Islamic Da'Wah Council of the Philippines vs. Court of Appeals

A person need not be a party to the judgment sought to be annulled; what is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby. The Court of Appeals has exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts pursuant to Section 9(2) of Batas Pambansa Blg. 129, and a judgment that has already been fully executed may still be the subject of an action for annulment.

The Islamic Da'Wah Council of the Philippines (the Council) was the mortgagee in a real estate mortgage over a 4,754 sq. m. parcel of land in Cubao, Quezon City, covered by Transfer Certificate of Title (TCT) No. 30461, executed by Freddie and Marconi Da Silva as mortgagors on February 15, 1984. The property was originally purchased by Jesus Amado Araneta in 1953, but title was placed in the name of Fred Da Silva, an employee of Araneta, under an alleged trust arrangement. The heirs of Araneta claimed ownership over the property and sought to annul the foreclosure judgment that transferred title to the Council. Prior to the enactment of Batas Pambansa Blg. 129, different views had been entertained regarding whether a branch of a Regional Trial Court may annul a judgment of another branch of the same court.

On February 15, 1984, Freddie and Marconi Da Silva, as mortgagors, and the Islamic Da'Wah Council of the Philippines (the Council), as mortgagee, executed a real estate mortgage over a 4,754 sq. m. parcel of land located in Cubao, Quezon City, covered by Transfer Certificate of Title (TCT) No. 30461, as security for the payment of a one million peso promissory note in favor of the mortgagee. The mortgagors were unable to pay their obligation, so the Council instituted foreclosure proceedings with the Regional Trial Court, docketed as Civil Case No. Q-43746. On February 5, 1985, the parties submitted a compromise agreement stipulating that because of the Da Silvas' inability to pay their debt to the Council, and for the additional consideration of P500,000.00, they jointly agreed to cede, transfer, and convey to the Council the land they mortgaged. On February 12, 1985, the Regional Trial Court approved the compromise agreement, and thereafter, TCT No. 328021 was issued in the name of the Council by the Register of Deeds of Quezon City.

On August 8, 1985, Jesus Amado Araneta filed with the Register of Deeds a notice of lis pendens in connection with Civil Case No. Q-47989 entitled "Islamic Da'Wah Council of the Philippines vs. Jesus Amado Araneta" for ejectment. The complaint was converted into an action for collection of rentals with damages but was later withdrawn by the Council. On August 13, 1985, Araneta also filed with the same Register of Deeds an affidavit of adverse claim in connection with Civil Case No. Q-43469 entitled "Marconi Da Silva, et al. vs. Jesus Amado Araneta, et al." for recovery of possession. The notice of lis pendens and adverse claim were annotated at the back of TCT No. 328021 by the Register of Deeds. On October 9, 1985, the Council filed in the Regional Trial Court of Quezon City a complaint for Quieting of Title, Recovery of Possession and Damages with Preliminary Mandatory Injunction against Araneta, praying for the cancellation of all the annotations at the back of TCT No. 328021, docketed as Civil Case No. Q-46196.

While this case was pending, on July 6, 1987, the heirs of Jesus Amado Araneta filed with the Court of Appeals a petition to annul the judgment in Civil Case No. Q-43746 for foreclosure. The heirs of Araneta narrated that on December 20, 1953, Jesus Amado Araneta purchased the property from the Spouses Garcia and since then he and his family have always been in possession thereof; for some reason known only to Araneta and Fred Da Silva, an employee of the former, title to the property was placed in the latter's name as evidenced by TCT No. 30461, although the owner's duplicate copy of said TCT has always been in the possession of Araneta. On January 31, 1963, the parties decided to terminate the trust that had been created over the property, and Da Silva executed a deed of sale over the same parcel of land in favor of Araneta, but no consideration was given by the latter to the former for said sale. The Register of Deeds, however, refused to register the deed of sale because the title was in the name of "Fred Da Silva married to Leocadia Da Silva" and was thus presumed conjugal, and the conjugal partnership should first be liquidated as the wife had already died.

Alleging that their copy was lost and/or destroyed, on February 1, 1984, Freddie and Marconi Da Silva, two of the three surviving children of Fred Da Silva who died in 1963, filed a petition, docketed as LRC Record Case No. Q-2772, for the issuance of a new copy of the owner's duplicate copy of TCT No. 30461. The petition was granted by Judge Vera on March 24, 1984. Araneta learned about this and immediately filed a motion to re-open the proceedings stating that he has in his possession the owner's duplicate copy of TCT No. 30461. The motion was granted, and on December 7, 1984, the land registration court ordered the Da Silvas to (a) return to the Register the second owner's duplicate copy of the title and (b) neither enter into any transaction concerning said second owner's duplicate copy nor utilize the title for any purpose other than to return the same to the Register of Deeds. On November 11, 1985, the Da Silvas manifested before the land registration court that the title to the property was transferred to the Council based on a compromise agreement in Civil Case No. Q-43746 for foreclosure. On motion of the heirs of Araneta, who substituted him upon his death in 1985, Judge Vera consolidated Civil Cases Nos. Q-2772 and Q-43469, both raffled to his sala, with Civil Case No. Q-46196, but the judge hearing the latter case would not heed the order of consolidation.

The heirs of Araneta set out their case for annulment of judgment alleging that the Da Silvas, with the connivance of the Council, executed a purported promissory note secured by a real estate mortgage the terms and conditions of which were made very onerous as to pave the way for the foreclosure of the property by virtue of a confession of judgment; and the Council had always known of the Aranetas' claim of ownership over the land because the former's executive officer and secretary general is the lawyer of the Da Silvas in the cases they filed against the Aranetas. The heirs of Araneta prayed that the judgment in Civil Case No. Q-43746 be annulled and set aside and that a restraining order be issued to enjoin the proceedings in Civil Case No. Q-46196. The Council filed a motion for reconsideration and a Supplement to Motion for Reconsideration with Motion to Dismiss questioning the Court of Appeals' jurisdiction to hear the petition for annulment of a judgment that had already been fully executed, and invoking the additional grounds of lack of cause of action, lack of legal capacity to sue, litis pendentia, and abandonment, waiver and unenforceability under the Statute of Frauds. The Court of Appeals denied the Council's motion for reconsideration and summarily denied the grounds raised in its Supplemental Motion and Motion to Dismiss.

• Fully Executed Judgment: Petitioner contended that the Court of Appeals should not continue to hear the petition for annulment of judgment since it is already fully executed and the purpose for which the case for annulment was filed will no longer be served, the parties having already complied with the decision.
• Lack of Right to Question the Judgment: Petitioner contended that private respondents have no right to question the validity or legality of the decision rendered foreclosing the mortgage since they are foreign to the transaction of mortgage between petitioner and Freddie and Marconi Da Silva.
• Availability of Another Remedy: Petitioner claimed that private respondents have another remedy in law, that is, in Civil Case No. Q-46196 for Quieting of Title where the question of ownership may be passed upon.
• Jurisdiction of the Regional Trial Court: In its Petition, the Council contended that a Regional Trial Court has the authority and jurisdiction to annul a judgment of another Regional Trial Court, a coordinate or co-equal court, and that the filing of a separate action for annulment of judgment is unnecessary because the Regional Trial Court hearing Civil Case No. Q-43469 for Quieting of Title can annul the judgment in Civil Case No. Q-43746 for Foreclosure rendered by another Regional Trial Court. In its Memorandum, however, the Council admitted that the Court of Appeals has the exclusive jurisdiction to annul the decision of the Regional Trial Court.
• Remedy Available Only to Parties: Petitioner contended that the remedy of annulment of judgment is available only to one who is a party to the case where the judgment sought to be annulled is rendered.
• Annulment Applies Only to Final and Executory Judgments: The Council asserted that the remedy of annulment of judgment applies only to final and executory judgment and not to that which had already been fully executed or implemented, as evidenced by the fact that title to the property had been transferred in its name.

• Substantial Interest in the Property: Private respondents alleged that "there are sufficient facts and circumstances sufficient to show prima facie that [they] have a substantial interest in the ownership of the property which had been foreclosed without their knowledge and consent."
• Fraud and Connivance: The heirs of Araneta alleged fraud and connivance perpetuated by and between the Da Silvas and the Council as would adversely affect them, which allegation, if fully substantiated by preponderance of evidence, could be the basis for the annulment of Civil Case No. Q-43746.

• Jurisdiction of the Court of Appeals: Whether the Court of Appeals has jurisdiction to hear the petition for annulment of judgment of a Regional Trial Court.
• Standing to Sue for Annulment of Judgment: Whether a person who is not a party to the judgment sought to be annulled may properly institute a petition for annulment of judgment.
• Effect of Full Execution of the Judgment: Whether a judgment that has already been fully executed or implemented may still be annulled.

• Jurisdiction of the Court of Appeals: Yes. Under Section 9(2) of Batas Pambansa Blg. 129, the Court of Appeals has exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts. It is beyond dispute that it is only the Court of Appeals that can take cognizance of the annulment of judgment in Civil Case No. Q-43746 rendered by the Regional Trial Court.
• Standing to Sue for Annulment of Judgment: Yes. A person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby. The heirs of Araneta alleged fraud and connivance perpetuated by and between the Da Silvas and the Council as would adversely affect them.
• Effect of Full Execution of the Judgment: No. The Council's contention that a fully executed judgment can no longer be annulled is devoid of merit. In Garchitorena vs. Sotelo, the Court affirmed the trial court's annulment of the judgment on foreclosure notwithstanding the fact that ownership of the house and lot subject of the mortgage had passed from the mortgagee who foreclosed the mortgage and purchased the property at public auction to a person who bought the same and finally to another individual in whose name the Torrens certificate of title stood by the time the case reached the Tribunal.

• Jurisdiction of the Court of Appeals: The instant petition is one for certiorari under Rule 65 of the Rules of Court, so the inquiry is limited to error of jurisdiction or grave abuse of discretion committed by the Court of Appeals. Annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled was rendered. The judgment may be annulled on the ground of extrinsic or collateral fraud. Prior to the enactment of Batas Pambansa Blg. 129, different views had been entertained regarding whether a branch of a Regional Trial Court may annul a judgment of another branch of the same court. However, Batas Pambansa Blg. 129 introduced a new provision conferring on the Court of Appeals exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts. Section 9(2) of Batas Pambansa Blg. 129 expressly provides that the Court of Appeals shall exercise exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts. Thus, it is beyond dispute that it is only the Court of Appeals that can take cognizance of the annulment of judgment in Civil Case No. Q-43746 rendered by the Regional Trial Court.
• Standing to Sue for Annulment of Judgment: In Militante vs. Edrosolano, an action for annulment of judgment was filed by Militante, who was not a party to the judgment sought to be annulled. The Court, speaking through then Mr. Associate Justice Enrique Fernando, stated that the view entertained by the lower court that an action for annulment of judgment can be availed of only by those principally or secondarily bound is contrary to what had been so clearly declared by this Court in the leading case of Anuran vs. Aquino: "There can be no question as to the right of any persons adversely affected by a judgment to maintain an action to enjoin its enforcement and to have it declared a nullity on the ground of fraud and collusion practiced in the very matter of obtaining the judgment when such fraud is extrinsic or collateral to the matters involved in the issues raised at the trial which resulted in such judgment." This principle was further fortified by the observation made by this Court through Justice Ozaeta in Garchitorena vs. Sotelo: "The collusive conduct of the parties in the foreclosure suit constituted an extrinsic or collateral fraud by reason of which the judgment rendered therein may be annulled in this separate action." It is therefore clear that a person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby. In this present case, it is true that the heirs of Araneta are not parties to the foreclosure case, neither are they principally nor secondarily bound by the judgment rendered therein. However, in their petition filed with the Court of Appeals, they alleged fraud and connivance perpetuated by and between the Da Silvas and the Council as would adversely affect them. This allegation, if fully substantiated by preponderance of evidence, could be the basis for the annulment of Civil Case No. Q-43746.
• Effect of Full Execution of the Judgment: The Council's contention that the remedy of annulment of judgment applies only to final and executory judgment and not to that which had already been fully executed or implemented is devoid of merit. In Garchitorena vs. Sotelo, the Court affirmed the trial court's annulment of the judgment on foreclosure notwithstanding the fact that ownership of the house and lot subject of the mortgage had passed from the mortgagee who foreclosed the mortgage and purchased the property at public auction to a person who bought the same and finally to another individual in whose name the Torrens certificate of title stood by the time the case reached the Tribunal.

• Standing to Sue for Annulment of Judgment — A person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby. The Court applied this doctrine in finding that the heirs of Araneta, although not parties to the foreclosure case, could properly institute the petition for annulment of judgment because they alleged fraud and connivance between the Da Silvas and the Council that would adversely affect them.
• Extrinsic or Collateral Fraud as Ground for Annulment — A judgment may be annulled on the ground of extrinsic or collateral fraud. The collusive conduct of the parties in a foreclosure suit constitutes an extrinsic or collateral fraud by reason of which the judgment rendered therein may be annulled in a separate action. The Court relied on this doctrine in affirming the Court of Appeals' decision to give due course to the petition for annulment of judgment.
• Annulment of a Fully Executed Judgment — A judgment that has already been fully executed or implemented may still be annulled. The Court applied this doctrine in rejecting the Council's contention that the transfer of title to the property in its name barred the annulment of the judgment, citing Garchitorena vs. Sotelo where the annulment was affirmed notwithstanding the passage of ownership through several individuals.

• "There can be no question as to the right of any persons adversely affected by a judgement to maintain an action to enjoin its enforcement and to have it declared a nullity on the ground of fraud and collusion practiced in the very matter of obtaining the judgment when such fraud is extrinsic or collateral to the matters involved in the issues raised at the trial which resulted in such judgment." — This quotation from Anuran vs. Aquino, as cited in Militante vs. Edrosolano, establishes the canonical formulation of the doctrine that a person need not be a party to the judgment sought to be annulled.
• "The collusive conduct of the parties in the foreclosure suit constituted an extrinsic or collateral fraud by reason of which the judgment rendered therein may be annulled in this separate action." — This observation by Justice Ozaeta in Garchitorena vs. Sotelo fortifies the principle that collusive conduct in a foreclosure suit constitutes extrinsic or collateral fraud warranting annulment of the judgment.
• "It is therefore clear from the foregoing that a person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby." — This passage states the ratio decidendi of the Court's ruling on the standing of the heirs of Araneta to institute the petition for annulment of judgment.

• Militante vs. Edrosolano, G.R. No. L-27940, June 10, 1971, 39 SCRA 473 — Controlling precedent on the question of who may properly institute a petition for annulment of judgment. The Court relied on this case to hold that a person need not be a party to the judgment sought to be annulled.
• Anuran vs. Aquino, 38 Phil. 291 (1918) — Leading case cited in Militante establishing the right of any persons adversely affected by a judgment to maintain an action to enjoin its enforcement and to have it declared a nullity on the ground of fraud and collusion when such fraud is extrinsic or collateral.
• Garchitorena vs. Sotelo, 74 Phil. 25 (1942) — Cited to support the principle that the collusive conduct of the parties in a foreclosure suit constitutes extrinsic or collateral fraud by reason of which the judgment rendered therein may be annulled in a separate action, and that a fully executed judgment may still be annulled.
• Canlas vs. Court of Appeals, G.R. No. 77691, August 8, 1988 — Cited for the proposition that a judgment may be annulled on the ground of extrinsic or collateral fraud.

• Section 9(2), Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980) — Confers on the Court of Appeals exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts. The Court applied this provision in holding that it is only the Court of Appeals that can take cognizance of the annulment of judgment in Civil Case No. Q-43746 rendered by the Regional Trial Court.
• Rule 65, Rules of Court — Governs the petition for certiorari filed by the Council. The Court clarified that the inquiry is limited to error of jurisdiction or grave abuse of discretion committed by the Court of Appeals.

Chief Justice Fernan, and Justices Gutierrez, Jr., Feliciano, and Bidin concurred.