Spouses Manila vs. Spouses Gallardo-Manzo

A petition for annulment of judgment under Rule 47 may be granted only on the grounds of extrinsic fraud or absolute lack of jurisdiction, not for an erroneous exercise of jurisdiction; an RTC’s grant of relief beyond the scope of an appealed ejectment case is an exercise of its appellate jurisdiction, and an annulment petition filed long after finality through the petitioner’s own or counsel’s neglect is barred by laches.

The parties were lessor and lessee under a ten-year lease over two parcels in Las Piñas, with an option to purchase within two years at P150,000.00. The dispute reached the Supreme Court through a Rule 45 petition after the CA annulled an RTC judgment rendered on appeal from an ejectment case. The governing framework includes Rule 47 on annulment of judgments and Rule 70 on ejectment, under which possession is the core issue and ownership may be resolved only provisionally.

On June 30, 1982, Ederlinda Gallardo leased two parcels of land along Real St., Manuyo, Las Piñas, Metro Manila, to Eulogia Manila for a period of ten years. The monthly rental was P2,000.00 for the first two years, with an increase of ten percent every two years thereafter. The lease also granted the lessee an option to buy the property within two years from the execution of the contract at a fair market value of P150,000.00. Ederlinda later became Ederlinda Gallardo-Manzo, married to Daniel Manzo, while Eulogia was married to Ramon Manila; the spouses Manzo were the lessors and the spouses Manila were the lessees.

The lease expired on July 1, 1992, but the lessee continued in possession despite a formal demand letter dated August 8, 1992, to vacate and pay rental arrearages. In a letter reply dated August 12, 1992, the defendant-lessee claimed that no rental fee was due because she allegedly became the owner of the property at the time she communicated to the plaintiff-lessor her desire to exercise the option to buy. The parties brought their disagreement to the Barangay for conciliation, but no compromise was reached, and the Manzos filed an action for ejectment before the MeTC of Las Piñas City, Branch 79 (Civil Case No. 3537).

On July 14, 1993, the MeTC rendered judgment in favor of the plaintiffs, the Manzos. It ordered the defendants, the Manilas, to vacate the subject parcels and surrender possession upon payment by the plaintiffs of one-half of the value of the building constructed by the lessee; if the lessor refused to reimburse that amount, the lessee had the option to exercise her right under Article 1678 of the New Civil Code. It also ordered the Manilas to pay rental arrearages up to July 1, 1992 in the amount of P228,044.80; to pay P3,221.00 every month as reasonable compensation for continued withholding of possession, commencing July 2, 1992 until they finally yielded possession, subject to a ten percent increase after every two years from that date; and to pay P5,000.00 as attorney’s fees. No costs were pronounced.

The Manilas appealed to the RTC of Makati City, Branch 63 (Civil Case No. 93-3733). The RTC reversed the MeTC. It found that the Manilas had in fact exercised their option to buy the leased property but that the Manzos refused to honor it. It noted that the Manzos even informed the Manilas about foreclosure proceedings on their property, whereupon the Manilas tried to intervene by tendering rental payments, but the Manzos advised them to withhold such payments until the appeal of the Manzos in the case they filed against the Rural Bank of Bombon (Camarines Sur), Inc. (Civil Case No. 6062) was resolved. The RTC further noted that the Manzos’ intention to sell the lot to the Manilas was confirmed by the fact that the former allowed the latter to construct a building of strong materials on the premises. The RTC thus ordered the Manzos to execute a deed of absolute sale over the parcel subject of the Contract of Lease dated June 30, 1982 after full payment by the Manilas of the purchase price of P150,000.00, and to pay the costs of suit.

The Manzos filed a motion for reconsideration on December 23, 1994. In its Order dated March 24, 1995, the RTC denied the motion for having been filed beyond the fifteen-day period, considering that the Manzos received a copy of the decision on December 7, 1994. Consequently, the November 18, 1994 RTC decision became final and executory. On December 22, 1998, the Manzos filed a petition for annulment of the RTC decision in the CA. They assailed the RTC for ordering them to sell their property, arguing that the RTC’s appellate jurisdiction in ejectment cases was limited to determining who was entitled to physical possession; that the only judgment it could render in favor of the defendant was to recover costs; and that the sale of real property could be ordered only in a case for specific performance falling under the RTC’s original exclusive jurisdiction, not in the exercise of its appellate jurisdiction in an ejectment case. They also alleged that the petition for annulment was the only remedy available because the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies were no longer available through no fault on their part.

The CA granted the petition by Decision dated February 27, 2004, annulled the November 18, 1994 RTC decision, and reinstated the July 14, 1993 MeTC decision. The CA ruled that the RTC acted without jurisdiction when it ordered the Manzos to sell their properties to the Manilas, because the order to sell could be made only in an action for specific performance under the RTC’s exclusive original jurisdiction, not in the exercise of its appellate jurisdiction in an appealed ejectment suit. The CA added that the relief granted by the RTC was not even prayed for by the Manilas in their Answer and position paper before the MeTC, where they only asked for dismissal of the complaint. The CA denied the Manilas’ motion for reconsideration, and the Manilas filed the present petition for review on certiorari.

• Loss of Ordinary Remedies Through Respondents’ Fault: Petitioners argued that the CA committed grave error in annulling the RTC judgment notwithstanding the finding that the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies were lost through the fault of the respondents. They maintained that annulment of judgment cannot substitute for the lost remedy of appeal.
• Lack of Jurisdiction Not Shown: Petitioners contended that the CA erred in annulling the RTC judgment on the ground of lack of jurisdiction when it was not shown that the RTC had no jurisdiction over the person of the respondents or the subject matter of the claim.
• Erroneous Relief Is Not Lack of Jurisdiction: Petitioners assailed the CA’s holding that the RTC decision was void because it granted a relief inconsistent with the nature of an ejectment suit and not prayed for by the respondents. They argued that whatever may be questionable in the decision is a ground for assignment of errors on appeal, or in certain cases a special civil action for certiorari under Rule 65, and not a ground for annulment.

• CA’s Power to Review Findings: Respondents asserted that the CA, being a higher court, had the power to adopt, reverse, or modify the findings of the RTC in this case. They pointed out that the CA, in the exercise of its sound discretion, found the RTC’s findings unsupported by the evidence on record.
• Lack of Jurisdiction in Ejectment Appeal: Respondents contended that the RTC’s appellate jurisdiction in ejectment cases was limited to determining who was entitled to physical possession of the real property; that the only judgment it could render in favor of the defendant was to recover costs; and that such judgment was conclusive only on the issue of possession and did not affect ownership of the land.
• Specific Performance Outside Appellate Jurisdiction: Respondents argued that the sale of real property by one party to another may be ordered by the RTC only in a case for specific performance falling under its original exclusive jurisdiction, not in the exercise of its appellate jurisdiction in an ejectment case.
• No Fault in Loss of Remedies: Respondents alleged that the petition for annulment was the only remedy available because the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies were no longer available through no fault on their part. They claimed they constantly followed up the status of the case with their former counsel, Atty. Jose Atienza, who repeatedly assured them he was on top of the situation; out of their long and close relationship and due regard for his poor health, they desisted from hiring another lawyer until his death on September 10, 1998, and only in November 1998 engaged new counsel.
• Relief Not Prayed For: Respondents also pointed out that the RTC’s order to sell was not prayed for in their Answer and position paper before the MeTC, where they only asked for dismissal of the complaint.

• Loss of Ordinary Remedies Through Fault: Whether the CA committed grave error in annulling the RTC judgment notwithstanding the finding that the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies were lost through the fault of the respondents.
• Lack of Jurisdiction: Whether the CA committed grave error in annulling the RTC judgment on the ground of lack of jurisdiction when it was not shown that the RTC had no jurisdiction over the person of the respondents or the subject matter of the claim.
• Laches/Timeliness: Whether the respondents’ petition for annulment of judgment, filed on December 22, 1998 after the RTC decision had become final and executory, was barred by laches or estoppel.

• Loss of Ordinary Remedies Through Fault: Yes. The CA erred. Rule 47 permits annulment only where the ordinary remedies are no longer available through no fault of the petitioner; respondents’ loss of remedies was due to their own and their counsel’s negligence, and annulment cannot substitute for a lost appeal.
• Lack of Jurisdiction: Yes. The CA erred. Lack of jurisdiction means absence of jurisdiction over the person or subject matter; the RTC had appellate jurisdiction over ejectment cases, and its erroneous grant of relief beyond the ejectment judgment was an exercise of jurisdiction, not a lack thereof.
• Laches/Timeliness: Yes. The annulment petition was barred by laches. A petition based on lack of jurisdiction must be filed before barred by laches or estoppel; respondents waited three and a half years after finality without acceptable explanation.

• Loss of Ordinary Remedies Through Fault: Rule 47, Section 1, allows a petition for annulment of judgments or final orders of an RTC in civil actions only where the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies are no longer available through no fault of the petitioner. The remedy is exceptional and is never a substitute for a party’s own neglect in not promptly availing of ordinary remedies. Respondents attributed the loss of remedies to their former counsel, Atty. Jose Atienza, who filed their motion for reconsideration late and failed to file a proper petition to set aside the RTC decision. They claimed they constantly followed up with him, relied on his assurances, and refrained from hiring another lawyer because of their close relationship and his poor health, until his death on September 10, 1998. The Court was not persuaded. Respondents could have followed up the status of the case with the RTC, especially during Atty. Atienza’s hospital confinements. As party litigants, they should have monitored the progress of their case. Having completely entrusted the case to their former counsel and believed his assurances, they had no one to blame but themselves when their opportunity to appeal and other remedies were lost due to counsel’s neglect. Their continued reliance on counsel despite his chronic ailments requiring prolonged hospital confinement was unthinkable. Negligence of counsel binds the client, especially when the client offers no plausible explanation for his own inaction; when a party retains a lawyer, he is bound by the lawyer’s actions and decisions regarding the conduct of the case. The principle is that an action for annulment of judgment cannot and is not a substitute for the lost remedy of appeal. In any event, the petition for annulment was based not on fraudulent assurances or negligent acts of counsel, but on lack of jurisdiction.
• Lack of Jurisdiction: Lack of jurisdiction as a ground for annulment under Rule 47 refers to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim. The petitioner must show not merely an abuse of jurisdictional discretion but an absolute lack of jurisdiction—an absence of or no jurisdiction, meaning the court should not have taken cognizance of the petition because the law does not vest it with jurisdiction over the subject matter. Jurisdiction over the nature of the action or subject matter is conferred by law. There was no dispute that the RTC was vested with appellate jurisdiction over ejectment cases decided by the MeTC, MTC, or MCTC. Petitioners’ attack on the validity of the RTC decision pertained to a relief erroneously granted on appeal, beyond the scope of judgment provided in Section 6 (now Section 17) of Rule 70. While an ejectment court may delve into ownership or possession de jure solely to resolve possession de facto, it has no jurisdiction to settle ownership with finality, and any pronouncement on ownership is provisional. A judgment in forcible entry or detainer disposes of no other issue than possession and establishes only who has the right of possession, but it does not bar an action to determine ownership. Although it was proper for the RTC on appeal to delve into ownership and receive evidence on possession de jure, it could not adjudicate ownership with finality by ordering the cancellation of a TCT. In this case, the RTC acted in excess of its jurisdiction when, instead of simply dismissing the complaint and awarding costs due to the defendants, it ordered the respondents-lessors to execute a deed of absolute sale in favor of the petitioners-lessees based on its interpretation of the Contract of Lease granting an option to buy. This cannot be done in an ejectment case where the only issue is physical possession. Such erroneous grant of relief, however, was an exercise of jurisdiction by the RTC. Jurisdiction is not the same as the exercise of jurisdiction; jurisdiction is the authority to decide a cause, not the decision rendered therein. The ground for annulment is absence of, or no, jurisdiction—that the court should not have taken cognizance because the law does not vest it with jurisdiction over the subject matter. Respondents assailed the content of the RTC decision but failed to show that the RTC did not have authority to decide the case on appeal. As held in Ybañez vs. Court of Appeals, Section 22 of B.P. Blg. 129 vests upon the RTC appellate jurisdiction over all cases decided by the MeTC, MTC, and MCTC in their respective territorial jurisdictions; when the RTC took cognizance of the appeal from the MTC in the ejectment suit, it was unquestionably exercising its appellate jurisdiction as mandated by law, and its decision could not be annulled on the basis of lack of jurisdiction. The CA therefore erred in annulling the November 18, 1994 RTC decision on the ground of lack of jurisdiction.
• Laches/Timeliness: Under Section 3, Rule 47, a petition for annulment based on extrinsic fraud must be filed within four years from its discovery; if based on lack of jurisdiction, it must be filed before it is barred by laches or estoppel. The principle of laches or stale demands ordains that failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier—negligence or omission to assert a right within a reasonable time—warrants a presumption that the party entitled to assert it has abandoned it or declined to assert it. There is no absolute rule as to what constitutes laches; each case is determined according to its particular circumstances. Here, respondents failed to assail the RTC ruling in a petition for review or certiorari before the CA, rendering the ruling final and executory. Having lost these remedies due to their lethargy for three and a half years, they could not be permitted to assail anew the RTC ruling rendered in the exercise of its appellate jurisdiction. Their inaction and neglect to pursue available remedies for such length of time, without any acceptable explanation other than the word of a former counsel who had already passed away, constituted unreasonable delay warranting the presumption that they had declined to assert their right over the leased premises, which continued to be in the possession of the petitioners. The petition to annul the final RTC decision was therefore barred under the equitable doctrine of laches.

• Annulment of Judgment Under Rule 47 — A petition for annulment of judgments or final orders of an RTC in civil actions is an exceptional remedy available only where the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies are no longer available through no fault of the petitioner. It lies only on the grounds of extrinsic fraud and lack of jurisdiction and cannot substitute for a lost appeal. In this case, the respondents lost their remedies through their own and their counsel’s negligence, so the no-fault requirement was not satisfied.
• Lack of Jurisdiction vs. Exercise of Jurisdiction — Lack of jurisdiction as a ground for annulment refers to absence of jurisdiction over the person of the defending party or over the subject matter of the claim; it requires an absolute lack of jurisdiction, not merely an abuse of jurisdictional discretion. Jurisdiction is the authority to decide a cause, not the decision rendered therein. The RTC had appellate jurisdiction over the ejectment appeal; its erroneous order for the sale of the property was an exercise of jurisdiction, not a lack of it.
• Limited Jurisdiction in Ejectment — In an ejectment case, the court resolves only the issue of physical possession. It may delve into ownership or possession de jure solely to determine possession de facto, but any pronouncement on ownership is provisional and does not settle ownership with finality. The RTC exceeded the scope of an ejectment judgment by ordering the execution of a deed of absolute sale, but that error did not render its decision void for lack of jurisdiction.
• Negligence of Counsel Binds the Client — A party who retains a lawyer is bound by the lawyer’s actions and decisions regarding the conduct of the case. The client cannot blame counsel for lost remedies where the client failed to monitor the progress of the case and offered no plausible explanation for his own inaction. The respondents’ reliance on their former counsel’s assurances, despite the counsel’s chronic illnesses, did not excuse their failure to avail of ordinary remedies.
• Laches in Annulment of Judgment — A petition for annulment based on lack of jurisdiction must be filed before it is barred by laches or estoppel. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it warrants a presumption that the party has abandoned or declined to assert the right. The respondents’ three-and-a-half-year delay after finality, without acceptable explanation, barred their annulment petition.

• "A petition for annulment of judgments or final orders of a Regional Trial Court in civil actions can only be availed of where "the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner."" — This states the threshold condition under Rule 47 and explains why the respondents’ loss of remedies through counsel’s neglect did not justify annulment.
• "Lack of jurisdiction as a ground for annulment of judgment refers to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim." — This defines the only jurisdictional ground for annulment and frames the inquiry into whether the RTC had authority to decide the ejectment appeal.
• "Such erroneous grant of relief to the defendants on appeal, however, is but an exercise of jurisdiction by the RTC. Jurisdiction is not the same as the exercise of jurisdiction. As distinguished from the exercise of jurisdiction, jurisdiction is the authority to decide a cause, and not the decision rendered therein." — This is the ratio decidendi distinguishing an erroneous exercise of jurisdiction from a lack of jurisdiction, which defeated the annulment petition.
• "Clearly, respondents’ petition to annul the final RTC decision is barred under the equitable doctrine of laches." — This states the independent ground of laches based on the respondents’ three-and-a-half-year delay after the RTC decision became final.

• Ybañez vs. Court of Appeals, G.R. No. 117499, February 9, 1996, 253 SCRA 540 — Quoted by the Court for the rule that Section 22 of B.P. Blg. 129 vests the RTC with appellate jurisdiction over cases decided by the MeTC, MTC, and MCTC; because the RTC was exercising that jurisdiction, its decision could not be annulled for lack of jurisdiction.
• Lazaro vs. Rural Bank of Francisco Balagtas (Bulacan), Inc., G.R. No. 139895, August 15, 2003, 409 SCRA 186 — Cited for the principle that annulment of judgment is an exceptional remedy and is never resorted to as a substitute for a party’s own neglect in not promptly availing of ordinary remedies.
• Tolentino vs. Leviste, G.R. No. 156118, November 19, 2004, 443 SCRA 274 — Cited for the rule that negligence of counsel binds the client and for the distinction between lack of jurisdiction and the exercise of jurisdiction.
• Mercado vs. Security Bank Corporation, G.R. No. 160445, February 16, 2006, 482 SCRA 501 — Cited for the oft-repeated principle that an action for annulment of judgment cannot and is not a substitute for the lost remedy of appeal.
• Dizon vs. Court of Appeals, G.R. No. 116854, November 19, 1996, 264 SCRA 391 — Cited for the rule that although the RTC on appeal in an ejectment suit may delve into ownership and receive evidence on possession de jure, it cannot adjudicate ownership with finality by ordering the cancellation of the TCT.
• Galicia vs. Manliquez Vda. de Mindo, G.R. No. 155785, April 13, 2007, 521 SCRA 85 — Cited for the definition of laches as failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier.
• Far East Bank and Trust Company vs. Querimit, 424 Phil. 721, 732 (2002) — Cited for the rule that there is no absolute rule as to what constitutes laches; each case is determined according to its particular circumstances.
• Republic vs. Technological Advocates for Agro-Forest Programs Association, Inc., G.R. No. 165333, February 9, 2010, 612 SCRA 76 — Cited for the definition of lack of jurisdiction as absence of or no jurisdiction, where the court should not have taken cognizance because the law does not vest it with jurisdiction over the subject matter.

• Section 1, Rule 47, 1997 Rules of Civil Procedure — Provides that a petition for annulment of judgments or final orders of an RTC in civil actions may be availed of only where the ordinary remedies of new trial, appeal, petition for relief, or other appropriate remedies are no longer available through no fault of the petitioner. The Court applied this to hold that the respondents’ loss of remedies through their own and their counsel’s neglect did not satisfy the no-fault requirement.
• Section 2, Rule 47, 1997 Rules of Civil Procedure — Limits the grounds for annulment to extrinsic fraud and lack of jurisdiction. The Court held that the respondents failed to establish either ground because the RTC had jurisdiction over the ejectment appeal.
• Section 3, Rule 47, 1997 Rules of Civil Procedure — Requires a petition based on extrinsic fraud to be filed within four years from discovery and one based on lack of jurisdiction before it is barred by laches or estoppel. The Court applied this to bar the respondents’ petition by laches.
• Section 17 (formerly Section 6), Rule 70, 1997 Rules of Civil Procedure — Prescribes the judgment in an ejectment case: if the allegations of the complaint are true, judgment for restitution, arrears, reasonable compensation, attorney’s fees, and costs; if not true, judgment for the defendant to recover costs; and if a counterclaim is established, judgment for the sum in arrears and costs. The Court cited this to show that the RTC’s order for the sale of the property went beyond the relief authorized in an ejectment appeal.
• Section 16, Rule 70, 1997 Rules of Civil Procedure — Provides that when the defendant raises ownership in an ejectment case and possession cannot be resolved without deciding ownership, the issue of ownership shall be resolved only to determine possession. The Court cited this to explain the limited scope of ownership inquiry in ejectment.
• Section 18, Rule 70, 1997 Rules of Civil Procedure — Provides that a judgment in forcible entry or detainer disposes of no other issue than possession and establishes only who has the right of possession, without barring an action for determination of ownership. The Court cited this to show that the RTC could not finally adjudicate ownership in the ejectment appeal.
• Section 22, B.P. Blg. 129 (Judiciary Reorganization Act of 1980) — Vests the RTC with appellate jurisdiction over all cases decided by the MeTC, MTC, and MCTC in their respective territorial jurisdictions. The Court relied on this to hold that the RTC had jurisdiction to decide the ejectment appeal, even though it erroneously granted relief beyond the ejectment judgment.

Renato C. Corona (Chief Justice, Chairperson), Teresita J. Leonardo-De Castro, Lucas P. Bersamin, and Mariano C. Del Castillo concurred. No separate concurring opinions are noted in the text.