a fair and open hearing
(St. Marys College-Tagum, Davao v. NLRC, 181 SCRA 73). A hearing does not necessarily mean verbal
arguments in open court. One may be heard also through pleadings (Mutuc v. Court of Appeals, 190
SCRA 43). A motion for reconsideration or an appeal may cure an alleged denial of due process (Rosales
v. Court of Appeals, 165 SCRA 344).chanrobles lawlibrary : rednad
WHEREFORE, the petition for review is DENIED for lack of merit. The impugned decision of the Court of
Appeals is hereby AFFIRMED
ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, petitioner, vs.
HONORABLE COURT OF APPEALS and THE HEIRS of JESUS AMADO ARANETA, respondents.

Magtanggol C. Gunigundo for petitioner.

Antonio P. Barredo for respondents.
CORTES, J.:
Petitioner impugns the resolutions of the Court of Appeals dated November 10 and December 2 and 3,
1987 which, in effect, gave due course to private respondents' petition for annulment of judgment.
The antecedents of this case are as follows:
On February 15,1984 Freddie and Marconi Da Silva, as mortgagors, and Islamic Da'Wah Council of the
Philippines (Council for brevity), as mortgagee, executed a real estate mortgage over a 4,754 sq. m.
parcel of land located in Cubao, Quezon City and covered by Transfer Certificate of Title (TCT) No. 30461
as security for the payment of a one million peso promissory note in favor of the mortgagee. The
mortgagors were unable to pay their obligation, hence, the Council instituted foreclosure proceedings
with the Regional Trial Court, docketed as Civil Case No. Q-43746. On February 5, 1985 the parties
submitted a compromise agreement wherein it was stipulated that because of the Da Silvas' inability to
pay their debt to the Council, and for the additional consideration of P 500,000.00, they jointly agree to
cede, transfer and convey to the Council the land they mortgaged to the latter. On February 12, 1985,
the Regional Trial Court approved the compromise agreement. Thereafter, TCT No. 328021 was issued in
the name of the Council by the Register of Deeds of Quezon City.
Subsequent thereto, on August 8,1985, Jesus Amado Araneta filed with the Register of Deeds a notice of
lis pendens in connection with Civil Case No. Q-47989 entitled "Islamic Da'Wah Council of the Philippines
v. Jesus Amado Araneta" for ejectment. The complaint was converted into an action for collection of
rentals with damages but was later on withdrawn by the Council. On August 13, 1985 Araneta also filed
with the same Register of Deeds an affidavit of adverse claim in connection with Civil Case No. Q-43469
entitled "Marconi Da Silva, et al. v. Jesus Amado Araneta, et al." for recovery of possession. The notice of
lis pendens and adverse claim were annotated at the back of TCT No. 328021 by the Register of Deeds.
On October 9, 1985 the Council filed in the Regional Trial Court of Quezon City a complaint for Quieting
of Title, Recovery of Possession and Damages with Preliminary Mandatory Injunction against Araneta
praying, inter alia, for the cancellation of all the annotations at the back of TCT No. 328021. The case is
docketed as Civil Case No. Q-46196.
While this case was pending, on July 6, 1987, the heirs of Jesus Amado Araneta, private respondents
herein, filed with the Court of Appeals a petition to annul the judgment in Civil Case No. Q-43746 for
foreclosure. In support of their petition the heirs of Araneta narrated the following events:
(1) on December 20,1953 Jesus Amado Araneta purchased the 4,754 sq.m. parcel of land located in
Cubao from the Spouses Garcia and since then he and his family have always been in possession
thereof;
(2) for some reason known only to Araneta and Fred Da Silva,an employee of the former, title to the
property was placed in the latter's name as evidenced by TCT No. 30461 although from the time of its
issuance the owner's duplicate copy of said TCT has always been in the possession of Araneta,

(3) on January 31, 1963, the parties decided to terminate the trust that had been created over the
property, thus, Da Silva executed a deed of sale over the same parcel of land in favor of Araneta but no
consideration was given by the latter to the former for said sale and any recital of consideration
appearing in the deed is purely fictitious;
(4) the Register of Deeds, however, refused to register the deed of sale because the title is in the name
of "Fred Da Silva married to Leocadia Da Silva" and is thus presumed conjugal and the conjugal
partnership should first be liquidated as the wife had already died;
(5) alleging that their copy was lost and/or destroyed, on February 1, 1984 Freddie and Marconi Da Silva,
two of the three surviving children of Fred Da Silva who died in 1963, filed a petition, docketed as LRC
record Case No. Q-2772, for the issuance of a new copy of the owner's duplicate copy of TCT No. 30461.
The petition was granted by Judge Vera on March 24,1984:
(6) Araneta learned about this and immediately filed a motion to re-open the proceedings stating that
he has in his possession the ,- owner's duplicate copy of TCT No. 30461 and explaining the reasons for
such possession;
(7) the motion was granted and on December 7,1984 the land registration court ordered the Da Silvas to
(a) return to the Register of the second owner's duplicate copy of the title and (b) neither enter into any
transaction concerning said second owner's duplicate copy nor utilize the title for any purpose other
than to return the same to the Register of Deeds;
(8) on November 11, 1985, the Da Silvas manifested before the land registration court that the title to
the property was transferred to the Council based on a compromise agreement in Civil Case No. Q43746
for foreclosure; and

litis pendentia because of the pendency of the quieting of title case between the same parties; and,
abandonment, waiver and unenforceability under the Statute of Frauds [Petition, Annex "H"]. On
December 2, 1987 the Court of Appeals denied the Council's motion for reconsideration for lack of merit.
In the hearing conducted on December 3, 1987 the Council reiterated the grounds it raised in its
Supplemental Motion and Motion to Dismiss but the same were summarily denied by the Court of
Appeals. Hence, this petition for certiorari.
Petitioner contends the following: first, that the Court of Appeals should not continue to hear the petition
for annulment of judgment since it is already fully executed and the purpose for which the case for
annulment was filed will no longer be served, the parties having already complied with the decision;
second, private respondents have no right to question the validity or legality of the decision rendered
foreclosing the mortgage since they are foreign to the transaction of mortgage between petitioner and
Freddie and Marconi Da Silva; lastly, petitioner claims that private respondents have another remedy in
law and that is in Civil Case No. Q-46196 for Quieting of Title where the question of ownership may be
passed upon.
At the outset it must be clarified that the instant petition is one for certiorari under Rule 65 of the Rules
of Court. Thus, the inquiry this Court should address itself is limited to error of jurisdiction or grave
abuse of discretion committed by the Court, of Appeals, in particular, whether or not respondent court
acted without jurisdiction or with grave abuse of discretion in giving due course to the petition for
annulment of judgment. This clarification is rendered necessary because the parties themselves, in their
pleadings, have gone beyond this issue and have discussed the merits of the annulment of judgment
case now pending decision with the Court of Appeals.

(9) on motion of the heirs of Araneta, who substituted him upon his death in 1985, Judge Vera
consolidated Civil Cases Nos. Q- 2772 and Q-43469, both of which were raffled to his sala, with Civil
Case No. Q-46196 but the judge hearing the latter case would not heed the order of consolidation.

In its Petition, the Council contends that a Regional Trial Court has the authority and jurisdiction to annul
a judgment of another Regional Trial Court, a coordinate or co-equal court Specifically, petitioner alleges
that the filing of a separate action for annulment of judgment is unnecessary because the Regional Trial
Court hearing Civil Case No. Q-43469 for Quieting of Title can annul the judgment in Civil Case No. Q43746 for Foreclosure rendered by another Regional Trial Court [Rollo, pp. 15-16). In its Memorandum,
however, the Council admitted that the Court of Appeals has the exclusive jurisdiction to annul the
decision of the Regional Trial Court [Rollo, pp. 152-1531.

(10) and then set out their case for annulment of judgment alleging that the Da Silvas, with the
connivance of the Council, executed a purported promissory note secured by a real estate mortgage the
terms and conditions of which were made very onerous as to pave the way for the foreclosure of the
property by virtue of a confession of judgment; and, the Council had always known of the Araneta's
claim of ownership over the land because the former's executive officer and secretary general is the
lawyer of the Da Silvas in the cases they filed against the Araneta's. The heirs of Araneta in their
petition prayed, inter alia, that (1) the judgment in Civil Case No. Q- 43746 be annulled and set aside
and (2) a restraining order be issued to enjoin the proceedings in Civil Case No. Q-46196 [Petition,
Annex "A"].

Annulment of judgment is a remedy in law independent of the case where the judgment sought to be
annulled was rendered. The judgment may be annulled on the ground of extrinsic or collateral fraud
[Canlas v. Hon- Court of Appeals, G.R. No. 77691, August 8,19881. Jurisdiction over actions for
annulment of Regional Trial Court judgment has been clarified by Batas Pambansa Blg. 129 (otherwise
known as The Judiciary Reorganization Act of 1980). Prior to the enactment of this law, different views
had been entertained regarding the issue of whether or not a branch of a Regional Trial Court may annul
a judgment of another branch of the same court. * However, Batas Pambansa Blg. 129 introduced a new
provision conferring on the Court of Appeals exclusive original jurisdiction over actions for annulment of
judgments of Regional Trial Courts. Sec. 9(2) of Batas Pambansa Blg. 129 expressly provides that:

In a resolution dated November 10, 1987 the Court of Appeals issued a temporary restraining order
enjoining the trial judge from hearing Civil Case No. Q-46196 until further orders from the court. In the
same resolution the parties were ordered to appear for a pre- trial conference. The Council filed a
motion for reconsideration of this resolution. Later on the Council filed a Supplement to Motion for
Reconsideration with Motion to Dismiss questioning the Court of Appeals' jurisdiction to hear the petition
for annulment of a judgment that had already been fully executed. The Council also invoked the
additional grounds of lack of cause of action because the Aranetas are not valid claimants of the
property; lack of legal capacity to sue because the Aranetas were not parties to the foreclosure case;

Sec. 9. Jurisdiction. -The Court of Appeals shall exercise: ...

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; Thus,
it is beyond dispute that it is only the Court of Appeals that can take cognizance of the annulment of
judgment in Civil Case No. Q-43746 rendered by the Regional Trial Court.

The next issue raised in this petition deals with the question of who may properly institute a petition for
annulment of judgment. It is petitioner's contention that the remedy is available only to one who is a
party to the case where the judgment sought to be annulled is rendered. Private respondents, on the
other hand, allege that "there are sufficient facts and circumstances sufficient to show prima facie that
[they] have a substantial interest in the ownership of the property which had been foreclosed without
their knowledge and consent" [Rollo, p. 90]. In fine, the question deals with whether or not the heirs of
Araneta have a cause of action against the Council.

observation made by this Court through Justice Ozaeta in Garchitorena v. Sotelo [74 Phil. 25 (,1942)j'.
These are his words: "The collusive conduct of the parties in the foreclosure suit constituted an extrinsic
or collateral fraud by reason of which the judgment rendered therein may be annulled in this separate
action [citing also the case of Anuran]. Aside from the Anuran-Aquino case, innumerable authorities from
other jurisdictions may be cited 'in support of the annulment. But were there not any precedent to guide
us, reason and justice would compel us to lay down such doctrine for the first time." [at 481-482-, Italics
supplied.]

In Militante v. Edrosolano [G.R. No. L-27940, June 10, 1971, 39 SCRA 4731, an action for annulment of
judgment in Civil Case No. 6216 between Edrosolano and Belosillo was filed by Militante. The petition
stemmed from a complaint instituted by Militante on September 6, 1965 against Edrosolano for
damages arising from a breach of contract of carriage. On January 18,1966 Militante obtained an order
of preliminary attachment on the property of Edrosolano. Alleging that he purchased all of Edrosolano's
TPU equipment on February 28, 1966, Belosillo filed a third-party claim. It appears that on February 25,
1963 Belosillo obtained a judgment by default against Edrosolano in Civil Case No. 6216 for collection of
amount of P45,000.00, the value of the promissory note executed by the latter on February 1, 1960.
After a recital of these antecedent facts, Militante, in his petition for annulment of judgment
contended, inter alia, that (1) Civil Case No. 6216 "was based on a fictitious cause of action because
[the] promissory note was without lawful consideration whatsoever" [at 476]; (2) Edrosolano did not file
any answer to Belosillo's complaint and allowed the latter to obtain a judgment by default which
judgment attained finality without the former appealing therefrom; and, (3) while judgment in Civil Case
No. 6216 was promulgated iii 1963 it was "only on January 19, 1966 when . . . Belosillo caused the
execution thereof after [Militante] had already instituted his civil case for damages against ... Edrosolano
and an order for issuance of preliminary attachment issued" [at 477]. The trial court however dismissed
Militante's action for annulment on finding that it did not state a cause of action. Thereafter, Militante
filed an appeal to this Tribunal and in setting aside the trial court's order of dismissal', the Court,
speaking through then Mr. Associate Justice Enrique Fernando, stated that:

It is therefore clear from the foregoing that a person need not be a party to the judgment sought to be
annulled. What is essential is that he can prove his allegation that the judgment was obtained by the
use of fraud and collusion and he would be adversely affected thereby.

xxx xxx xxx

2. More specifically, the view entertained by the lower court in its order of dismissal that an action for
annulment of judgment can be availed of only by those principally or secondarily bound is contrary to
what had been so clearly declared by this Court in the leading case of Anuran v. Aquino t38 Phil. 291,
decided in 1918. It was emphatically announced therein: "There can be no question as to the right of
any persons adversely affected by a judgement to maintain an action to enjoin its enforcement and to
have it declared a nullity on the ground of fraud and collusion practiced in the very matter of obtaining
the judgment when such fraud is extrinsic or collateral to the matters involved in the issues raised at
the trial which resulted in such judgment. x x x." [at 3233.] Such a principle was further fortified by an

In this present case it is true that the heirs of Araneta are not parties to the foreclosure case. Neither are
they principally nor secondarily bound by the judgment rendered therein. However. their petition filed
with the Court of Appeals they alleged fraud and connivance perpetuated by and between the Da Silvas
and the Council as would adversely affect them. This allegation, if fully substantiated by preponderance
of evidence, could be the basis for the annulment of Civil Case No. Q-43476.
Finally, the Council asserts that the remedy of annulment of judgment applies only to final and
executory judgment and not to that which had already been fully executed or implemented.It is the
Council's contention that as the judgment in the foreclosure case had already been executed evidenced
by the fact that title to the property in question had been transferred in its name the judgment can no
longer be annulled. The Council's contention is devoid of merit. In Garchitorena u. Sotelo, supra, the
Court affirmed the trial court's annulment of the judgment on foreclosure notwithstanding the fact that
ownership of the house and lot subject of the mortgage had passed from the mortgagee who foreclosed
the mortgage and purchased the property at public auction to a person who bought the same and finally
to another individual in whose name the Torrens certificate of title stood by the time the case reached
this Tribunal.
In view of the foregoing the Court finds that the Court of Appeals neither acted without jurisdiction nor
committed grave abuse of discretion in giving due course to the petition for annulment of judgment as
would warrant the issuance of the extraordinary writ of certiorari in this case.
WHEREFORE, the instant petition is DISMISSED and the orders of the Court of Appeals dated November
10 and December 2 and 3,1987 are AFFIRMED.