Mandy Commodities Co., Inc. vs. The International Commercial Bank of China

A petition for annulment of judgment under Rule 47 is available only on the grounds of lack of jurisdiction or extrinsic fraud, and mere errors of judgment committed in the exercise of jurisdiction are correctible by ordinary appeal, not by annulment. A petition for certiorari under Rule 65 cannot be used as a substitute for a lost appeal where the latter remedy was available but was not timely availed of.

Petitioner Mandy Commodities Co., Inc. obtained loans from respondent The International Commercial Bank of China, secured by chattel mortgages over twenty-five units of two-storey concrete buildings in Binondo, Manila. The parties expressly stipulated in an agreement to consider the buildings "as chattels, and as such, they can be the subject of a Chattel Mortgage under the law." The buildings were owned by petitioner, but the land on which they stood was merely leased from PNB-Management and Development Corporation. The deeds of chattel mortgage and the agreement were registered with the Chattel Mortgage Registry of Manila.

On July 17 and December 17, 1996, petitioner Mandy Commodities Co., Inc., through its authorized representative William Mandy, obtained a total of ₱20,000,000.00 in loans from respondent The International Commercial Bank of China. The loans were secured by two deeds of chattel mortgage over twenty-five units of two-storey concrete buildings in Binondo, Manila, owned by petitioner but standing on land leased from PNB-Management and Development Corporation. On the day the first deed was executed, the parties entered into an agreement stipulating that the buildings would be considered "as chattels, and as such, they can be the subject of a Chattel Mortgage under the law." Both the deeds and the agreement were registered with the Chattel Mortgage Registry of Manila.

When petitioner defaulted, respondent applied on February 26, 1999 before a notary public for the notarial sale of the mortgaged buildings, pursuant to paragraph 18 of the chattel mortgage agreements, which gave the mortgagee full and irrevocable power as attorney-in-fact to sell the properties upon default. The sale was scheduled for March 26, 1999. On March 1, 1999, the notary public posted the Notice of Extrajudicial Sale at the Office of the Register of Deeds of Manila, the Office of the Ex Officio Sheriff, and the Regional Trial Court of Manila, and the notice was published in The Philippine Recorder in its March 1, 8, and 15, 1999 issues. At the sale, respondent placed the highest bid of ₱25,435,716.89, and on April 12, 1999, the notary public issued a Certificate of Sale in respondent's name, "subject to petitioner's right of redemption."

On May 17, 1999, respondent filed with the Regional Trial Court of Manila, Branch 4, an Ex Parte Petition for the Issuance of a Writ of Possession Pending Redemption, stating that the foreclosure proceeded under Act No. 3135, which entitles the mortgagee to possession pending redemption upon approval of a bond. The trial court approved respondent's ₱600,000.00 bond and granted the petition. Petitioner filed a motion for reconsideration, arguing that the buildings were chattels per the parties' agreement, that Act No. 1508 governed, and that the foreclosure sale was void for failure to comply with the 10-day personal notice requirement. Meanwhile, the trial court issued a Writ of Possession dated December 10, 2001, and the sheriff served a notice to vacate on petitioner.

Petitioner then filed a Rule 45 petition directly with the Supreme Court (G.R. No. 146929), which was dismissed for violating the principle of hierarchy of courts. Petitioner next sought annulment of the trial court's twin orders through a Rule 47 petition before the Court of Appeals, arguing that the trial court acted without jurisdiction since it had no power to issue writs of possession under Act No. 1508, and invoking denial of due process for non-compliance with the 10-day notice requirement. The Court of Appeals denied the petition, holding that annulment was not the proper remedy, and affirmed the trial court's order. Petitioner's motion for reconsideration was denied, and it received the Resolution on September 21, 2004. Instead of appealing within fifteen days, petitioner filed the instant Rule 65 petition. During the proceedings, ROP Investments, Limited — Philippine Branch was substituted as respondent, having acquired by assignment all the rights, titles, and interests of the original respondent in September 2003.

• Wrong Remedy Before the Trial Court: Petitioner argued that nothing in the chattel mortgage agreement states that the same would be enforceable under Act No. 3135, and that no provision relating to possession pending redemption exists in the Chattel Mortgage Law, unlike the Real Estate Mortgage Law, meaning a creditor may not have a writ of possession issued in his favor under the former law but must resort to an action for recovery of possession.
• Lack of Jurisdiction: Petitioner theorized that because the foreclosure sale was null and void for failure to comply with the 10-day personal notice requirement under Act No. 1508, the trial court was devoid of jurisdiction to act on the petition for a writ of possession and to issue the writ.
• Grave Abuse of Discretion: Petitioner concluded that when the Court of Appeals did not annul the trial court's orders and instead affirmed them, it abused its discretion amounting to lack or excess of jurisdiction.

• Procedural Infirmity: ROP Philippines posited that the filing of the petition was a mere afterthought in the hope of curing the wrong remedy availed of by petitioner in the first instance, which resulted in the dismissal of its earlier petition in G.R. No. 146929 for violation of the rule on hierarchy of courts.
• Improper Grounds for Annulment: ROP Philippines maintained that the Court of Appeals did not abuse its discretion in dismissing the petition, as the grounds invoked by petitioner were not apt for a Rule 47 petition.
• Ministerial Duty to Issue Writ: ROP Philippines asserted that the issuance of the writ of possession is a ministerial duty of the trial court under Act No. 3135, and since petitioner did not pursue any of the proper remedies against the trial court's orders, the writ should be issued.

• Propriety of Annulment Remedy: Whether the Court of Appeals erred in holding that the petition for annulment of judgment under Rule 47 was not the proper remedy to set aside the trial court's orders.
• Grave Abuse of Discretion: Whether the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in affirming the trial court's orders.
• Propriety of Certiorari Remedy: Whether the petition for certiorari under Rule 65 was the proper remedy to challenge the Court of Appeals' decision.

• Propriety of Annulment Remedy: No. The petition for annulment of judgment under Rule 47 was not the proper remedy because the grounds raised by petitioner — alleged errors in the manner the trial court issued its orders — constituted mere errors of judgment, not lack of jurisdiction, and were correctible by ordinary appeal.
• Grave Abuse of Discretion: No. The Court of Appeals had every good and valid reason to dismiss the petition for annulment, and no grave abuse of discretion amounting to lack or excess of jurisdiction was demonstrated.
• Propriety of Certiorari Remedy: No. The petition for certiorari under Rule 65 cannot substitute for a lost appeal; an appeal was available to petitioner within fifteen days from receipt of the Court of Appeals' Resolution on September 21, 2004, but petitioner failed to avail of it.

• Propriety of Annulment Remedy: The remedy of petition for annulment of judgment, final order, or resolution under Rule 47 is extraordinary, available only where ordinary remedies of new trial, appeal, petition for relief, or other remedies can no longer be availed of through no fault of the petitioner. The grounds are restricted to lack of jurisdiction and extrinsic fraud. Lack of jurisdiction is confined to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim, resting exclusively on absolute lack of jurisdiction as opposed to mere abuse of jurisdictional discretion or mere errors in judgment. Because petitioner questioned the manner by which the trial court arrived at its orders, it effectively acknowledged that the trial court possessed jurisdiction. The trial court acquired jurisdiction over the subject matter of respondent's application upon its filing, and the duty to issue the writ was essentially ministerial. Any purported errors were mere errors of judgment, correctible by ordinary appeal, not by annulment under Rule 47.

• Grave Abuse of Discretion: To warrant the issuance of a writ of certiorari, the tribunal must be shown to have capriciously and whimsically exercised its judgment in a way equivalent to lack or excess of jurisdiction. A bare allegation of grave abuse of discretion is not enough. As stated in San Fernando Rural Bank, Inc. vs. Pampanga Omnibus Development Corporation, when a court exercises its jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised. The Court of Appeals had every good and valid reason to dismiss the petition for annulment, and no grave abuse of discretion was shown.

• Propriety of Certiorari Remedy: Under Alba vs. Court of Appeals and Linzag vs. Court of Appeals, a party aggrieved by the decision of the Court of Appeals in a petition for annulment of judgment should file an ordinary appeal under Rule 45, not a petition for certiorari under Rule 65. A petition for certiorari is a remedy of last resort, available only when an appeal or any other adequate, plain, or speedy remedy may no longer be pursued. The remedies of appeal and certiorari are mutually exclusive and not alternative or cumulative. Petitioner received the Court of Appeals' Resolution on September 21, 2004, and had fifteen days to appeal but did not. The instant petition was a mere attempt to substitute a lost right to appeal.

• Annulment of judgment under Rule 47 — The remedy is extraordinary and equitable in character, available only where ordinary remedies of new trial, appeal, petition for relief, or other remedies can no longer be availed of through no fault of the petitioner. The grounds are restricted to lack of jurisdiction and extrinsic fraud. Lack of jurisdiction is confined to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim, resting exclusively on absolute lack of jurisdiction as opposed to mere abuse of jurisdictional discretion or mere errors in judgment. The Court applied this doctrine to hold that petitioner's allegations of procedural irregularities in the foreclosure and writ of possession proceedings were mere errors of judgment, not grounds for annulment.

• Certiorari cannot substitute for a lost appeal — The remedies of appeal in the ordinary course of law and certiorari under Rule 65 are mutually exclusive and not alternative or cumulative. Certiorari cannot be used as a substitute for a lost appeal where the latter remedy was available, especially if such loss or lapse was occasioned by one's own negligence or error in the choice of remedies. The Court applied this doctrine to dismiss the petition, as petitioner had fifteen days from September 21, 2004 to appeal but instead filed a Rule 65 petition.

• Ministerial duty to issue writ of possession — Once a court acquires jurisdiction over an application for a writ of possession, it is bound to act on it and issue the writ, as that duty is essentially ministerial. The Court applied this doctrine to hold that the trial court's issuance of the writ of possession was within its authority, and any incidental errors were correctible by appeal, not annulment.

• "The grounds for a petition for annulment are in themselves specific in the same way that the relief itself is. The Rules restrict the grounds only to lack of jurisdiction and extrinsic fraud to prevent the remedy from being used by a losing party in making a complete farce of a duly promulgated decision or a duly issued order or resolution that has long attained finality." — This passage articulates the restrictive nature of the annulment remedy and the policy rationale behind limiting its grounds.

• "In turn, lack of jurisdiction - - the ground relied upon by petitioner - - is confined only to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim. A valid invocation of this ground rests exclusively on absolute lack of jurisdiction as opposed to a mere abuse of jurisdictional discretion or mere errors in judgment committed in the exercise of jurisdiction inasmuch as jurisdiction is distinct from the exercise thereof." — This passage defines the scope of the lack of jurisdiction ground for annulment and distinguishes jurisdiction from errors committed in its exercise.

• "The remedies of appeal in the ordinary course of law and that of certiorari under Rule 65 of the Revised Rules of Court are mutually exclusive and not alternative or cumulative. Time and again this Court has reminded members of the bench and bar that the special civil action of Certiorari cannot be used as a substitute for a lost appeal where the latter remedy is available; especially if such loss or lapse was occasioned by one's own negligence or error in the choice of remedies." — This passage, quoted from Tagle vs. Equitable PCI Bank, states the controlling doctrine on the relationship between appeal and certiorari.

• Alba vs. Court of Appeals, G.R. No. 164041, July 29, 2005, 465 SCRA 495 — Cited as authority that a party aggrieved by the decision of the Court of Appeals in a petition for annulment of judgment must file an ordinary appeal under Rule 45, not a petition for certiorari under Rule 65.
• Linzag vs. Court of Appeals, G.R. No. 122181, June 26, 1998, 291 SCRA 304 — Cited for the same proposition as Alba, that Rule 45 appeal, not Rule 65 certiorari, is the proper remedy from a Court of Appeals decision in an annulment case.
• San Fernando Rural Bank, Inc. vs. Pampanga Omnibus Development Corporation, G.R. No. 168088, April 4, 2007, 520 SCRA 564 — Cited for the principle that an error committed while a court exercises its jurisdiction does not deprive it of jurisdiction, and for the definition of grave abuse of discretion warranting certiorari.
• Tagle vs. Equitable PCI Bank, G.R. No. 172299, April 22, 2008, 552 SCRA 424 — Cited for the doctrine that appeal and certiorari are mutually exclusive remedies and certiorari cannot substitute for a lost appeal.
• Morales vs. Subic Shipyard & Engineering, Inc., G.R. No. 148206, August 24, 2007, 531 SCRA 66 — Cited for the restrictive grounds of annulment of judgment and the definition of lack of jurisdiction.
• Tolentino vs. Leviste, G.R. No. 156118, November 19, 2004, 443 SCRA 274 — Cited for the distinction between lack of jurisdiction and errors of judgment committed in the exercise of jurisdiction.

• Rule 47, Section 2, Rules of Court — Restricts the grounds for a petition for annulment of judgment to lack of jurisdiction and extrinsic fraud. Applied to hold that petitioner's allegations of procedural irregularities did not constitute grounds for annulment.
• Rule 65, Section 1, Rules of Court — Provides that certiorari is a remedy of last resort, available only when an appeal or any other adequate, plain, or speedy remedy may no longer be pursued in the ordinary course of law. Applied to dismiss the petition for being the wrong remedy.
• Act No. 3135 (The Real Estate Mortgage Law), Section 7 — Entitles the mortgagee to take possession of foreclosed properties pending redemption upon approval of a bond. Cited by respondent as the basis for the writ of possession.
• Act No. 1508 (The Chattel Mortgage Law) — The law petitioner argued should govern the foreclosure, requiring a 10-day personal notice to the mortgagor of the date and time of the sale. The Court did not reach the merits of this argument because the petition was dismissed on procedural grounds.

The decision was penned by Del Castillo, J., with Associate Justices Elvi John S. Asuncion and Edgardo F. Sundiam concurring in the Court of Appeals decision. The Supreme Court decision does not identify the specific justices who concurred in the Third Division.

N/A — The case text does not mention any dissenting opinion.