Heirs of Encarnacion Llamas, et al. vs. Sps. Roberto M. Gabrino, et al.

A petition for annulment of judgment may be dismissed for failure of the petitioner or counsel to attend the preliminary conference after an express warning, and liberality will not be extended absent a clear showing that the procedural lapse was not due to negligence or design and that a favorable ruling would afford real relief. The dismissal was upheld under Section 1(h), Rule 50, and the annulment remedy was held to be equitable and exceptional, unavailable where the RTC's denial of intervention was without prejudice and the petitioner would not derive real benefit.

Petitioners are the Heirs of Encarnacion Llamas and the Estate of Julita Dioso Enriquez, represented by Gaspar E. Llamas, Jr.; respondents are Spouses Roberto M. and Corazon Gabrino and Alfredo C. Penachos, Jr. The dispute centers on Lot No. 714-G, a 389-square-meter parcel in Tacloban City, over which petitioners and Spouses Gabrino asserted ownership and which Penachos occupied under a lease arrangement with Donato Enriquez. The proceedings implicated Rule 47 of the Rules of Court on annulment of judgment and the CA's power to dismiss for non-compliance with its orders.

Julita owned a registered 389-square-meter parcel of land under Transfer Certificate of Title No. T-25141, designated as Lot No. 714-G, which she inherited from her father. Ownership over the parcel was later transferred to Encarnacion, sister of Julita and mother of Llamas, by virtue of a Certificate of Redemption inscribed at the dorsal portion of TCT No. T-825. The parcel was leased to Penachos in 2004 for P2,500.00 a month. Because Penachos refused to pay his arrears amounting to P184,721.83 and to vacate the property, Llamas filed a complaint for unlawful detainer. Penachos answered that his lease contract was with Donato Enriquez, not with petitioners, who were not owners of the property; thus, they had no right to demand that he vacate.

The unlawful detainer case was referred to mediation, and the parties arrived at a compromise agreement whereby petitioners would forego their claim of unpaid balance, while Penachos would pay petitioners P50,000.00 upon signing, vacate the property, and deliver the residential house built on the disputed property to petitioners without compensation on or before January 31, 2010. The agreement was approved through a Judgment by Way of a Compromise Agreement dated November 18, 2009.

Unknown to petitioners, Spouses Gabrino filed before Branch 9, RTC, Tacloban City a Complaint for Recovery of Possession with Damages with Prayer for Preliminary Injunction dated June 15, 2009 against Penachos, docketed as Civil Case No. 2009-06-67. Spouses Gabrino alleged that they owned Lot No. 714-G, containing 389 square meters, covered by TCT No. T-1770 issued by the Registry of Deeds of Tacloban City, and presently covered by Tax Declaration No. 02400020 with an assessed value of P563,960.00. According to them, the property was formerly owned by Ciriaco Enriquez and inherited by Donato on December 10, 1958 by virtue of a last will and testament executed by Ciriaco. In 1979, Donato sold the property to Spouses Gabrino, which deed of sale gave rise to the cancellation of the original title and the issuance of TCT No. 1770 in their names, and the sale was affirmed by Donato in an affidavit of confirmation of sale. From 1979 up to April 2009, they tolerated the occupancy of Donato's family and later by Penachos. As they were expanding their business, their counsel wrote a letter to Penachos demanding that he vacate the property; Penachos refused, hence the complaint for recovery of possession.

Penachos countered that the title of Spouses Gabrino was fraudulent and spurious and that the lot described in Tax Declaration No. 02400020 was a different lot from that described in the complaint. He contended that he was the lawful possessor of the subject property by virtue of his Contract of Lease with Donato executed on June 21, 2003, which contract was renewable every five years and gave him priority to purchase the property for the same price and under the terms and conditions that it may be offered for sale to any other person. Spouses Gabrino and Penachos subsequently entered into a compromise agreement whereby they agreed that Penachos would immediately vacate the property upon payment of P50,000.00 by Spouses Gabrino and that they would waive their respective claims against each other.

After discovering the existence of Civil Case No. 2009-06-67, Llamas filed a Motion for Leave of Court to Intervene and Motion to Admit Attached Answer-In-Intervention with Answer in Intervention, pointing out that there were two compromise agreements concerning one and the same parcel of land, Lot No. 714-G. On February 3, 2010, the RTC denied petitioners' motion for intervention because the interest of the would-be intervenor in the property was not clear, the adjudication of the rights of the original parties would be delayed if intervention were granted, and the intervenor's supposed rights could be protected in a separate proceeding; the denial was without prejudice to the right of petitioners to ventilate their interests and rights in a separate proceeding.

Petitioners then filed before the CA a petition for annulment of judgment under Rule 47, claiming that the remedies of new trial, appeal, or petition for relief from judgment were not available to them. In the CA proceedings, Penachos filed an Answer, while Spouses Gabrino filed a Motion for Extension of Time. A Notice of Pre-Trial was issued on June 23, 2016 for August 10, 2016, but it was moved due to conflict of schedule. On August 1, 2016, both Llamas and Penachos filed their respective pre-trial briefs. On August 9, 2016, the CA cancelled the preliminary conference pending submission by the Clerk of Court of proof of summons to Spouses Gabrino. On August 30, 2016, the CA reset the schedule for a pre-trial conference and held it in abeyance. On January 31, 2017, the CA issued a Resolution stating that Spouses Gabrino failed to file their answer despite proper service of summons. The preliminary conference was set for February 23, 2017, but both Llamas and Penachos failed to appear. On September 11, 2017, the CA rescheduled the preliminary conference to November 9, 2017 and warned that failure of the parties and their counsel to attend would warrant dismissal of their petition. Petitioners filed a Manifestation and Motion dated November 4, 2017 stating that Atty. Sumayod had a very urgent and important family concern and had arranged for a special appearance by a collaborating counsel. On November 9, 2017, only Llamas appeared. Penachos's counsel moved for dismissal, which the CA granted on February 7, 2018. Petitioners' counsel later explained that his failure to appear was due to illness, supported by a medical certificate. The CA denied reconsideration on April 12, 2018, and the Supreme Court denied the petition.

• Dismissal on Technical Rules: Petitioners argued that the CA gravely erred in dismissing the case based purely on technical rules of procedure, disregarding humane consideration, instead of deciding the case on the merits.
• Default of Spouses Gabrino: Petitioners maintained that the CA was unjust and unfair in failing to rule that respondents Spouses Roberto and Corazon Gabrino should be in default for snubbing and disregarding the summons and legal orders issued by the CA.
• Counsel's Illness as Fortuitous Event: Petitioners asserted that the CA gravely erred in failing to consider the special and extraordinary circumstances of their counsel's illness, which they characterized as a fortuitous event, in dismissing the case and causing grave injustice.
• Compliance and Appearance: Petitioners claimed they complied with all orders of the hearing officer, including submission of the pre-trial brief and attendance of their representative, Llamas, in all incidents; that Spouses Gabrino never complied despite proper summons and notices; that both petitioners and respondents failed to appear on February 23, 2017; and that on the rescheduled preliminary conference on November 7, 2017, only Llamas appeared, while their counsel explained his absence due to an urgent family concern and later illness.
• Prayer for Proceedings Anew: Petitioners prayed that the CA Resolutions dated February 7, 2018 and April 12, 2018 be reversed and that the CA be ordered to conduct proceedings anew from the preliminary conference to the reception of evidence until issuance of a decision on the merits.

• Dismissal for Non-Appearance: Whether the CA gravely erred in dismissing the petition for annulment of judgment based purely on technical rules of procedure, disregarding humane consideration, rather than deciding the case on the merits.
• Default of Spouses Gabrino: Whether the CA was unjust and unfair in failing to rule that respondents Spouses Roberto and Corazon Gabrino should be in default for snubbing and disregarding the summons and legal orders issued by it.
• Counsel's Illness as Fortuitous Event: Whether the CA gravely erred in failing to consider the special and extraordinary circumstances of counsel's illness, which petitioners characterize as a fortuitous event, in dismissing the petition and causing grave injustice.
• Propriety and Utility of Annulment of Judgment: Whether the petition for annulment of judgment was the proper remedy and whether petitioners would derive real benefit from a favorable ruling.

• Dismissal for Non-Appearance: No. The CA correctly dismissed the petition for failure of petitioners and their counsel to attend the preliminary conference despite the express warning that non-appearance would warrant dismissal; Section 1(h), Rule 50 allows dismissal for failure to comply with court orders without justifiable cause.
• Default of Spouses Gabrino: No. The alleged failure of Spouses Gabrino to answer or comply did not excuse petitioners' own non-compliance with the CA's warning; the dismissal was grounded on petitioners' failure to attend.
• Counsel's Illness as Fortuitous Event: No. Liberality is not warranted absent a clear factual basis showing that the procedural lapse was not due to negligence or design and that a favorable ruling would result in fairness and justice; no sufficient ground was found.
• Propriety and Utility of Annulment of Judgment: No. Annulment of judgment is an equitable remedy available only in exceptional cases where there is no available or adequate remedy; the RTC's denial of intervention was without prejudice to a separate proceeding, and even a favorable annulment ruling would not determine petitioners' rights or give real benefit.

• Dismissal for Non-Appearance: Section 1(h), Rule 50 of the Rules of Court provides that the CA may dismiss an appeal motu proprio for failure of a party to comply with orders, circulars, or directives of the court without justifiable cause. This confers discretionary power on the CA. Case law presumes that the CA exercised sound discretion in deciding whether to dismiss in accordance with the rules; the burden is on petitioners to overturn that presumption. Here, the CA's Resolution dated September 11, 2017 explicitly warned that failure of the parties and their counsel to attend the preliminary conference on November 9, 2017 would warrant dismissal. Petitioners knew their counsel on record, Atty. Sumayod, would not be available; they even filed a Manifestation and Motion dated November 4, 2017 stating he had an urgent family concern and that a collaborating counsel would make a special appearance. On November 9, 2017, only Llamas appeared. Penachos's counsel moved for dismissal, and the CA granted it. The CA had earlier postponed the preliminary conference twice at petitioners' or their counsel's instance. Thus, the dismissal was proper.

• Default of Spouses Gabrino: The dismissal was premised on petitioners' failure to heed the court's warning, not on any failure of Spouses Gabrino to answer or comply. Although the CA noted that Spouses Gabrino failed to file their answer despite proper service of summons, that circumstance did not supply justifiable cause for petitioners' own non-appearance or negate the CA's authority to dismiss under its warning. The Court thus did not disturb the dismissal on this ground.

• Counsel's Illness as Fortuitous Event: Liberality lies within the bounded discretion of a court to allow an equitable result when proven circumstances require it, but it is not an end in itself; otherwise it would become a backdoor disguising arbitrariness or despotism. The factual antecedents of a plea for liberality must be clear. There must be a showing that the factual basis is not due to the negligence or design of the party requesting suspension of the rules. The basis for claiming an equitable result must be clearly and sufficiently pleaded and argued. Since courts exercise liberality in line with equity jurisdiction, it may be exercised only if it will result in fairness and justice. Petitioners must show that they would suffer an injustice not commensurate to the thoughtlessness of their procedural mistakes. The Court found no sufficient ground to exercise liberality. Petitioners knew of their counsel's unavailability and filed a manifestation about an urgent family concern; only Llamas appeared on the scheduled date. The later claim of illness, supported by a medical certificate, did not overcome the CA's express warning and the repeated postponements.

• Propriety and Utility of Annulment of Judgment: A petition for annulment of judgment under Rule 47 is a remedy in law independent of the case where the judgment sought to be annulled was rendered. Its purpose is to have the final and executory judgment set aside so that litigation may be renewed. It is resorted to where ordinary remedies of new trial, appeal, petition for relief from judgment, or other remedies are no longer available through no fault of petitioner. It is based on only two grounds: extrinsic fraud and lack of jurisdiction or denial of due process. A person need not be a party to the judgment sought to be annulled, but it is essential that one can prove that the judgment was obtained by fraud and collusion and that he or she would be adversely affected. An action to annul a final judgment on the ground of fraud lies only if the fraud is extrinsic or collateral. Fraud is extrinsic where it prevents a party from having a trial or from presenting his or her entire case to the court, or where it operates upon matters pertaining not to the judgment itself but to the manner in which it is procured. The overriding consideration is that the fraudulent scheme of the prevailing litigant prevented a party from having his or her day in court. Here, petitioners sought recourse from the RTC Order denying their motion for intervention in Civil Case No. 2009-06-67. The RTC denied intervention because the interest of the would-be intervenor was not clear and the intervenors' supposed rights could be protected in a separate proceeding; the denial was without prejudice. Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases where there is no available or other adequate remedy. Civil Case No. 2009-06-67 was filed by Spouses Gabrino against Penachos to recover possession of the subject property. Even if the CA granted the relief sought and allowed petitioners to intervene in the RTC case, such a decision would not really determine petitioners' rights in the property. Annulment is an equitable relief not because a party-litigant 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. Petitioners should have taken cue from the RTC Order that the denial of their motion to intervene was without prejudice to their filing a separate action where they could ventilate their rights and interests, such as an action for quieting of title or an action for reconveyance. Even if petitioners were allowed to file an action for annulment, it would be for naught as they would not derive any real benefit from a favorable ruling. Thus, denial of the petition was warranted.

• Dismissal for Failure to Comply with Court Orders (Rule 50, Section 1(h)) — The CA may dismiss an appeal motu proprio for failure of a party to comply with orders, circulars, or directives of the court without justifiable cause. The provision confers discretionary power, and the CA is presumed to have exercised sound discretion; the burden is on the petitioner to overturn the presumption. Applied: the CA dismissed the Rule 47 petition after petitioners' counsel failed to attend the preliminary conference despite an express warning; the Supreme Court upheld the dismissal.
• Liberality in Procedural Rules — Liberality lies within the bounded discretion of a court to allow an equitable result when proven circumstances require it, but it is not an end in itself. The factual antecedents must be clear; the basis must not be due to negligence or design; it must be clearly and sufficiently pleaded and argued; and it may be exercised only if it will result in fairness and justice. The petitioner must show an injustice not commensurate to the thoughtlessness of its procedural mistakes. Applied: counsel's illness and urgent family concern did not justify liberality given the express warning and prior postponements.
• Annulment of Judgment (Rule 47) — Annulment of judgment is an independent remedy, equitable in character, available only in exceptional cases where ordinary remedies of new trial, appeal, petition for relief from judgment, or other remedies are no longer available through no fault of petitioner. It is based on extrinsic fraud and lack of jurisdiction or denial of due process. Its purpose is to set aside a final and executory judgment so that litigation may be renewed, but only where the judgment is an absolute nullity or was procured by extrinsic fraud. Applied: petitioners failed to show that annulment was proper or that they would derive real benefit; the RTC denial of intervention was without prejudice to a separate action.
• Extrinsic Fraud — Fraud is extrinsic where it prevents a party from having a trial or from presenting his or her entire case to the court, or where it operates upon matters pertaining not to the judgment itself but to the manner in which it is procured. The overriding consideration is that the fraudulent scheme of the prevailing litigant prevented a party from having his or her day in court. Applied: the Court discussed the standard but found no sufficient basis to grant annulment; petitioners' grievance was the denial of intervention, which was without prejudice.

• "The CA correctly dismissed the petition on the ground of petitioners' failure to heed the court's warning, explicitly stated in its Resolution dated September 11, 2017 that failure of the parties and their counsel to attend the preliminary conference on November 9, 2017 shall warrant the dismissal of their petition." — This passage states the ratio decidendi for upholding the CA's dismissal: the petitioners were expressly warned, and their non-appearance triggered the warned consequence.
• "Section(1)(h), Rule 50 of the Rules of Court provides that the CA may dismiss an appeal, motu proprio, for failure of a party to comply with orders, circulars, or directives of the court without justifiable cause. Said provision confers a discretionary power on the CA." — This passage identifies the controlling procedural rule and confirms that the CA's dismissal power is discretionary.
• "Liberality however is not an end in itself, otherwise, it will become a backdoor disguising the arbitrariness or despotism of judges and justices." — This passage defines the limits of liberality and explains why the Court refused to relax the rules despite counsel's claimed illness.
• "An 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." — This passage articulates the equitable nature and proper function of annulment of judgment, which the Court used to deny relief because petitioners would not derive real benefit.

• Heirs of Batori vs. Register of Deeds of Benguet, G.R. No. 212611, February 11, 2019 — Cited for the rule that the CA is presumed to have exercised sound discretion in dismissing a case under the rules, and the burden is on the petitioner to overturn that presumption.
• Viva Shipping Lines, Inc. vs. Keppel Phils. Marine, Inc., et al., 781 Phil. 95, 122 (2016) — Cited for the principles governing liberality in procedural rules, including the requirement of a clear factual basis and that liberality must result in fairness and justice.
• Alaban vs. Court of Appeals, 507 Phil. 682, 694 (2005) — Cited for the nature and purpose of a petition for annulment of judgment and its availability when ordinary remedies are no longer available through no fault of petitioner.
• Islamic Da'Wah Council of the Philippines vs. Court of Appeals, 258 Phil. 802, 808, 810-811 (1989) — Cited for the grounds of annulment of judgment and the definition of extrinsic fraud.
• Teodoro vs. Court of Appeals, 437 Phil. 336, 345 (2002) — Cited for the rule that fraud must be extrinsic or collateral and for the definition of extrinsic fraud.
• Espinosa vs. Court of Appeals, 474 Phil. 111, 118 (2004) — Cited for the principle that annulment of judgment is an equitable recourse allowed only in exceptional cases where there is no available or adequate remedy.
• Barco vs. Court of Appeals, 465 Phil. 39, 53, 64 (2004) — Cited for the same principle and for the equitable nature of annulment.
• Toledo, et al. vs. Court of Appeals, et al., 765 Phil. 649, 664 (2015) — Cited for the statement that annulment is an equitable relief to discharge a party from a judgment that was an absolute nullity.

• Section 1(h), Rule 50, Rules of Court — Provides that the CA may dismiss an appeal, on its own motion or on that of the appellee, for failure of the appellant to appear at the preliminary conference under Rule 48 or to comply with orders, circulars, or directives of the court without justifiable cause. Applied: the Court cited this in upholding the CA's dismissal of the petition for annulment of judgment after petitioners' counsel failed to attend the preliminary conference despite warning.
• Section 3, Rule 17, Rules of Court — The CA invoked this provision, in relation to Section 6, Rule 47, in dismissing the petition for annulment of judgment. Applied: the CA's February 7, 2018 Resolution dismissed the petition pursuant to this provision.
• Section 6, Rule 47, Rules of Court — Cited by the CA in relation to Section 3, Rule 17 as the basis for dismissing the petition for annulment of judgment.
• Section 1, Rule 47, Rules of Court — Cited in Alaban vs. Court of Appeals for the rule that a petition for annulment of judgment is based on extrinsic fraud and lack of jurisdiction or denial of due process. Applied: the Court discussed these grounds in assessing petitioners' annulment petition.
• Rule 45, Rules of Court — The petition before the Supreme Court was filed under Rule 45 as a Petition for Review on Certiorari. Applied: the Court reviewed the CA Resolutions dated February 7, 2018 and April 12, 2018.

Leonen (Chairperson), Hernando, Rosario, and J. Lopez, JJ., concur.