Calubad vs. Aceron and Soriano

A person who acquires an interest in the subject property from a judgment debtor after the judgment has become final and executory is a successor-in-interest bound by the judgment under Section 47(b), Rule 39 of the Rules of Court, even if not a party to the case, and may be reached by an order of execution; such a person cannot evade the judgment through a Rule 47 petition for annulment, which is an equitable remedy available only on the grounds of extrinsic fraud or lack of jurisdiction and only where ordinary remedies are no longer available through no fault of the petitioner.

The case concerns a parcel of land in Quezon City originally registered in the names of Spouses Francisco R. Soriano and Rosa R. Soriano, who donated it to their son Oliver R. Soriano. Aceron contracted to purchase the property from Oliver under a Deed of Conditional Sale, while Calubad later extended a loan to Oliver secured by a real estate mortgage over the same property. The dispute requires application of the Rules of Court on annulment of judgment and the conclusiveness of final judgments against persons who acquire interests from a judgment debtor after finality.

In April 1992, Billy M. Aceron and Oliver R. Soriano entered into an unnotarized Deed of Conditional Sale over a 760-square-meter parcel of land in Quezon City covered by Transfer Certificate of Title (TCT) No. 15860 registered in the names of Spouses Francisco R. Soriano and Rosa R. Soriano, who had donated the property to their son Oliver. The consideration was P1.6 million. Because the title was yet to be reconstituted in Oliver's name, the Deed provided that Oliver would cause the reconstitution of title and transfer ownership to Aceron, while Aceron could take possession of the property upon payment of P300,000.00.

In October 1992, the title was reconstituted, prompting Aceron to demand from Oliver the execution of a Deed of Absolute Sale. Oliver informed Aceron that he would cancel the Deed of Conditional Sale. On October 19, 1993, Aceron filed a Complaint before the Regional Trial Court of Quezon City, Branch 96, docketed as Civil Case No. Q-93-18011, praying that Oliver execute the Deed of Absolute Sale and pay damages. Oliver claimed that he had to cancel the Deed of Conditional Sale because Aceron failed to pay the total amount of the contract.

On December 26, 1996, the RTC rendered its Decision in favor of Aceron and ordered Oliver to execute a Deed of Absolute Sale over the subject property and pay P25,000.00 as attorney's fees. Aceron appealed to the Court of Appeals praying for payment of moral and exemplary damages and additional attorney's fees, but the appellate court, in its February 18, 2002 Decision, denied his appeal and affirmed the RTC's December 26, 1996 Decision, which became final and executory on August 5, 2003. On July 4, 2003, the trial court granted the motion for writ of execution filed by Oliver. On August 5, 2003, the Register of Deeds of Quezon City issued TCT No. N-253373 in the name of Oliver. On November 5, 2003, Oliver informed Aceron of the notarial rescission of the Deed of Conditional Sale and demanded that he vacate the subject property within five days.

On December 17, 2003, Oliver obtained a loan of P1.6 million from Calubad and mortgaged the subject property covered by TCT No. N-253373 as security. On January 9, 2004, Aceron moved for the execution of the RTC's December 26, 1996 Decision, which the trial court granted in its March 5, 2004 Order. On April 1, 2004, Aceron deposited P970,000.00 at the Office of the Clerk of Court. Oliver, however, failed to deliver TCT No. N-253373 as ordered. Aceron then moved that Oliver be divested of his title over the subject property and that it be transferred to him. Oliver manifested that he could not surrender the title because it was already mortgaged to Calubad before the issuance of the RTC's March 5, 2004 Order.

On July 23, 2004, Aceron moved that Oliver's title and ownership over the subject property be transferred to his name, free from all liens and encumbrances, pursuant to the Court of Appeals' February 18, 2002 Decision. On October 3, 2004, Aceron filed an Omnibus Motion praying that (a) Calubad deliver TCT No. N-253373 in the name of Oliver; (b) Oliver and Calubad refrain from doing acts that would adversely affect the delivery of TCT No. N-253373; (c) Oliver execute a Deed of Absolute Sale in favor of Aceron; (d) Oliver be divested of his title over the subject property; and (e) ownership over the subject property be transferred to Aceron free from all liens and encumbrances. On December 13, 2004, the trial court granted Aceron's Omnibus Motion. The Resolution divested Oliver of ownership over the property covered by TCT No. N-253373, allowed him to withdraw the P970,000.00 deposited by Aceron as payment of the balance of the purchase price, directed the Register of Deeds of Quezon City to issue a new title in Aceron's name free from all encumbrances and liens, and declared the mortgage and consequent foreclosure sale null and void. The Resolution became final and executory on January 20, 2005.

Calubad was not a party to Civil Case No. Q-93-18011. The records show that Oliver mortgaged the subject property to Calubad after the decision in that case had become final and executory, and that at the time of the mortgage the issue of ownership over the subject property had already been settled in favor of Aceron. Calubad had received a copy of Aceron's Manifestation with Prayer to Reset Hearing on the Omnibus Motion dated October 26, 2004.

• Reliance on Torrens Title: Petitioner argued that there was no notice of lis pendens of Civil Case No. Q-93-18011 on TCT No. 15860 or TCT No. N-253373; he was not informed of the case before agreeing to accept the property as security for the loan; Aceron had the opportunity to file a notice of lis pendens but failed to do so; and under Lim vs. Chuatoco, he had the right to rely on the correctness of the certificate of title and was not obliged to go beyond it.
• Lack of Personality and Notice: Petitioner maintained that he was not a party to Civil Case No. Q-93-18011; although he was furnished a copy of Aceron's Omnibus Motion dated October 3, 2004, he received it after the scheduled hearing; Aceron filed a Manifestation with Prayer to Reset Hearing dated October 26, 2004 because there was no proof of service on Oliver or his counsel or on Calubad, but the trial court did not reset the hearing and instead issued the December 13, 2004 Resolution.
• Unavailable Remedies: Petitioner argued that he had no personality to submit a comment or opposition to the Omnibus Motion because he was not a party; he could not file a motion for intervention because the case had become final and executory in 2002, long before his receipt of the Omnibus Motion; and he could not file a petition for relief from judgment under Rule 38 because that remedy is available only to a party to the case.
• Improper Remedy and Rule 47: Petitioner explained that he filed a petition for review on certiorari before the Court of Appeals, which was dismissed for improper remedy; hence, he filed a petition for annulment of judgment or resolution under Rule 47. He prayed that the CA decision declaring the real estate mortgage and foreclosure sale null and void be reversed and set aside and that the certificate of sale on the new title issued to Aceron be cancelled on the ground that, as a party not included in the case, he cannot be bound by the decision.

• Aceron — Successor-in-Interest: Aceron cited Vda. De Medina vs. Cruz, where the petitioner therein acquired a right over the subject property after the original action was commenced and became final and executory; similarly, Calubad acquired the right of a mortgagee after Civil Case No. Q-93-18011 had attained finality, so the judgment, having the force of law, should be enforced against Calubad even though he was not a party.
• Aceron — Bad Faith: Aceron contended that Calubad could not be considered a mortgagee in good faith because during the execution of the mortgage contract Aceron was in possession of the subject property; later, Oliver, accompanied by armed men, forcibly took possession of the subject property and Aceron's properties; at that time Calubad already knew of the trial court's decision in Civil Case No. Q-93-18011.
• Aceron — No Extrinsic Fraud: Aceron argued that, as correctly found by the Court of Appeals, no extrinsic fraud was perpetrated against Calubad.
• Oliver — Rescission and Good Faith: Oliver opined that he was in good faith when he rescinded the Deed of Conditional Sale because Aceron failed to pay the balance of the purchase price; Aceron paid only eleven years after it had become due by depositing the amount with the court, by which time the value of the subject property had considerably appreciated. Oliver also claimed that he filed a motion for execution on May 21, 2003, but Aceron delayed the execution of the judgment.
• Oliver — Mortgage in Good Faith: Oliver claimed that the mortgage contract was done in good faith because it was executed after the rescission of the Deed of Conditional Sale and before the consignation of the balance of the purchase price, so he could not be faulted for mortgaging the subject property to Calubad.

• Jurisdiction Over the Mortgagee: Whether the court had jurisdiction to cancel the annotations of the real estate mortgage and certificate of sale in favor of Calubad on TCT No. N-253373, declare the real estate mortgage and foreclosure sale null and void, and declare Calubad a mortgagee in bad faith, despite Calubad not being a party to Civil Case No. Q-93-18011 and there being no notice of lis pendens on TCT No. N-253373.
• Propriety of Rule 47 Annulment: Whether the Court of Appeals correctly dismissed the petition for annulment and found that Calubad had available remedies other than a petition for annulment of judgment or final resolution under Rule 47 of the Rules of Court.

• Jurisdiction Over the Mortgagee: Yes. The RTC acted within its jurisdiction when it resolved the motion for execution and issued the December 13, 2004 Resolution; jurisdiction is the authority to decide a case, not the correctness of the decision, and the RTC had acquired jurisdiction over the subject matter and the persons of Oliver and Aceron. No absolute lack of authority was shown.
• Propriety of Rule 47 Annulment: No. Annulment of judgment is an equitable remedy allowed only in exceptional cases and only on the grounds of extrinsic fraud or lack of jurisdiction; neither ground was present, and Calubad, as a non-party, could not avail of Rule 47 because the ordinary remedies were not available to him in the first instance.

• Jurisdiction Over the Mortgagee: Annulment of judgment under Rule 47 is a recourse equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy, and may be invoked only on two grounds: extrinsic fraud and lack of jurisdiction. Neither ground was present. The RTC acted within its jurisdiction when it resolved Aceron's motion for execution and issued the December 13, 2004 Resolution, which divested Oliver of ownership, directed the Register of Deeds to issue a new title in Aceron's name, and declared Calubad's real estate mortgage and foreclosure sale null and void. Jurisdiction is the authority to decide a case, not the decision rendered therein; the RTC had acquired jurisdiction over the subject matter and over the persons of Oliver and Aceron. The case had already become final and executory when the court a quo issued the assailed Resolution, which justified its subsequent issuance to put the judgment into effect. In a petition for annulment based on lack of jurisdiction, Calubad had to show not merely abuse of jurisdictional discretion but an absolute lack of authority to hear and decide the case, which he failed to do. There was also no extrinsic fraud: the records showed that Oliver mortgaged the subject property to Calubad after the decision in Civil Case No. Q-93-18011 had become final and executory, so at the time of the mortgage the issue of ownership over the subject property was already settled in favor of Aceron. A final judgment is immutable and unalterable and can no longer be modified even to correct an erroneous conclusion of fact or law. Section 47(b), Rule 39 of the Rules of Court provides that a judgment is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity. Although Calubad was not a party to Civil Case No. Q-93-18011, the December 13, 2004 Resolution was conclusive and binding upon him as the successor-in-interest of Oliver, who acquired title to the subject property after the case had become final and executory. As a general rule, a person not impleaded and given the opportunity to present his case cannot be bound by a decision; however, having acquired an alleged interest over the subject property only after the finality of Civil Case No. Q-93-18011, Calubad was bound by the judgment and the determination of the rights of the original parties. Calubad, being a privy to the judgment debtor Oliver, could be reached by an order of execution. His claim over the subject property was not adverse to Oliver's because he derived his alleged ownership or interest from Oliver by virtue of a contract of loan and deed of real estate mortgage. He could not enforce his alleged interest against Aceron, the adjudged owner, nor exempt himself from the execution of Civil Case No. Q-93-18011 on the pretext that he was a purchaser in good faith and for value relying on the indefeasibility of a Torrens title.
• Propriety of Rule 47 Annulment: The Court of Appeals correctly dismissed the petition. Calubad's resort to annulment of judgment under Rule 47 was unnecessary because the remedy extends only to a party in whose favor the remedies of new trial, reconsideration, appeal, and petition for relief from judgment are no longer available through no fault of that party. As a non-party in Civil Case No. Q-93-18011, Calubad could not bring an action for annulment of judgment because those remedies were not available to him in the first instance. Even assuming that he could avail of Rule 47, such an action would not finally determine his rights over the subject property as against the competing rights of the original parties. Annulment of judgment is an equitable relief not because a party-litigant thereby gains another opportunity to reopen the already-final judgment but because a party-litigant is enabled to be discharged from the burden of being bound by a judgment that was an absolute nullity to begin with. Finally, an action for annulment of judgment under Rule 47 does not involve the merits of the final order of the trial court. The issues of whether the subsequent mortgage by Oliver to Calubad and the indefeasibility of a Torrens title gave Calubad a right of ownership superior to Aceron's were outside the scope of the petition for review; resolving them would require a review of evidence, which the Supreme Court could not do in the petition. An action for annulment of judgment is an independent action where the judgment or resolution sought to be annulled is rendered and is not an appeal of the judgment or resolution therein. Thus, Calubad's alleged interest in or ownership of the subject property could not be addressed in the petition for review.

• Annulment of Judgment under Rule 47 — Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy. It may be invoked only on two grounds: extrinsic fraud and lack of jurisdiction. It is not a substitute for a lost appeal and does not involve the merits of the final order. In this case, neither extrinsic fraud nor lack of jurisdiction was present, and Calubad, as a non-party, could not avail of the remedy because the ordinary remedies were not available to him in the first instance.
• Immutability of Final Judgments — A judgment that has become final is immutable and unalterable and can no longer be modified in any respect, even if the modification is meant to correct an erroneous conclusion of fact or of law, whether by the court that rendered it or by the highest court. The Court applied this doctrine because Civil Case No. Q-93-18011 had become final and executory, and the RTC's subsequent issuance of the December 13, 2004 Resolution was justified to put the judgment into effect.
• Conclusiveness of Judgment on Successors-in-Interest (Section 47(b), Rule 39) — A judgment or final order is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action, litigating for the same thing and under the same title and in the same capacity. Although a non-party is generally not bound by a decision, one who acquires an interest in the subject property from a judgment debtor after finality is a successor-in-interest or privy and is bound by the judgment; such a privy may be reached by an order of execution. The Court applied this to Calubad, who took a mortgage from Oliver after the judgment had become final and executory.
• Jurisdiction vs. Exercise of Jurisdiction — Jurisdiction is the authority to decide a case, not the decision rendered therein. A petition for annulment of judgment based on lack of jurisdiction requires a showing of an absolute lack of authority to hear and decide the case, not merely an abuse of jurisdictional discretion. The RTC had acquired jurisdiction over the subject matter and the persons of Oliver and Aceron, so no lack of jurisdiction existed.
• Torrens Title and Good Faith Not a Shield Against Final Judgment — A person who acquires an interest from a judgment debtor after finality cannot enforce that interest against the adjudged owner or exempt himself from execution on the pretext that he is a purchaser in good faith and for value relying on the indefeasibility of a Torrens title. The Court held that Calubad's claim, derived from Oliver by loan and mortgage, was not adverse to Oliver and could not defeat the final judgment in favor of Aceron.

• "Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as where there is no available or other adequate remedy." — This states the threshold requirement for Rule 47 annulment and frames the Court's conclusion that Calubad's petition was improper.
• "In addition, it may be invoked only on two grounds, namely, extrinsic fraud and lack of jurisdiction. None of these grounds are present in this case." — This is the ratio decidendi on the absence of the only two grounds for annulment of judgment.
• "Jurisdiction is the authority to decide a case, and not the decision rendered therein." — This defines the jurisdictional standard and explains why the RTC's issuance of the December 13, 2004 Resolution did not constitute lack of jurisdiction.
• "While it is true that petitioner Calubad is not a party to Civil Case No. Q-93-18011, the foregoing provision states that the Resolution dated December 13, 2004 is conclusive and binding upon him being the successor-in-interest of Oliver who acquired title to the subject property after Civil Case No. Q-93-18011 has become final and executory." — This is the core ruling on the binding effect of the final judgment on Calubad as a successor-in-interest.

• Heirs of So vs. Obliosca, 566 Phil. 397, 406 (2008), citing Orbeta vs. Sendiong, 501 Phil. 478, 489 (2005) — Cited for the rule that annulment of judgment is a recourse equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy, and that jurisdiction is the authority to decide a case, not the decision rendered therein.
• Dare Adventure Farm Corp. vs. Court of Appeals, 695 Phil. 681, 689 (2012), citing Peña vs. Government Service Insurance System (GSIS), 533 Phil. 670, 689-690 (2006) — Cited for the immutability of final judgments and the limitations of Rule 47; the Court relied on it to hold that a final judgment cannot be modified even to correct an erroneous conclusion of fact or law and that annulment of judgment does not involve the merits of the final order.
• Church Assistance Program, Inc. vs. Sibulo, 253 Phil. 404, 410 (1989) — Cited for the rule that a privy to the judgment debtor may be reached by an order of execution, which the Court applied to Calubad as Oliver's successor-in-interest.
• Vda. De Medina vs. Cruz, 244 Phil. 40, 48 (1988) — Cited by respondent Aceron for the principle that a person who acquires a right over the subject property after the original action was commenced and became final and executory is bound by the judgment, even if not a party.
• Lim vs. Chuatoco, 493 Phil. 460, 469 (2005) — Cited by petitioner Calubad for the right to rely on the correctness of a Torrens certificate of title; the Court did not adopt it as a ground to exempt Calubad from the final judgment.
• Antonio vs. The Register of Deeds of Makati, 688 Phil. 527, 537-539 (2012); Barco vs. Court of Appeals, 465 Phil. 39, 64 (2004) — Cited for the principle that annulment of judgment is an equitable relief that does not give a party another opportunity to reopen an already-final judgment, but discharges a party from a judgment that was an absolute nullity.

• Section 1, Rule 47, Rules of Court — Governs the annulment of judgments or final orders and resolutions of the RTC where 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 held that Calubad could not avail of this remedy because he was a non-party and the ordinary remedies were not available to him in the first instance, and because neither extrinsic fraud nor lack of jurisdiction was present.
• Section 47(b), Rule 39, Rules of Court — Provides that a judgment or final order is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity. The Court applied this provision to bind Calubad, who acquired a mortgage interest from Oliver after Civil Case No. Q-93-18011 had become final and executory.
• Rule 38, Rules of Court — Referred to in Calubad's argument as the petition for relief from judgment, which he claimed was available only to a party to the case and therefore could not be used by him. The Court's ruling noted that the ordinary remedies, including petition for relief, were not available to Calubad in the first instance because he was a non-party.

Perlas-Bernabe (Chairperson), Inting, and Delos Santos, JJ., concurred. Baltazar-Padilla, J., was on leave.