Co It vs. Co

A withdrawn petition that has resulted in a final and executory judgment may be reinstated where the withdrawal was premised on a mistaken expectancy of reconciliation that never materialized and counsel failed to advise the client of the legal consequences, the interest of substantial justice prevailing over the immutability of final judgments.

Gonzalo Co It established Gonzalo Laboratories in 1952 as a sole proprietorship, formulator and maker of Green Cross alcohol, with the trademark registered in his name. In 1971, he incorporated the business as Gonzalo Laboratories, Inc. (GLI), later renamed Green Cross, Inc. in 1989. To comply with the five-incorporator requirement and to honor his parents, Gonzalo caused shares to be registered in the names of his parents, Co Ay Tian and Ang Si, and his siblings—respondents Anthony Co, Mary Co Cho, Peter Co, and his deceased brother Joseph Co—without any of them paying consideration, allegedly holding the shares in trust for him. The dispute concerns ownership of shares of stock in the family-owned corporation, including shares registered in the parents' names at the time of their deaths and the alleged fraudulent dilution of Gonzalo's holdings.

Gonzalo Co It founded Gonzalo Laboratories in 1952 as a sole proprietorship, formulator and maker of Green Cross alcohol, with the trademark and name registered in his name with the Philippine Patent Office. He is the eldest legitimate child of the deceased spouses Co Ay Tian and Ang Si, whose other legitimate children are respondents Anthony Co, Mary Co Cho, and Peter Co. In 1971, Gonzalo incorporated the business as Gonzalo Laboratories, Inc. (GLI), subscribing to twenty percent of the authorized capital stock. To honor his parents and to comply with the five-incorporator requirement, he caused shares to be registered in the names of his mother, Ang Si, and his siblings—400 shares for Anthony, and 200 shares each for Ang Si, Joseph Co, and Mary—without any of them paying consideration, allegedly holding the shares in trust for him. He later caused additional shares to be registered in Peter's name and, in 1977, in his father's name. By 1978, the distribution stood at: Gonzalo, 500 shares; Anthony, 300; Joseph, 300; Peter, 300; Mary, 100; Co Ay Tian, 250; and Ang Si, 250.

According to Gonzalo, respondents took advantage of their familial relationship to deceive him into waiving his pre-emptive rights over additional subscriptions when GLI's capital stock was increased, reducing his shareholdings to a single share while correspondingly increasing their own. He alleged that the capital stock increase from 5,000 to 25,000 was machinated, with 15,000 of the 20,000 additional stocks subscribed to by respondents, paid for through the unlawful distribution of dividends from transactions unknown to him. In August 1989, GLI's corporate name was changed to Green Cross, Inc. Within the same month, Ang Si died intestate, holding 3,640 shares. Co Ay Tian died in 1991, holding 3,034 shares. As of the filing of the complaint, both estates remained unsettled. In 1992, Joseph died, and by 1994, respondent Lucy So Hua Tan Co transferred all of Joseph's shares to her name without proper documentation. Gonzalo alleged that respondents appropriated their parents' shares to his exclusion, despite his right as a compulsory heir to an equal share.

On June 29, 2009, Gonzalo filed a complaint for reconveyance with damages against respondents before the RTC of Pasay City. Respondents moved to dismiss on grounds of lack of jurisdiction and prescription, arguing that only a probate court could settle the decedents' estates and that Gonzalo's cause of action was barred by prescription, respondents having acquired ownership through eight years of uninterrupted possession. The RTC granted the motion to dismiss on January 11, 2010, on the ground of prescription, while ruling that it had jurisdiction over the subject matter. The Court of Appeals affirmed the dismissal. Gonzalo then filed a petition for review on certiorari before the Supreme Court.

On November 28, 2011, Gonzalo filed a Motion to Withdraw Petition, stating that in light of the upcoming yuletide season, his failing health, and advanced age, he believed it would be in everyone's best interest to withdraw the appeal to pave the way for a long-delayed reconciliation among blood relatives. Respondents manifested their lack of objection. On January 30, 2012, the Supreme Court granted the withdrawal, declared the case closed and terminated, and informed the parties that the CA Decision had become final and executory. On March 8, 2012, an Entry of Judgment was issued.

The reconciliation never materialized. Gonzalo alleged that at a meeting on January 16, 2012 at the Heritage Hotel, respondents expressed no desire to settle, berated him for filing cases, and demanded a public apology in a Chinese newspaper before discussing reconciliation. Gonzalo claimed his lawyers had led him to believe in a reconciliation that respondents never intended, and that his lawyers had no document protecting his interests in the event no settlement was reached. In May 2014, Gonzalo changed counsel and filed a Respectful Motion to Reinstate Petition, arguing that the withdrawal was based on a non-existent consideration and was sought with excusable improvidence, given his advanced age and complete reliance on counsel's advice. Respondents opposed, contending that the judgment had attained finality, the Court had lost jurisdiction, and Gonzalo's proper remedy would be a petition for annulment of judgment under Rule 47, which was likewise unavailable absent extrinsic fraud.

• Non-Existent Consideration for Withdrawal: Petitioner maintained that the withdrawal of his petition was based on a non-existent consideration—the expected reconciliation with respondents—which never materialized, rendering the withdrawal fundamentally flawed.
• Counsel Negligence: Petitioner argued that his previous lawyers were negligent in advising him to sign the Motion to Withdraw without any guarantee of reconciliation or any document protecting his interests, and that as a non-lawyer of advanced age, he completely relied on counsel's advice.
• Excusable Improvidence: Petitioner submitted that the withdrawal was sought with excusable improvidence, given his advanced age and misplaced trust in his counsel's representations.
• Exception to Immutability of Final Judgments: Petitioner insisted that the rule on immutability of final judgments is not without exceptions, particularly where circumstances transpiring after finality render execution unjust and inequitable, and where blind adherence would sacrifice justice for technicality.
• Imprescriptibility of Action: Petitioner claimed continuing and persistent fraud in the transfer of shares, characterizing the action as one for declaration of nullity of shares of stock, which is imprescriptible under Article 1410 of the Civil Code.

• Finality of Judgment and Loss of Jurisdiction: Respondents argued that the CA Decision had already attained finality with the issuance of the Entry of Judgment on March 8, 2012, and consequently the Supreme Court had lost jurisdiction over the case.
• Estoppel: Respondents contended that the ruling of the trial court dismissing Gonzalo's complaint is conclusive on Gonzalo, who is estopped from further assailing the finding that his causes of action are barred by prior final judgment.
• Improper Remedy: Respondents argued that Gonzalo's remedy is not a motion to reinstate appeal but a petition for annulment of judgment under Rule 47 of the Rules of Court, which is likewise unavailable absent extrinsic fraud, which Gonzalo does not claim.

• Reinstatement of Withdrawn Petition: Whether the petition for review on certiorari, which had been withdrawn and resulted in a final and executory judgment, may be reinstated on the ground that the withdrawal was premised on a reconciliation that never materialized and on counsel's inadequate advice.

• Reinstatement of Withdrawn Petition: Yes. The Motion to Reinstate Petition was granted, the interest of substantial justice prevailing over the immutability of final judgments where the withdrawal was based on a non-existent consideration and counsel failed to protect the client's interests.

• Reinstatement of Withdrawn Petition: The doctrine of immutability of final judgments is well settled: once a judgment attains finality, it can no longer be modified in any respect. However, the Court has recognized exceptions, as in Sacdalan vs. Court of Appeals, where an appeal was reinstated after finality in the interest of substantial justice. In Sacdalan, the appellate court had dismissed an appeal for non-payment of docket fees, and the dismissal became final; yet the Supreme Court affirmed the reinstatement, holding that the interest of substantial justice far outweighed whatever negligence the party and counsel may have committed. The Court found a direct parallel: Gonzalo's withdrawal was not based on a ruling on the merits but on his earnest belief—fostered by counsel's representations—that reconciliation with his siblings was possible. The Motion to Withdraw did not specify the legal consequences of withdrawal, including the preclusion of all legal remedies should reconciliation fail. Gonzalo, then ninety-one years old and a non-lawyer, relied entirely on counsel's advice. Counsel's failure to advise against withdrawal without any guarantee of reconciliation was a dereliction of professional duty, implicating Rule 19.03 of the Code of Professional Responsibility. Because the reconciliation never materialized and Gonzalo received no benefit from the withdrawal, the Court could not countenance the resulting injustice. Reinstatement was thus imperative to allow Gonzalo to pursue his legal remedies, including the issues of trust over the incorporating shares, alleged fraudulent dilution, unsettled estates of the parents, appropriation of inheritance shares, and the imprescriptible action to declare the nullity of shares allegedly transferred through fraud.

• Immutability of Final Judgments — A judgment, once it attains finality, becomes immutable and unalterable and can no longer be modified in any respect, whether by the rendering court or the highest court. This rule rests on public policy and sound practice: all litigation must come to an end. However, the Court has recognized exceptions where circumstances transpiring after finality render execution unjust and inequitable, or where the greater interest of justice demands reinstatement of an appeal despite finality.
• Reinstatement of Appeals in the Interest of Substantial Justice — Where an appeal or petition was withdrawn or dismissed based on a ground that later proves non-existent or fundamentally flawed—such as a mistaken expectancy of reconciliation—and counsel failed to protect the client's interests, the interest of substantial justice may justify reinstatement even after an Entry of Judgment has been issued. The Court applied this principle by drawing a direct parallel to Sacdalan vs. Court of Appeals, where reinstatement was affirmed despite finality of dismissal.
• Counsel's Duty to Client (Rule 19.03, Code of Professional Responsibility) — A lawyer shall not allow the client to dictate the procedure in handling the case. The Court observed that counsel's duty extends to properly advising the client of the legal consequences of procedural actions; counsel's failure to advise Gonzalo against withdrawing his petition without any guarantee of reconciliation constituted a dereliction warranting reinstatement.

• "We cannot countenance such an injustice and validate a stance that our approval of a clearly lopsided Motion completely precludes Gonzalo from pursuing his legal remedies." — This passage articulates the Court's rationale for departing from the immutability doctrine: the withdrawal was fundamentally unfair because it was premised on a reconciliation that never occurred, and the petitioner was left without recourse.
• "The interest of substantial justice far outweighs whatever negligence Belen and her counsel might have committed." — Quoted from Sacdalan vs. Court of Appeals, this is the canonical formulation the Court adopted as the controlling standard for reinstating a finalized appeal, directly applied to Gonzalo's situation.
• "Palpably, the interest of substantial justice demand that Gonzalo be allowed to pursue his appeal, reinstatement of the petition imperative to further thresh out the issues involved herein." — This is the dispositive reasoning of the Resolution, tying the exception to the immutability rule to the specific facts of counsel's failure and the non-existent reconciliation.

• Sacdalan vs. Court of Appeals, 472 Phil. 652 (2004) — Controlling precedent. The Court affirmed the reinstatement of an appeal that had been dismissed and become final, on the ground that the interest of substantial justice outweighed the party's negligence. The Court drew a direct parallel between the facts of Sacdalan and Gonzalo's situation, applying the same rationale to justify reinstatement of the withdrawn petition.
• Ocampo vs. RPN-9, G.R. No. 192947, Dec. 9, 2015 — Cited for the general doctrine that a judgment, once final, becomes immutable and unalterable. The Court acknowledged this rule but found an exception applicable.
• Siy vs. National Labor Relations Commission, 505 Phil. 265 (2005) — Cited for the proposition that once a case is decided with finality, the controversy is settled and the matter is laid to rest.
• Filipro, Inc. vs. Permanent Savings & Loan Bank, 534 Phil. 551 (2006) — Cited for the principle that the rule on finality of judgments rests on public policy and sound practice, and that all litigation must come to an end.

• Rule 19.03, Code of Professional Responsibility — "A lawyer shall not allow his client to dictate the procedure in handling the case." The Court invoked this provision to underscore counsel's duty to properly advise the client, observing that Gonzalo's previous counsel should not have allowed the withdrawal without any guarantee of reconciliation.
• Article 1410, Civil Code — Provides that an action to declare the inexistence of a contract or transaction is imprescriptible. Gonzalo characterized the transfer of shares through alleged fraud as a nullity, rendering the action imprescriptible; the Court noted this as one of the issues to be threshed out upon reinstatement.
• Article 2, Corporation Code — Cited in connection with the five-incorporator requirement that led Gonzalo to register shares in the names of family members who did not pay consideration, forming the basis of his trust claim.

Carpio (Chairperson), Perez, Reyes, and Perlas-Bernabe, JJ., concurred. Sereno, C.J., was on official leave.