Arcelona vs. Court of Appeals

A final judgment may be annulled not only on the ground of extrinsic fraud but also for lack of jurisdiction over the subject matter or over the persons of indispensable parties. Because co-owners pro indiviso are indispensable parties in a tenancy suit over the entire property, their non-inclusion deprives the trial court of jurisdiction over their persons, rendering the judgment void and incapable of attaining finality as to them.

Six Arcelona siblings—Marcelino, Tomasa, Ruth (representing the deceased Benedicto), Pacita, Maria, and Natividad—are co-owners pro indiviso of a fishpond covered by Transfer Certificate of Title No. 34341, which expressly names all six as registered owners and indicates the foreign residences of some. On March 4, 1978, the three sisters residing in the Philippines (Pacita, Maria, and Natividad, referred to as Olanday, et al.) leased the fishpond to Cipriano Tandoc for three years, renewed up to February 2, 1984. Private respondent Moises Farnacio was appointed by Tandoc as caretaker-tenant of the fishpond. After the lease terminated and Tandoc surrendered possession to Olanday, et al., Farnacio filed an action to maintain his tenancy, but he impleaded only the three Philippines-based sisters, omitting the three siblings residing in the United States despite the TCT's clear indication of their co-ownership and foreign addresses.

• The Co-ownership and the Lease: The six Arcelona siblings inherited and co-owned a fishpond pro indiviso, as evidenced by TCT No. 34341, which named all six co-owners and specified that some resided in California, U.S.A. On March 4, 1978, the three Philippines-based sisters (Olanday, et al.) leased the fishpond to Cipriano Tandoc. Private respondent Moises Farnacio was appointed by Tandoc as caretaker-tenant. The lease was renewed until February 2, 1984, after which Tandoc surrendered possession to Olanday, et al.
• The Tenancy Suit: On February 7, 1984, Farnacio filed Civil Case No. D-7240 against Olanday, et al. to maintain his status as tenant and secure possession of the fishpond. Farnacio omitted the three US-based siblings (petitioners) as defendants, despite the TCT's explicit notation of their co-ownership and foreign residence.
• The RTC Decision: On October 31, 1984, the RTC ruled in favor of Farnacio, declaring him the tenant-caretaker over the entire fishpond and ordering the defendants to maintain his peaceful possession. The decision referenced the cadastral lot number and the lease contract, which should have alerted the court to the existence of other co-owners, especially given Pacita Olanday's testimony that she signed the surrender of lease only for herself and her two sisters.
• The Annulment Petition: After the decision was affirmed by the IAC and the Supreme Court, and Farnacio was placed in possession of the entire property, petitioners filed a petition for annulment of judgment before the Court of Appeals, arguing that the trial court never acquired jurisdiction over them as indispensable parties.

• Petitioners argued that the Court of Appeals erred in ruling that extrinsic fraud is the sole ground for annulment of judgment, maintaining that lack of jurisdiction over indispensable parties and denial of due process are equally valid grounds.
• Petitioners contended that, as co-owners of the subject property, they are indispensable parties; because they were never impleaded or served with summons, the trial court's judgment is void for want of jurisdiction over their persons.
• Petitioners asserted that the Court of Appeals should not have considered extraneous matters—such as testimony from a separate criminal case or presumptions about their knowledge of the lease—to defend the validity of the judgment, arguing that the nullity of a judgment must stand or fall on the records of the case.
• Petitioners maintained that they are not guilty of laches or estoppel because they were not aware of the tenancy suit and were never impleaded, and that their receipt of lease rentals (raised for the first time on appeal) does not constitute recognition of Farnacio's tenancy.
• Petitioners insisted that an independent action for annulment is a proper remedy and that they were not required to intervene in the execution stage of the original case.

• Respondent Court of Appeals held that annulment of judgment rests on a single ground: extrinsic fraud, citing Canlas v. Court of Appeals and Islamic Da' Wah Council of the Phils. v. Court of Appeals.
• The Court of Appeals found that petitioners were estopped from questioning the judgment because they knew of the lease contract and failed to intervene during the pendency of the civil case or the execution stage.
• Private respondent Farnacio countered that Pacita Olanday testified she was authorized by her siblings to lease the property, and that petitioners received their corresponding shares of the lease rentals, thereby impliedly recognizing his tenancy.
• Private respondent argued that petitioners deliberately chose not to intervene in the court of origin to preserve their ability to question the judgment later.

• Procedural Issues:
  • Whether an independent action for annulment of judgment filed in the Court of Appeals is a proper remedy to assail a void final judgment, or whether intervention before the court of origin during the execution stage is the exclusive remedy.
• Substantive Issues:
  • Whether a final judgment may be annulled on grounds other than extrinsic fraud, specifically for lack of jurisdiction over the persons of indispensable parties and denial of due process.
  • Whether extraneous matters not found in the records of the original case may be used to defend the validity of a final judgment attacked for lack of jurisdiction.
  • Whether co-owners pro indiviso are indispensable parties in a tenancy suit such that their non-inclusion constitutes a jurisdictional defect that nullifies the judgment.

• Procedural: The Court held that intervention is not the only remedy to assail a void final judgment. An independent action to declare a judgment null and void for lack of jurisdiction is a recognized and proper remedy. There is no procedural rule prescribing that intervention during the execution stage is the exclusive means to question a void judgment, particularly where the petitioners were unaware of the proceedings.
• Substantive: The Court held that a final judgment may be annulled not only on the ground of extrinsic fraud but also for lack of jurisdiction over the subject matter or over the persons of indispensable parties. Jurisdiction over indispensable parties must be acquired before a court can validly pronounce a personal judgment; absent such jurisdiction, the judgment is null and void and can never become final and executory. Because the fishpond was undivided and it was impossible to determine which portion belonged to which co-owner, all co-owners were indispensable parties. Farnacio's failure to implead the petitioners deprived the trial court of jurisdiction over their persons.
• Substantive: The Court ruled that in an action to declare a judgment void for lack of jurisdiction, only evidence found in the records of the case can justify the annulment or defense thereof; extraneous evidence cannot be used to vary the record. The nullity of a judgment due to lack of jurisdiction may be proved by evidence on record—such as the TCT and testimony referenced in the decision showing the existence of other co-owners—but never by extraneous evidence like testimony from a separate criminal case. Accordingly, the Court found no basis for estoppel or laches, as the record contained no proof that petitioners had knowledge of the tenancy suit, and a void judgment cannot be validated by laches.

• Remedies to Set Aside Final and Executory Judgments — There are three ways to set aside a final and executory judgment: (1) a petition for relief from judgment under Rule 38 on grounds of fraud, accident, mistake, or excusable negligence; (2) a direct action to annul the judgment on the ground of extrinsic fraud; and (3) a direct action for certiorari or collateral attack to annul a judgment that is void upon its face or void by virtue of its own recitals, such as for want of jurisdiction or lack of due process. The Court applied this framework to clarify that annulment of judgment is not limited to extrinsic fraud but extends to void judgments lacking jurisdiction over indispensable parties.
• Indispensable Parties in Tenancy Suits Involving Co-owned Property — All co-owners pro indiviso are indispensable parties in an action to establish tenancy over the entire co-owned property. A tenant must implead all co-owners to establish his tenancy with finality; failing to do so prevents a final determination of the action. The Court applied this principle to hold that the failure to implead the three US-based co-owners deprived the trial court of jurisdiction over their persons, rendering the judgment void.
• Exclusion of Extraneous Evidence in Collateral Attacks on Judgments — In a collateral attack or action to declare a judgment void for lack of jurisdiction, the validity or nullity of the judgment must be determined from the record alone, excluding extraneous evidence. The Court applied this doctrine to strike down the Court of Appeals' reliance on testimony from a separate criminal case and assumptions about the petitioners' knowledge, holding that the nullity of the judgment must stand or fall on the evidence on record.
• Void Judgments Not Subject to Laches — No laches attach to a judgment that is null and void for want of jurisdiction. The Court applied this principle to reject the Court of Appeals' finding of laches against the petitioners.

• "A decision that is null and void for want of jurisdiction on the part of the trial court is not a decision in the contemplation of law and, hence, it can never become final and executory."
• "The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present."
• "In an action to declare a judgment void because of lack of jurisdiction over the parties or subject matter, only evidence found in the records of the case can justify the annulment of the said judgment."
• "To say, then, that petitioners can avail themselves only of the ground of extrinsic fraud and no other is to fail to appreciate the true meaning and ramifications of annulment/nullity."

• Macabingkil vs. People's Homesite and Housing Corporation, 72 SCRA 326 (1976) — Followed. Established the three remedies for attacking a final judgment and clarified that a direct action or collateral attack is proper for judgments void on their face or by their recitals for lack of jurisdiction.
• Islamic Da' Wah Council of the Phils. vs. Court of Appeals, 178 SCRA 178 (1989) — Clarified. While the case stated that annulment rests on extrinsic fraud, the Court clarified that this did not preclude actions to declare a judgment void for lack of jurisdiction.
• Servicewide Specialists, Incorporated vs. Court of Appeals, 251 SCRA 70 (1995) — Followed. Held that no final determination of a case can be made if an indispensable party is not impleaded.
• Alabang Development Corporation vs. Valenzuela, 116 SCRA 261 (1982) — Followed. Enunciated the principle that no laches attach when a judgment is null and void for want of jurisdiction.
• Leonor vs. Court of Appeals, 256 SCRA 69 (1996) — Followed. Reiterated that a void judgment for want of jurisdiction is no judgment at all, cannot be the source of any right, and can never become final.

• Rule 3, Section 7, Rules of Court — Defines indispensable parties as parties-in-interest without whom no final determination of an action can be had. The Court applied this to hold that the co-owners pro indiviso were indispensable parties in the tenancy suit, and their non-inclusion was a fatal jurisdictional defect.
• Rule 3, Section 2, Rules of Court — Requires that every action be prosecuted in the name of the real party in interest and that all persons having an interest in the subject of the action be joined as plaintiffs. The Court applied this to impose upon the private respondent the responsibility to implead all co-owners.
• Rule 3, Section 11, Rules of Court — Authorizes courts to drop or add parties on motion or on its own initiative at any stage of the action. The Court applied this provision to emphasize that the trial court should have taken the initiative to order the impleading of the absent co-owners upon learning of their existence from the evidence on record.
• Rule 9, Section 9, Rules of Court — Requires a pleader to set forth the names of persons who ought to be parties if complete relief is to be accorded, and to state why they have been omitted. The Court used this to highlight private respondent's failure to disclose the other co-owners.

Narvasa, C.J., Romero, Melo, and Francisco, JJ.