Baclaran Marketing Corporation vs. Fernando C. Nieva and Mamerto Sibulo, Jr.

Annulment of judgment under Rule 47 is available only against a final judgment, order, or resolution, and extrinsic fraud must be committed by the adverse party; a lawyer's gross negligence is not extrinsic fraud and does not excuse the client from the consequences of the judgment absent clear and convincing proof of malicious deprivation of information and the client's own diligence.

Baclaran Marketing Corporation is a domestic corporation engaged in the distribution, marketing, and delivery of cement. The present controversy concerns the equitable remedy of annulment of judgment under Rule 47 of the Rules of Court, which governs annulment of final judgments, orders, or resolutions of Regional Trial Courts in civil actions and is available only in exceptional cases where no other adequate remedy exists. The property involved was registered under Transfer Certificate of Title No. 34587 and was later brought within proceedings under Section 107 of Presidential Decree No. 1529.

Baclaran Marketing Corporation is a domestic corporation engaged in the distribution, marketing, and delivery of cement. It was one of the defendants in Civil Case No. 1218-A, entitled "Mamerto Sibulo, Jr. vs. Ricardo Mendoza and Baclaran Marketing, Inc.," pending with the Regional Trial Court of Antipolo, Branch 74. The case was one for damages arising from a vehicular collision in Taytay, Rizal between a 10-wheeler truck owned by BMC and driven by its employee Ricardo Mendoza, and a car owned and driven by Mamerto Sibulo, Jr. In its Decision dated November 21, 1990, the Antipolo Court ruled in favor of BMC and Mendoza and dismissed Sibulo's complaint. It found that the damages suffered by Sibulo were the result of his own reckless and imprudent driving.

On appeal, the Court of Appeals, in its Decision dated May 9, 2005, reversed the Antipolo Court and held that Mendoza's negligence caused the collision. It awarded Sibulo damages in the total amount of ₱765,159.55. In the absence of a motion for reconsideration, the Decision became final and executory on June 12, 2005. The Antipolo Court subsequently issued a Writ of Execution on January 16, 2006. Then, in an Order dated February 23, 2006, it directed the Deputy Sheriff, upon motion of Sibulo, to implement the Writ of Execution against the real properties owned by BMC, as it appeared that BMC had no personal properties.

The sheriff of the Antipolo Court levied upon BMC's real property in Parañaque City covered by Transfer Certificate of Title No. 34587. He sold the property and its improvements through public auction on April 17, 2006. Respondent Fernando C. Nieva emerged as the highest bidder, paying the total price of ₱800,000. For BMC's failure to redeem the property within one year from the sale, Nieva consolidated ownership over it. He filed a Petition for Cancellation of Transfer Certificate of Title No. 34587 and Issuance of New Title in the Regional Trial Court of Parañaque City, Branch 257, pursuant to Section 107 of Presidential Decree No. 1529. The case was docketed as LRC Case No. 07-0119.

The Parañaque Court granted the petition in its Decision dated March 26, 2008 and ordered BMC to surrender to Nieva, within 15 days from receipt of the Decision, its owner's duplicate certificate of title over the property. Failing such, the Parañaque Court ordered the Register of Deeds to annul TCT No. 34587 and issue a new title in Nieva's name. The Decision of the Parañaque Court became final on May 8, 2008. Consequently, Nieva filed a Petition for Issuance of a Writ of Possession over the property in the Parañaque Court. The case was docketed as LRC Case No. 08-0077. The Parañaque Court granted the petition in its Decision dated January 26, 2009 and issued a Writ of Possession and Notice to Vacate against BMC dated March 12, 2009 and March 22, 2009, respectively.

In view of the Writ of Possession and Notice to Vacate issued against it, BMC filed a Petition for Annulment of Judgment before the Court of Appeals. BMC prayed for the annulment of (a) the Writ of Execution dated January 16, 2006 issued by the Antipolo Court in Civil Case No. 1218-A; (b) the Order dated February 23, 2006 of the Antipolo Court in Civil Case No. 1218-A ordering the implementation of the writ of execution over the real properties of BMC; (c) the Auction Sale dated April 17, 2006; (d) the Decision dated March 26, 2008 of the Parañaque Court in LRC Case No. 07-0119 canceling TCT No. 34587; and (e) the Decision dated January 26, 2009 of the Parañaque Court in LRC Case No. 08-0077 ordering the issuance of a Writ of Possession.

BMC alleged that its counsel, Atty. Isagani B. Rizon, committed acts of gross and inexcusable negligence constituting "extrinsic fraud," which deprived it of due process and an opportunity to present its side. It discovered the fraud only in December 2008 when its representatives tried to pay the real estate tax on the property, only to learn that the title to it had already been transferred to Nieva. BMC averred that it did not know that Sibulo appealed the 1990 Decision of the Antipolo Court to the CA. It claimed that Atty. Rizon assured BMC that the 1990 Decision ended the controversy. Had BMC known of the appeal, it could have opposed the proceedings or engaged the services of new counsel. BMC claimed that it immediately called Atty. Rizon in his office upon discovering that the property was levied upon and sold at public auction. However, BMC was informed that Atty. Rizon died on January 30, 2009. It also learned that Atty. Rizon ran for public office and won as Mayor of Baroy, Lanao Del Norte in the 1995, 2001, 2004 and 2007 elections. BMC alleged that based on court records, notices relative to the case against BMC were sent to Atty. Rizon but, for some reason unknown to BMC, Atty. Rizon never informed it of the court documents and processes. BMC emphasized that the Antipolo Court ruled in its favor in Civil Case No. 1218-A and that it was only when BMC failed to participate in the appeal that an adverse decision was rendered against it. It maintained that if the orders of the Antipolo and Parañaque Courts were allowed to stand, BMC would be deprived of its substantial property rights over the property: when the property was sold to Nieva at the public auction for a bid price of ₱800,000, its market value was already ₱19,890,000. Nieva and Sibulo, on the other hand, asserted that BMC was not deprived of due process. They averred that the records of the CA show that BMC was furnished with a copy of the decision of the CA and a copy of the entry of judgment.

• Extrinsic Fraud: BMC alleged that its counsel, Atty. Isagani B. Rizon, committed acts of gross and inexcusable negligence constituting extrinsic fraud, which deprived it of due process and an opportunity to present its side.
• Lack of Notice of Appeal: BMC maintained that it did not know Sibulo appealed the 1990 Decision to the CA; Atty. Rizon assured it that the 1990 Decision ended the controversy, and had it known of the appeal, it could have opposed the proceedings or engaged new counsel.
• Due Process and Abandonment: BMC argued that Atty. Rizon never informed it of the court documents and processes, and that his gross negligence amounted to abandonment, so it should not be bound by his negligence.
• Substantial Property Rights: BMC contended that allowing the orders to stand would deprive it of substantial property rights, since the property was sold to Nieva for ₱800,000 when its market value was ₱19,890,000.
• Annulment of Specific Orders: BMC sought annulment of the writ of execution, the order implementing it, the auction sale, and the Parañaque Court decisions cancelling its title and issuing a writ of possession.

• Due Process: Nieva and Sibulo asserted that BMC was not deprived of due process; the records of the CA show that BMC was furnished a copy of the CA decision and a copy of the entry of judgment.

• Availability of Annulment of Judgment: Whether the CA erred in dismissing BMC's petition for annulment of judgment.
• Final Judgment Requirement: Whether a writ of execution, an order implementing a writ of execution, an auction sale, and a writ of possession may be annulled under Rule 47.
• Extrinsic Fraud: Whether the alleged gross negligence of BMC's counsel constitutes extrinsic fraud under Rule 47, Section 2.
• Denial of Due Process: Whether BMC was deprived of due process by its counsel's failure to inform it of the appeal and subsequent proceedings.

• Availability of Annulment of Judgment: No. The CA correctly dismissed the petition; Rule 47 is extraordinary and requires strict compliance, and BMC failed to meet the first and second requisites.
• Final Judgment Requirement: No as to the writ of execution, the order implementing the writ, the auction sale, and the writ of possession; these are not final orders. Yes as to the Parañaque Court decision cancelling BMC's title, which is a final judgment, but annulment was still denied because the grounds were absent.
• Extrinsic Fraud: No. Extrinsic fraud must be committed by the adverse party; counsel's neglect is not extrinsic fraud.
• Denial of Due Process: No. The negligence of counsel binds the client; the exception requires clear and convincing proof of malicious deprivation and the absence of the client's own negligence, which BMC failed to show.

• Availability of Annulment of Judgment: Rule 47 of the Rules of Court governs actions for the annulment of final judgments, orders, or resolutions of Regional Trial Courts in civil actions. It is a recourse equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy. Its objective is to set aside a final and executory judgment which is not void upon its face, but is entirely regular in form, and whose alleged defect is not apparent upon its face or from the recitals contained in the judgment. Because it disregards the rule of immutability and unalterability of final judgments, the Rules impose stringent requirements. In Pinausukan Seafood House vs. Far East Bank & Trust Company, the Court held that a petitioner must comply with the statutory requirements under Rule 47: (1) the remedy is available only when the petitioner can no longer resort to the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies through no fault of the petitioner; (2) the grounds are limited to either extrinsic fraud or lack of jurisdiction; (3) the action must be filed within four years from discovery of the extrinsic fraud, and if based on lack of jurisdiction, before it is barred by laches or estoppel; and (4) the petition must be verified and should allege with particularity the facts and the law relied upon for annulment, as well as those supporting the petitioner's good and substantial cause of action or defense. BMC's petition failed to meet the first and second requisites.

• Final Judgment Requirement: Rule 47, Section 1 limits the applicability of the remedy of annulment of judgment to final judgments, orders or resolutions. A final judgment or order is one that finally disposes of a case, leaving nothing more for the court to do in respect thereto. This may be an adjudication on the merits which, on the basis of the evidence presented at the trial, declares categorically what the rights and obligations of the parties are and which party is in the right, or a judgment or order that dismisses an action on the ground of res judicata or prescription. In contrast, an interlocutory order does not dispose of a case completely but leaves something to be done upon its merits. In Guiang vs. Co, the Court declared that an auction sale and a writ of execution are not final orders. Thus, they cannot be nullified through an action for annulment of judgment. The rule does not apply to an action to annul the levy and sale at public auction of petitioner's properties or the certificate of sale executed by the deputy sheriff over said properties. Neither does it apply to an action to nullify a writ of execution because a writ of execution is not a final order or resolution, but is issued to carry out the mandate of the court in the enforcement of a final order or of a judgment. Corollarily, an order implementing a writ of execution issued over certain real properties is also not a final order as it merely enforces a judicial process over an identified object. It does not involve an adjudication on the merits or determination of the rights of the parties. Closely related to a writ of execution is a writ of possession. In LZK Holdings and Development Corp. vs. Planters Development Bank, the Court explained that a writ of possession is a writ of execution employed to enforce a judgment to recover the possession of land. It commands the sheriff to enter the land and give its possession to the person entitled under the judgment. Thus, similar to a writ of execution, a writ of possession is not a final order which may be annulled under Rule 47. It is merely a judicial process to enforce a final order against the losing party. For this reason, the Decision of the Antipolo Court ordering the issuance of a writ of possession is also not amenable to an action for annulment of judgment. In fine, only the Decision of the Parañaque Court ordering the cancellation of BMC's title over the property qualifies as a final judgment. It is a judgment on the merits declaring who between Nieva and BMC has the right over the title to the property. Therefore, it may be the subject of an action for annulment of judgment. Be that as it may, BMC failed to prove that any of the grounds for annulment are present in this case.

• Extrinsic Fraud: Rule 47, Section 2 provides extrinsic fraud and lack of jurisdiction as the exclusive grounds for the remedy of annulment of judgment. Case law, however, recognizes a third ground—denial of due process of law. Arcelona vs. Court of Appeals teaches that a decision which is patently void may be set aside on grounds of want of jurisdiction or non-compliance with due process of law. Here, BMC invoked extrinsic fraud and lack of due process as grounds for its petition for annulment of judgment. It claimed that Atty. Rizon's gross negligence in handling the case constitutes extrinsic fraud and deprived it of due process of law. The Court was not persuaded. Extrinsic fraud refers to a fraud committed to the unsuccessful party by his opponent preventing him from fully exhibiting his case 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 when an attorney fraudulently or without authority connives at his defeat. In Pinausukan, the Court held that a lawyer's neglect in keeping track of the case and his failure to apprise his client of the developments of the case do not constitute extrinsic fraud. Fraud is not extrinsic if the alleged fraudulent act was committed by petitioner's own counsel. The fraud must emanate from the act of the adverse party and must be of such nature as to deprive petitioner of its day in court. Thus, in many cases, the Court has held that a lawyer's mistake or gross negligence does not amount to extrinsic fraud that would grant a petition for annulment of judgment. In this case, the CA correctly found that BMC neither alleged nor proved that the gross negligence of its former counsel was done in connivance with Nieva or Sibulo. Therefore, it is not the extrinsic fraud contemplated under Rule 47, Section 2.

• Denial of Due Process: BMC maintained that it was denied due process of law because it was not able to participate in the proceedings subsequent to the 1990 Decision of the Antipolo Court. It alleged that Atty. Rizon did not inform it of Sibulo's appeal and of the orders and processes issued by the courts. BMC pleaded that Atty. Rizon's gross negligence in handling the case is tantamount to abandonment of the same, so it should not be bound by the negligence of its counsel. Nieva and Sibulo asserted that BMC was not deprived of due process, averring that the records of the CA show that BMC was furnished with a copy of the decision of the CA and a copy of the entry of judgment. BMC's contentions had no leg to stand on. It is well-settled that the negligence of the counsel binds the client, except in cases where the gross negligence of the lawyer deprived his client of due process of law. However, mere allegation of gross negligence does not suffice. In Ong Lay Hin vs. Court of Appeals, the Court held that for the exception to apply, the client must prove by clear and convincing evidence that he was maliciously deprived of information that he could not have acted to protect his interests. The error of his counsel must have been both palpable and maliciously exercised that it could viably be the basis for a disciplinary action. Malice is never presumed but must be proved as a fact. The record is bereft of showing that BMC alleged and proved that Atty. Rizon was motivated by malice in failing to inform it of Sibulo's appeal. Moreover, the gross negligence of the counsel must not be accompanied by the client's own negligence. In Bejarasco, Jr. vs. People, the Court ruled that for his failure to keep himself up-to-date on the status of his case, the client should suffer whatever adverse judgment is rendered against him. A litigant bears the responsibility of monitoring the developments of his case for no prudent party leaves the fate of his case entirely in the hands of his lawyer. In this light, BMC cannot pass all the blame to Atty. Rizon. It admitted in its petition before the Court that after obtaining a favorable decision from the Antipolo Court, it did not bother to check the status of the case. While it might be true that Atty. Rizon assured it that the case had already ended with the 1990 Decision, the prudent thing would have been for BMC to ask for evidence or proof that the decision was already final. This, BMC failed to do. Since Sibulo's claim for damages involved a considerable amount of money, BMC was expected to protect its own interest and not merely to rely on its counsel. It is the duty of BMC to be in touch with its counsel regarding the progress of the case. It cannot just sit back, relax, and wait for the outcome of the case. Since the alleged negligent act of its counsel was accompanied by BMC's own negligence, the latter shall be bound by the former's negligence. The Court commiserated with the plight of BMC, assuming that it was indeed unaware of the proceedings subsequent to the 1990 Decision. Nevertheless, the Court cannot simply disregard the statutory requirements of an action for annulment of judgment, lest it open the gates for possible abuse of litigants who seek to delay the enforcement of final and executory judgments of the courts.

• Annulment of Judgment under Rule 47 — Rule 47 governs 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. It is equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy. The requirements are: (1) the remedy is available only when the petitioner can no longer resort to the ordinary remedies through no fault of the petitioner; (2) the grounds are limited to extrinsic fraud or lack of jurisdiction; (3) the action must be filed within four years from discovery of the extrinsic fraud, and if based on lack of jurisdiction, before it is barred by laches or estoppel; and (4) the petition must be verified and allege with particularity the facts and law relied upon, as well as those supporting the petitioner's good and substantial cause of action or defense. BMC failed to meet the first and second requisites.

• Final Judgment vs. Interlocutory Order — A final judgment or order finally disposes of a case, leaving nothing more for the court to do in respect thereto. It may be an adjudication on the merits declaring the rights and obligations of the parties, or a judgment or order dismissing an action on the ground of res judicata or prescription. An interlocutory order does not dispose of a case completely but leaves something to be done upon its merits. A writ of execution, an order implementing a writ of execution, an auction sale, and a writ of possession are not final orders and cannot be annulled under Rule 47. Only the Parañaque Court decision cancelling BMC's title qualified as a final judgment.

• Extrinsic Fraud — Extrinsic fraud refers to fraud committed to the unsuccessful party by his opponent preventing him from fully exhibiting his case 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 when an attorney fraudulently or without authority connives at his defeat. Fraud is not extrinsic if the alleged fraudulent act was committed by petitioner's own counsel. The fraud must emanate from the adverse party and must deprive petitioner of its day in court. A lawyer's neglect in keeping track of the case and failure to apprise his client of developments do not constitute extrinsic fraud. BMC neither alleged nor proved connivance between its counsel and Nieva or Sibulo.

• Negligence of Counsel Binds the Client; Exception — The negligence of counsel binds the client, except where the gross negligence of the lawyer deprived the client of due process of law. Mere allegation of gross negligence does not suffice. For the exception to apply, the client must prove by clear and convincing evidence that he was maliciously deprived of information that he could not have acted to protect his interests. The error of counsel must be both palpable and maliciously exercised that it could viably be the basis for a disciplinary action. Malice is never presumed but must be proved as a fact. Moreover, the gross negligence of counsel must not be accompanied by the client's own negligence. BMC failed to prove malice on the part of Atty. Rizon, and BMC itself admitted that it did not check the status of the case after obtaining a favorable decision.

• Denial of Due Process as a Ground for Annulment — Although Rule 47, Section 2 provides extrinsic fraud and lack of jurisdiction as the exclusive grounds for annulment of judgment, case law recognizes denial of due process of law as a third ground. A decision which is patently void may be set aside on grounds of want of jurisdiction or non-compliance with due process of law. BMC invoked denial of due process, but the Court found that the alleged negligence of its counsel, accompanied by BMC's own negligence, did not amount to a deprivation of due process.

• "(1) The remedy is available only when the petitioner can no longer resort to the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies through no fault of the petitioner; (2) The grounds for the action of annulment of judgment are limited to either extrinsic fraud or lack of jurisdiction; (3) The action must be filed within four years from the discovery of the extrinsic fraud; and if based on lack of jurisdiction, must be brought before it is barred by laches or estoppel; and (4) The petition must be verified, and should allege with particularity the facts and the law relied upon for annulment, as well as those supporting the petitioner's good and substantial cause of action or defense, as the case may be." — This passage states the stringent statutory requirements for annulment of judgment under Rule 47, as summarized in Pinausukan Seafood House vs. Far East Bank & Trust Company, and explains why BMC's petition failed the first and second requisites.

• "The rule does not apply to an action to annul the levy and sale at public auction of petitioner's properties or the certificate of sale executed by the deputy sheriff over said properties. Neither does it apply to an action to nullify a writ of execution because a writ of execution is not a final order or resolution, but is issued to carry out the mandate of the court in the enforcement of a final order or of a judgment. It is a judicial process to enforce a final order or judgment against the losing party." — This passage, quoted from Guiang vs. Co, distinguishes final orders from writs of execution and auction sales, and supports the ruling that these cannot be the subject of an annulment of judgment under Rule 47.

• "Extrinsic fraud refers to a fraud committed to the unsuccessful party by his opponent preventing him from fully exhibiting his case 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 when an attorney fraudulently or without authority connives at his defeat." — This is the Court's canonical definition of extrinsic fraud, which it applied to hold that the alleged negligence of BMC's own counsel was not extrinsic fraud.

• "It is well-settled that the negligence of the counsel binds the client, except in cases where the gross negligence of the lawyer deprived his client of due process of law. However, mere allegation of gross negligence does not suffice." — This passage states the general rule and the exception on negligence of counsel, which the Court applied to reject BMC's due process claim.

• "for the exception to apply, the client must prove by clear and convincing evidence that he was maliciously deprived of information that he could not have acted to protect his interests. The error of his counsel must have been both palpable and maliciously exercised that it could viably be the basis for a disciplinary action." — This passage, drawn from Ong Lay Hin vs. Court of Appeals, sets the high evidentiary standard for the exception to the binding effect of counsel's negligence, which BMC failed to satisfy.

• Pinausukan Seafood House vs. Far East Bank & Trust Company, G.R. No. 159926, January 20, 2014, 714 SCRA 226 — Controlling precedent; the Court relied on it for the requirements of Rule 47 and for the rule that a lawyer's neglect in keeping track of the case and failure to apprise the client of developments do not constitute extrinsic fraud.
• Guiang vs. Co, G.R. No. 146996, July 30, 2004, 435 SCRA 556 — The Court cited it for the rule that an auction sale and a writ of execution are not final orders and cannot be nullified through an action for annulment of judgment.
• LZK Holdings and Development Corp. vs. Planters Development Bank, G.R. No. 167998, April 27, 2007, 522 SCRA 731 — The Court cited it for the rule that a writ of possession is a writ of execution employed to enforce a judgment to recover possession of land and is not a final order annullable under Rule 47.
• Arcelona vs. Court of Appeals, G.R. No. 102900, October 2, 1997, 280 SCRA 20 — The Court cited it for the rule that a decision which is patently void may be set aside on grounds of want of jurisdiction or non-compliance with due process of law, recognizing denial of due process as a ground for annulment.
• Ong Lay Hin vs. Court of Appeals, G.R. No. 191972, January 26, 2015, 748 SCRA 198 — The Court relied on it for the standard that the exception to the binding effect of counsel's negligence requires clear and convincing evidence of malicious deprivation of information and an error that is both palpable and maliciously exercised.
• Bejarasco, Jr. vs. People, G.R. No. 159781, February 2, 2011, 641 SCRA 328 — The Court cited it for the rule that a client who fails to keep himself up-to-date on the status of his case must suffer the adverse judgment, since a prudent party does not leave the fate of his case entirely in the hands of his lawyer.
• Cosmic Lumber Corporation vs. Court of Appeals, G.R. No. 114311, November 29, 1996, 265 SCRA 168 — The Court cited it for the definition of extrinsic fraud.

• Rule 47, Section 1, Rules of Court — This provision governs 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 Court applied it to limit the remedy to final judgments, orders, or resolutions, and to hold that the writ of execution, the order implementing it, the auction sale, and the writ of possession were not proper subjects of annulment.
• Rule 47, Section 2, Rules of Court — This provision states that annulment may be based only on the grounds of extrinsic fraud and lack of jurisdiction, and that 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 Court applied it to hold that the alleged gross negligence of BMC's own counsel was not extrinsic fraud, and that BMC failed to establish lack of jurisdiction.
• Section 107, Presidential Decree No. 1529 — The Property Registration Decree provision cited as the basis for Nieva's Petition for Cancellation of Transfer Certificate of Title No. 34587 and Issuance of New Title in the Parañaque Court. The Parañaque Court granted the petition, and its Decision became final; the Supreme Court later held that this Decision was the only challenged issuance that qualified as a final judgment under Rule 47.

Justice Presbitero J. Velasco, Jr. (Chairperson), Justice Lucas P. Bersamin, Justice Marvic M.V.F. Leonen, and Justice Neol G. Tijam concurred.