Durisol Philippines, Inc. vs. Court of Appeals

A party who actively participates in proceedings and raises affirmative defenses on the merits without questioning the court's jurisdiction may be estopped from belatedly challenging that jurisdiction in a petition for annulment of judgment, and a regional trial court has jurisdiction over a petition for the surrender of withheld duplicate certificates of title under Section 107 of the Property Registration Decree (PD 1529).

Durisol Philippines, Inc. obtained industrial loans from the Development Bank of the Philippines (DBP) on January 17, 1962 and December 5, 1969, in the amounts of ₱1,213,000.00 and ₱2,698,800.00, respectively, secured by mortgages over two parcels of registered land in Polo (now Valenzuela), Bulacan, covered by TCT Nos. 29906 and 29909. After Durisol defaulted, DBP extrajudicially foreclosed the mortgage and purchased the properties at the foreclosure sale on October 9, 1973. Durisol's president, Rene Knecht, had earlier borrowed the owner's duplicate titles from DBP purportedly to obtain new titles under an approved subdivision plan, with the agreement that DBP's encumbrances would be annotated on the new titles. Durisol obtained seven new certificates of title but never returned them to DBP, preventing DBP from registering the foreclosed properties in its name.

Durisol Philippines, Inc. obtained two industrial loans from the Development Bank of the Philippines (DBP): ₱1,213,000.00 on January 17, 1962, and ₱2,698,800.00 on December 5, 1969. As security, Durisol executed a mortgage over two parcels of registered land in Polo (now Valenzuela), Bulacan, covered by TCT Nos. 29906 and 29909. After Durisol defaulted, DBP filed a petition for extrajudicial foreclosure of the mortgage on August 21, 1970. While the foreclosure proceedings were pending, Durisol's president, Rene Knecht, borrowed the two TCTs from DBP on March 6, 1972, purportedly to obtain new titles in accordance with an approved subdivision plan, on the condition that DBP's existing encumbrances, including the mortgage, would be annotated on all new certificates of title.

The foreclosure sale proceeded, and DBP emerged as the highest bidder. On October 9, 1973, the corresponding certificates of sale were issued to DBP. Durisol, however, filed a complaint for annulment of the extrajudicial foreclosure before the then Court of First Instance (CFI) of Valenzuela, Bulacan, docketed as Civil Case No. 605-V. The CFI upheld the validity of the foreclosure, and the Court of Appeals affirmed, with the decision becoming final on April 30, 1975. Meanwhile, Durisol obtained new certificates of title — TCT Nos. T-167751 and T-167752 in lieu of TCT No. 29906, and TCT Nos. T-187023 to T-187027 in lieu of TCT No. 29909 — all issued in its name. Contrary to its promise, Durisol never returned the titles to DBP, leaving DBP unable to register the foreclosed properties despite having purchased them at auction.

On February 25, 1977, DBP filed before the CFI of Valenzuela, Bulacan, Branch VIII, a petition for surrender of the owner's duplicate titles, docketed as (AD) Case No. 35-V-77, LRC Record No. 5941. Durisol filed its answer raising the defenses that the petition failed to state a cause of action, that it had already paid its loans, that it had a valid adverse claim on the properties, and that DBP's action was barred by laches and estoppel. DBP replied that Durisol had failed to exercise its right of redemption. On April 15, 1977, the trial court rendered summary judgment ordering Durisol to surrender the seven certificates of title within five days. Durisol's motion for reconsideration, which included an alternative prayer to record its adverse claim representing improvements it introduced on the property, was denied on August 22, 1977.

Durisol appealed to the Intermediate Appellate Court (IAC), docketed as AC-G.R. CV No. 65324. On July 9, 1984, the IAC remanded the case to the lower court for further proceedings, holding that summary judgment was improper because genuine issues were involved. This decision became final and executory. DBP then filed a motion to dispense with further proceedings and to render judgment based on admissions in the pleadings and the IAC decision, but this was denied. The case was set for hearing on November 15, 1988. On that date, neither Durisol nor its counsel appeared despite due notice, and DBP was allowed to present evidence ex parte. On January 10, 1989, the trial court granted the petition and ordered Durisol, through its president and general manager, to surrender and deliver the owner's duplicate of the seven certificates of title within five days from receipt.

Durisol filed a motion for reconsideration sixteen days after receipt, alleging that the ex parte presentation of evidence violated its right to due process. The motion was denied for having been filed out of time and for lack of notice of hearing. DBP's motion for execution was granted, but the writ was returned unserved because Durisol was not found at the address stated in the record. An alias writ of execution was issued against Rene Knecht, who refused to comply. On April 4, 1990, the trial court directed the Register of Deeds of Bulacan to cancel the seven titles and issue new ones in lieu thereof. New certificates of title were issued to DBP, which thereafter sold the lots to various third-party buyers: Manila Fertilizers, Inc., which in turn sold to Polar Mines and Development Corporation; and the property under TCT No. T-167751 was sold to spouses Villarama, Rolando Ang See, Remedios Reyes, spouses Cabrales, and spouses Go Gabriel.

More than four years later, on September 2, 1994, Durisol filed before the Court of Appeals a petition to annul the trial court's resolution dated January 10, 1989 and order dated April 4, 1990, alleging for the first time that the trial court had no jurisdiction over the case. Durisol prayed that the certificates of title issued to all private respondents except DBP be annulled and that the original seven titles be reinstated. The Court of Appeals dismissed the petition on January 20, 1995, and denied Durisol's motion for reconsideration for lack of merit. Durisol then elevated the case to the Supreme Court via the present petition for review.

• Lack of Jurisdiction: Petitioner argued that the then CFI had no jurisdiction when the case was remanded to it by the IAC, because as a cadastral court, the CFI had limited jurisdiction over land registration matters.
• Due Process: Petitioner alleged that the ex parte presentation of evidence by DBP, being akin to a judgment by default, was done in violation of its right to due process.
• Annulment of Titles: Petitioner prayed that the certificates of title issued in the names of all private respondents except DBP be annulled and that the original seven titles be reinstated in its name.

• Failure to Redeem: Respondent DBP countered that petitioner failed to exercise its right of redemption of the properties sold at public auction after foreclosure of the mortgage.
• Estoppel: Respondent DBP argued that petitioner was estopped from challenging the court's jurisdiction, having actively participated in the proceedings for two decades without raising the issue.

• Jurisdiction over Surrender of Titles: Whether the trial court had jurisdiction over the petition for issuance of new duplicate owner's certificate of title.
• Estoppel on Jurisdiction: Whether petitioner was estopped from challenging the court's lack of jurisdiction.

• Jurisdiction over Surrender of Titles: Yes. The regional trial court had jurisdiction over the petition for surrender of withheld duplicate certificates of title under Section 107 of the Property Registration Decree (PD 1529), which expressly vests in the trial courts the authority to hear and determine all petitions filed after original registration of title.
• Estoppel on Jurisdiction: Yes. Petitioner was estopped from challenging the trial court's jurisdiction, having actively participated in the proceedings for two decades without raising the issue, only doing so for the first time in its petition for annulment of judgment filed more than four years after the judgment attained finality.

• Jurisdiction over Surrender of Titles: The regional trial court, formerly the CFI, is a court of general jurisdiction, and all cases not specifically assigned to other courts fall under its jurisdiction. While the RTC is also a court of limited jurisdiction over cadastral and land registration cases, all proceedings involving title to real property, including incidents such as the issuance of owner's duplicate certificates of title, are cognizable by the RTC. Section 107 of PD 1529 expressly authorizes a party in interest to file a petition in court to compel the surrender of a withheld owner's duplicate certificate of title, and Section 2 of the same decree defines "court" as referring to Courts of First Instance, now Regional Trial Courts. Moreover, petitioner's argument that the CFI had limited jurisdiction as a cadastral court was untenable, because by the time the IAC remanded the case, the distinction between the CFI acting as a land registration court with limited jurisdiction and a CFI acting as an ordinary court exercising general jurisdiction had already been removed with the effectivity of PD 1529. The amendment was aimed at avoiding multiplicity of suits and simplified registration proceedings by conferring upon designated trial courts the authority to act not only on applications for original registration but also over all petitions filed after original registration of title.

• Estoppel on Jurisdiction: Even assuming arguendo that the trial court lacked jurisdiction, petitioner could no longer raise that ground after having actively participated in the prosecution of the case. A judgment rendered by a trial court for alleged lack of jurisdiction cannot be considered void where the party who has the right to challenge it failed to do so at the first instance. Petitioner did not raise lack of jurisdiction in its answer to DBP's petition, nor did it file any motion to dismiss on that ground; instead, it raised the affirmative defenses of failure to state a cause of action and payment — distinct and separate grounds from lack of jurisdiction. Petitioner assailed the merits of the decision in its motion for reconsideration without raising any jurisdictional argument, and failed to allege lack of jurisdiction when the case was elevated to the IAC and when it was remanded. The issue was raised only two decades after the institution of the case, by which time the judgment had already attained finality, more than four years having elapsed without any action from petitioner. Rule 47, Section 3 of the 1997 Rules of Civil Procedure expressly provides that a petition for annulment of judgment based on lack of jurisdiction must be filed before it is barred by laches or estoppel. While jurisdiction over the subject matter may be raised at any time, this rule presupposes that laches or estoppel has not supervened. The Court has consistently frowned upon the practice of a party submitting a case for decision and then accepting the judgment only if favorable, while attacking it for lack of jurisdiction when adverse.

• Estoppel on Jurisdiction — A party who actively participates in proceedings and raises affirmative defenses on the merits without questioning the court's jurisdiction may be estopped from belatedly challenging that jurisdiction. While jurisdiction over the subject matter may generally be raised at any stage of the proceedings, this rule presupposes that laches or estoppel has not supervened. A party may be barred from raising the question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so in the early stages of the proceedings. In this case, petitioner participated actively for two decades, raised affirmative defenses of failure to state a cause of action and payment, and never questioned jurisdiction until filing its petition for annulment of judgment more than four years after the judgment attained finality.

• Jurisdiction of RTC over Land Registration Incidents — Under Section 2 of the Property Registration Decree (PD 1529), the distinction between the CFI acting as a land registration court with limited jurisdiction and a CFI acting as an ordinary court exercising general jurisdiction was removed. Designated trial courts have authority to act not only on applications for original registration but also over all petitions filed after original registration of title, with power to hear and determine all questions arising from such applications or petitions. This includes petitions under Section 107 for the surrender of withheld duplicate certificates of title.

• Grounds for Annulment of Judgment — Under Rule 47, Section 2 of the 1997 Rules of Civil Procedure, annulment of judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction. Lack of jurisdiction means the absolute absence of jurisdiction — the court should not have taken cognizance of the case because the law does not vest it with jurisdiction over the subject matter. A petition for annulment based on lack of jurisdiction must be filed before it is barred by laches or estoppel, as provided in Rule 47, Section 3.

• "This Court has time and again frowned upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. Here, the principle of estoppel lies." — This passage articulates the ratio decidendi on the estoppel issue, establishing that active participation in proceedings without raising jurisdiction bars a later challenge.

• "A judgment rendered by a trial court for alleged lack of jurisdiction cannot be considered void where the party who has the right to challenge it failed to do so at the first instance." — This formulation defines the controlling doctrine on estoppel by laches in the context of jurisdictional challenges, frequently cited in subsequent jurisprudence.

• "The amendment was aimed at avoiding multiplicity of suits. The change has simplified registration proceedings by conferring upon the designated trial courts the authority to act not only on applications for 'original registration' but also 'over all petitions filed after original registration of title, with power to hear and determine all questions arising from such applications or petition.'" — This passage explains the jurisdictional basis under PD 1529 for the RTC's authority over post-registration petitions, including surrender of withheld titles.

• Saura vs. Saura, Jr., 313 SCRA 465 [1999] — Cited for the proposition that lack of jurisdiction means the absolute absence of jurisdiction, not merely an abuse of jurisdictional discretion.
• Robern Development Company vs. Quitain, 315 SCRA 150 [1999] — Cited alongside Saura for the definition of lack of jurisdiction in annulment of judgment proceedings.
• Serdoncillo vs. Benolirao, 297 SCRA 448 [1998] — Cited for the rule that regional trial courts have jurisdiction over all actions involving possession of land, except forcible entry and illegal detainer.
• Cloma vs. Court of Appeals, 234 SCRA 665 [1994] — Cited by comparison (cf.) regarding the distinction between lack of jurisdiction over the subject matter and failure to state a cause of action as separate grounds for dismissal.
• Prudential Bank & Trust Company vs. Reyes, G.R. No. 141093, February 10, 2001 — Cited for the doctrine that a party may be estopped from raising the question of jurisdiction for the first time when it failed to do so in the early stages of the proceedings; in turn citing Bañaga vs. Commission on the Settlement of Land Problems, 181 SCRA 590 [1990].
• Vda. de Arceo vs. Court of Appeals, 185 SCRA 489 [1990] — Cited for the principle that PD 1529 conferred upon designated trial courts authority over all petitions filed after original registration of title, eliminating the distinction between the CFI as a land registration court and as a court of general jurisdiction.

• Section 2, Rule 47, 1997 Rules of Civil Procedure — Provides that annulment of judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction. Applied to define the permissible grounds for petitioner's annulment petition.
• Section 3, Rule 47, 1997 Rules of Civil Procedure — Provides that a petition for annulment of judgment based on lack of jurisdiction must be filed before it is barred by laches or estoppel. Applied to hold that petitioner's delayed challenge was barred.
• Section 107, Presidential Decree No. 1529 (Property Registration Decree) — Governs the surrender of withheld duplicate certificates of title, authorizing a party in interest to file a petition in court to compel surrender, and empowering the court to order annulment of the outstanding duplicate and issuance of a new certificate if the holder is not amenable to the court's process. Applied as the statutory basis for DBP's petition and the trial court's jurisdiction.
• Section 2, Presidential Decree No. 1529 — Defines "court" as referring to Courts of First Instance, now Regional Trial Courts, for purposes of the Property Registration Decree. Applied to confirm that the RTC had jurisdiction over the petition for surrender of titles.
• Section 19, Batas Pambansa Blg. 129 — Defines the jurisdiction of regional trial courts over cases involving title to real property. Cited to support the RTC's jurisdiction over land registration matters.

Chief Justice Davide, Jr. (Chairman), Justice Puno, and Justice Kapunan concurred.