Stilianopulos vs. The City of Legaspi

An action for annulment of judgment based on extrinsic fraud must be filed within four years from discovery of the fraud, and an action based on lack of jurisdiction may be barred by laches; once a controlling legal principle is established by final judgment, the same parties may no longer litigate the same matter again. Even if extrinsic fraud and lack of jurisdiction are established, relief may be denied where the action is prescribed, barred by laches, or barred by res judicata.

Jose Manuel Stilianopulos is the son and successor-in-interest of Carlos V. Stilianopulos, also known as Chas V. Stilianopulos, who had been the registered owner and possessor of Lot 1, Psd-3261. The City of Legaspi claimed the same lot under OCT No. 665, which it caused to be judicially reconstituted under Republic Act No. 26. The dispute involved conflicting certificates of title over the property and the finality of the reconstitution and quieting-of-title proceedings. Republic Act No. 26 requires notice to occupants of land covered by a title sought to be reconstituted, while the Civil Code and the 1997 Rules of Civil Procedure govern the periods for annulment of judgment.

On September 26, 1962, the City of Legaspi filed a Petition for judicial reconstitution of its titles to twenty parcels of land, including Lot 1 (Psd 3261), alleging that the certificates had been lost or destroyed during World War II. The petition was docketed as Cad. Case No. RT-763 before the Court of First Instance of Albay, Branch II. On September 16, 1964, the trial court ordered the Register of Deeds to reconstitute the Original Certificates of Title over these lots, including OCT No. 665, in favor of the City.

On August 4, 1970, the City filed a Complaint for quieting of title over Lot 1, Psd-3261, covered by OCT No. 665, against Carlos V. Stilianopulos alias Chas V. Stilianopulos, Ana Estela Stilianopulos, and the American Oxygen and Acetylene Company. The case was docketed as Civil Case No. 4183 before the Regional Trial Court of Legaspi City, Branch VIII. While the case was pending, Carlos V. Stilianopulos died. As a consequence, TCT No. T-1427, registered under his name, was cancelled, and TCT No. 13448 was issued in the name of his son, petitioner Jose Manuel Stilianopulos, on July 12, 1974.

On February 29, 1984, the trial court rendered its Decision, upholding the validity of TCT No. 13448 and its superiority to OCT No. 665; petitioner was declared the lawful owner of Lot 1, Psd-3261. On appeal by both parties, the Court of Appeals, in its Decision of October 16, 1987, reversed the trial court and ruled in favor of the City of Legaspi. Petitioner’s recourse to the Supreme Court was dismissed in a Minute Resolution promulgated on August 17, 1988 on the ground that the issue raised was factual; reconsideration was denied on October 26, 1988.

Petitioner then filed an action for cancellation of OCT No. 665, docketed as GRL Cad. Case No. M-10108 before the Regional Trial Court of Legaspi City, Branch V. The trial court dismissed it on August 15, 1989 on the ground of res judicata. On appeal, docketed as CA-GR CV No. 24429, the Court of Appeals affirmed, reasoning that petitioner’s action was an action for annulment of the order of reconstitution of OCT No. 665 and was therefore not cognizable by the trial court.

On June 13, 1994, petitioner filed before the Court of Appeals a new action for annulment of the September 16, 1964 Order, docketed as CA-GR SP No. 34326, based on three grounds: (1) the City procured OCT No. 665 fraudulently; (2) the original certificate of title judicially reconstituted was non-existent; and (3) the court which ordered the reconstitution lacked jurisdiction. Before the Court of Appeals, petitioner alleged that the City had omitted from its Petition for Reconstitution the name and address of his predecessor-in-interest, Chas V. Stilianopulos, who at the time was the occupant and possessor of the disputed property, and that as early as January 26, 1953 and February 10, 1953, the City had actual knowledge that petitioner’s predecessor was the registered owner and possessor of Lot 1. He added that on January 26, 1953, his predecessor and the City had jointly petitioned the trial court in Cad. Case No. MM-302 for approval of the consolidation subdivision plan and technical description of Lot 1, as well as for issuance by the Register of Deeds of the corresponding Transfer Certificates of Title to the property in the name of petitioner’s predecessor. Petitioner further alleged that Lot 1 had never been issued an original certificate of title before World War II, as it was not an original or mother lot but a derived or resulting subdivision that came into existence only on February 10, 1953. His father and predecessor-in-interest was allegedly the registered owner of Lot No. 9703-A, evidenced by TCT No. 3227, taken by transfer from TCT No. 3224, entered at the Register of Deeds of Legaspi, Albay, on August 12, 1936, and administratively reconstituted from the owner’s duplicate as TCT No. 93 (3227) 20625 on June 20, 1949; and Lot No. 1023, evidenced by TCT No. 1912, entered at the Register of Deeds of Legaspi, Albay, on October 10, 1931, and administratively reconstituted from the owner’s duplicate as TCT No. 98 (1912) 20626 on June 21, 1949. These two lots were consolidated and subdivided into Lot 1 with an area of 5,808 square meters for Chas V. Stilianopulos; Lot 2 with an area of 1,003 square meters for the City of Legaspi, to which it had been donated by petitioner on September 13, 1952 as a city street to be named Stilianopulos Boulevard; and Lot 3, containing an area of 3,205 square meters for Chas V. Stilianopulos, per Consolidation Subdivision Plan Pcs-3261 surveyed on July 6, 1952. In the Deed of Donation executed on September 13, 1952, the City acknowledged that petitioner’s predecessor-in-interest was the absolute owner of the derived or resulting Lot 2 donated to it.

The Court of Appeals dismissed the petition and denied reconsideration. It found that petitioner became aware of OCT No. 665 in favor of the City when the quieting-of-title action was filed in 1970, yet he failed to file proceedings to annul the reconstitution order. It also found no sufficient explanation for reckoning the prescriptive period from March 24, 1988, since the Land Registration Commission Report had been available to petitioner’s counsel when attached to respondent’s Appeal Brief on April 5, 1986, or at the latest when the Court of Appeals Decision was promulgated on October 16, 1987. The Court of Appeals further found that the lapse of more than twenty years before petitioner filed the present action constituted unreasonable delay.

• Extrinsic Fraud: Petitioner contended that the City of Legaspi committed extrinsic fraud when it alleged in its Petition for Reconstitution that it owned Lot 1, Pcs-3261, and that the Original Certificate of Title to said lot issued in its name had been lost or destroyed during the war, despite knowing that Lot 1 was never covered by an original certificate of title, that it was a derived lot, that TCT No. T-1427 was issued only on March 5, 1953, that the Report of the Commissioner of Land Registration stated Decree No. 85234 pertained to Lot No. 9703 and not to the lost or destroyed OCT No. 665, that petitioner’s father and respondent had jointly petitioned for approval of the consolidation-subdivision plan, and that petitioner’s father had donated Lot 2 to respondent.
• Notice Under RA 26: Petitioner maintained that he and his predecessor-in-interest were not named in the Petition for Reconstitution as occupants or persons in possession of the disputed land and were not notified of the proceedings, in violation of Section 12(e) of Republic Act No. 26.
• Prescription: Petitioner argued that the four-year prescriptive period for extrinsic fraud should begin not from August 4, 1970, when the quieting-of-title action was filed, but from the discovery of the fraud by his counsel shortly after March 24, 1988; that his action for cancellation filed on May 26, 1988 interrupted the period until May 26, 1994; and that less than three months had lapsed before he filed the Petition for Annulment.
• Lack of Jurisdiction: Petitioner averred that the trial court had no jurisdiction to order the reconstitution of OCT No. 665 because respondent failed to state in its Petition that his predecessor-in-interest was in possession of Lot 1 and failed to give him notice of the proceedings.
• Laches: Petitioner disputed the finding of laches, arguing that his May 26, 1988 cancellation action negated abandonment; that he could not file the annulment action while the cancellation petition was pending because of the rule against forum-shopping; that there was no unreasonable delay because the annulment petition was filed eighteen days after receipt of the Court of Appeals Decision upholding the dismissal of the cancellation action; and that applying laches would perpetrate fraud and injustice.
• Res Judicata: Petitioner argued that there was no res judicata because the Court of Appeals in the quieting-of-title case had stated that the regularity of the judicial proceedings for reconstitution of OCT No. 665 affecting its validity had not been raised in the pleadings.

• Prescription: Respondent contended that the prescriptive period for filing an action based on extrinsic fraud had already run out on petitioner.

• Extrinsic Fraud: Whether the City of Legaspi committed extrinsic fraud in the reconstitution proceedings by failing to state that petitioner’s predecessor-in-interest was in possession of Lot 1 and by failing to give him notice.
• Prescription: Whether the action for annulment based on extrinsic fraud was filed within four years from discovery of the fraud.
• Jurisdiction: Whether the reconstitution court lacked jurisdiction because of the failure to notify the occupant and because the certificate of title was not lost or destroyed.
• Laches: Whether petitioner was guilty of laches barring the annulment action based on lack of jurisdiction.
• Res Judicata: Whether the petition for annulment was barred by res judicata in light of the final judgment in the quieting-of-title case.

• Extrinsic Fraud: Yes. The City’s failure to state in its Petition for Reconstitution that Lot 1 was occupied and possessed by petitioner’s predecessor and its failure to give him notice constituted extrinsic fraud.
• Prescription: Yes, the action had prescribed. Under Article 1391 of the Civil Code, an action for annulment based on extrinsic fraud must be filed within four years from discovery; petitioner discovered the fraud no later than 1970.
• Jurisdiction: Yes, the reconstitution court lacked jurisdiction. Under Section 13 of Republic Act No. 26, notice to the occupant is mandatory and jurisdictional, and reconstitution requires a lost or destroyed certificate; the title to Lot 1 was not lost.
• Laches: Yes, laches barred the action. Petitioner’s delay of more than twenty years after learning of the reconstituted title in 1970 was unreasonable and prevented him from raising lack of jurisdiction.
• Res Judicata: Yes. The final judgment in the quieting-of-title case, involving the same parties, subject matter, and cause of action, barred the annulment petition, which was a second cycle of review.

• Extrinsic Fraud: For fraud to become a basis for annulment of judgment, it has to be extrinsic or actual. Intrinsic fraud pertains to an issue involved in the original action or where the acts constituting the fraud were or could have been litigated. Extrinsic or collateral fraud occurs when a litigant commits acts outside of the trial which prevent a party from having a real contest, or from presenting all of his case, such that there is no fair submission of the controversy. The Court found that respondent failed to state in its Petition for Reconstitution that Lot 1 was occupied and possessed by petitioner’s predecessor-in-interest and failed to give him notice of the proceedings. Deliberately failing to notify a party entitled to notice constitutes extrinsic fraud. Thus, extrinsic fraud existed.
• Prescription: Under Article 1391 of the Civil Code, an action for annulment shall be brought within four years from the discovery of the fraud; that is, within four years from the discovery of the fraudulent statements made in the application. Petitioner argued that the period should begin only shortly after March 24, 1988, when his counsel allegedly discovered the fraud. This was untenable. Petitioner became aware of OCT No. 665 in favor of the City when the quieting-of-title action was filed in 1970. A simple check on the records of the reconstitution proceedings would have revealed that it was conducted without notice to petitioner’s father. Even if the period began when petitioner’s counsel read the Land Registration Commission Report, the Report had been made available to said counsel when it was attached to respondent’s Appeal Brief on April 5, 1986, or at the latest when the Court of Appeals Decision was promulgated on October 16, 1987. There was no excuse for waiting until the finality of the quieting-of-title case before raising extrinsic fraud to annul the reconstitution proceedings. The period had lapsed long ago.
• Jurisdiction: Under Section 13 of Republic Act No. 26, the sending of notice to the occupant of the land covered by the title sought to be reconstituted is mandatory and jurisdictional. If no notice of the date of hearing of a reconstitution case is served on the possessor or anyone else having interest in the property involved, the order of reconstitution is null and void. Reconstitution of title is simply the reissuance of a new duplicate certificate of title allegedly lost or destroyed in its original form and condition. It arises from the loss or destruction of the owner’s copy of the certificate. In this case, the title to Lot 1 was not lost or destroyed; it remained in the possession of petitioner’s father and was eventually passed on to petitioner. If a certificate of title has not been lost but is in fact in the possession of another person, then the reconstituted title is void and the court that rendered the Decision had no jurisdiction. The trial court therefore had no jurisdiction.
• Laches: Laches is the failure or neglect, for an unreasonable or unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, warranting the presumption that the right holder has abandoned that right or declined to assert it. This inaction or neglect to assert a right converts a valid claim into a stale demand. Laches prevents a litigant from raising the issue of lack of jurisdiction. Petitioner became aware of the reconstitution proceedings when the action for quieting of title was instituted in 1970, and he waited more than twenty years before filing the present action to annul the judgment in those proceedings. Although petitioner filed the annulment Complaint right after the dismissal of the cancellation-of-title case, it was filed only after the quieting-of-title case had been decided in favor of respondent. By participating in the quieting-of-title case and arguing therein his defenses against the legality of respondent’s title in order to establish his rights over the disputed property, petitioner was deemed to have chosen that action over the annulment of the reconstitution proceedings. Laches bars a party from invoking lack of jurisdiction for the first time on appeal for the purpose of annulling everything done, with his active participation, in the case below. Furthermore, by seeking reexamination of the ownership of the disputed lot, petitioner accepted the jurisdiction of the court which heard the action for quieting of title. A litigant cannot invoke the jurisdiction of a court to secure affirmative relief and, after failing to obtain such relief, repudiate or question that same jurisdiction.
• Res Judicata: Res judicata applies when the following elements are present: (1) a judgment has become final; (2) such judgment was rendered on the merits; (3) the court that rendered it had jurisdiction over the subject matter and the parties; and (4) there was identity of parties, subject matter, and causes of action between the previous and the subsequent action. There is identity of cause of action between a case for annulment of title and one for annulment of judgment. Causes of action are identical when there is an identity in the facts essential to the maintenance of the two actions, or where the same evidence will sustain both actions. The underlying objectives or reliefs sought in both the quieting-of-title and the annulment-of-title cases are essentially the same — adjudication of the ownership of the disputed lot and nullification of one of the two certificates of title. The same evidence or set of facts considered in the quieting-of-title case would also be used in this Petition. The difference in form and nature of the two actions is immaterial. The philosophy behind res judicata prohibits the parties from litigating the same issue more than once. The action for annulment of judgment was in effect a second cycle of review regarding a subject matter which had already been finally decided. Material facts or questions that had been in issue in a former action and were then admitted or judicially determined are conclusively settled by a judgment rendered therein. Even if the reconstitution proceedings and the reconstituted title were annulled, the ownership of the disputed lot by respondent had already been settled in the quieting-of-title case. Petitioner was legally bound to abide by the Decision in the earlier case.

• Extrinsic vs. Intrinsic Fraud — Intrinsic fraud pertains to an issue involved in the original action or where the fraudulent acts were or could have been litigated. Extrinsic or collateral fraud occurs when a litigant commits acts outside of the trial which prevent a party from having a real contest, or from presenting all of his case, such that there is no fair submission of the controversy. Deliberately failing to notify a party entitled to notice constitutes extrinsic fraud. The Court applied this doctrine in finding that the City’s omission of petitioner’s predecessor as occupant and its failure to notify him amounted to extrinsic fraud.
• Prescription of Annulment Based on Extrinsic Fraud — Under Article 1391 of the Civil Code, an action for annulment based on extrinsic fraud must be filed within four years from discovery of the fraud, that is, within four years from discovery of the fraudulent statements made in the application. The Court applied this rule by reckoning discovery no later than 1970, when petitioner became aware of OCT No. 665 through the quieting-of-title action, and by holding that the 1994 annulment petition had prescribed.
• Laches Bars Annulment Based on Lack of Jurisdiction — Laches is the failure or neglect, for an unreasonable or unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, warranting the presumption that the right holder has abandoned that right or declined to assert it. It converts a valid claim into a stale demand and prevents a litigant from raising the issue of lack of jurisdiction. The Court applied this doctrine because petitioner waited more than twenty years after learning of the reconstituted title before seeking annulment.
• Requisites of Res Judicata — Res judicata applies when: (1) a judgment has become final; (2) such judgment was rendered on the merits; (3) the court that rendered it had jurisdiction over the subject matter and the parties; and (4) there was identity of parties, subject matter, and causes of action between the previous and the subsequent action. Causes of action are identical when the same facts or evidence can sustain either action. The Court applied this doctrine because the quieting-of-title and annulment cases shared the same parties, subject matter, and essential facts, and sought the same reliefs concerning ownership and nullification of title.
• Law of the Case and Second Cycle of Review — Material facts or questions that had been in issue in a former action and were then admitted or judicially determined are conclusively settled by a judgment rendered therein. Such facts or questions become res judicata and may not again be litigated in a subsequent action between the same parties or their privies, regardless of the form the issue may take. A second cycle of review is prohibited. The Court applied this doctrine by holding that the annulment action was an impermissible second cycle of review of a subject matter already finally decided.
• Jurisdictional Notice in Reconstitution — Under Republic Act No. 26, the sending of notice to the occupant of the land covered by the title sought to be reconstituted is mandatory and jurisdictional. If no notice of the date of hearing is served on the possessor or anyone else having interest in the property, the order of reconstitution is null and void. Reconstitution is the reissuance of a new duplicate certificate allegedly lost or destroyed; if the certificate has not been lost but is in the possession of another, the reconstituted title is void and the court had no jurisdiction. The Court applied this doctrine in finding that the reconstitution court lacked jurisdiction.
• Estoppel by Laches and Repudiation of Invoked Jurisdiction — A litigant cannot invoke the jurisdiction of a court to secure affirmative relief and, after failing to obtain such relief, repudiate or question that same jurisdiction. The Court applied this principle because petitioner participated in the quieting-of-title case and sought affirmative relief therein, then later questioned the jurisdiction of the reconstitution court.

• "The annulment of a final judgment on the ground of extrinsic fraud prescribes within four years from the discovery of the fraud. On the other hand, a petition for annulment based on lack of jurisdiction may be barred by laches. In any event, once a controlling legal principle is established by final judgment, the same parties may no longer litigate the same matter again." — This passage states the Court’s controlling synthesis of the three grounds that defeated the petition: prescription, laches, and res judicata.
• "Deliberately failing to notify a party entitled to notice constitutes extrinsic fraud." — This defines the specific act that the Court found to constitute extrinsic fraud in the reconstitution proceedings.
• "Laches prevents a litigant from raising the issue of lack of jurisdiction." — This states the doctrine that barred petitioner from obtaining relief despite the reconstitution court’s lack of jurisdiction.
• "If a certificate of title has not been lost but is in fact in the possession of another person, then the reconstituted title is void and the court that rendered the Decision had no jurisdiction." — This articulates the jurisdictional defect in the reconstitution of OCT No. 665, which the Court nonetheless held barred by laches.

• Santos vs. Court of Appeals, 224 SCRA 673, 681, July 21, 1993 — Cited for the rule that fraud must be extrinsic or actual to serve as a basis for annulment of judgment.
• Heirs of Manuel A. Roxas vs. Court of Appeals, 270 SCRA 309, 318-319, March 21, 1997 — Cited for the distinction between intrinsic fraud and extrinsic or collateral fraud.
• Strait Times, Inc. vs. Court of Appeals, 294 SCRA 714, 721-722, August 28, 1998 — Cited for the definition of extrinsic fraud and for the rule that a reconstituted title is void where the certificate was not lost but is in the possession of another.
• Salva vs. Salvador, 18 Phil 193, 200, January 3, 1911 — Cited for the rule that deliberately failing to notify a party entitled to notice constitutes extrinsic fraud.
• Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611, 619, January 31, 1987 — Cited for the four-year prescriptive period under Article 1391 of the Civil Code and for laches as a bar.
• Director of Lands vs. Court of Appeals, 102 SCRA 370, 435, January 27, 1981 — Cited for the mandatory and jurisdictional nature of notice under Republic Act No. 26.
• Republic vs. Court of Appeals, 247 SCRA 551, 556, August 23, 1995 — Cited for the same mandatory notice requirement in reconstitution proceedings.
• Rivera vs. Court of Appeals, 244 SCRA 218, 223, May 22, 1995 — Cited for the rule that reconstitution is the reissuance of a new duplicate certificate allegedly lost or destroyed.
• Romualdez vs. RTC, Br. 7, Tacloban City, 226 SCRA 408, 414, September 14, 1993 — Cited for the rule that laches prevents a litigant from raising the issue of lack of jurisdiction.
• Maersk-Tabacalera Shipping Agency (Filipinas), Inc. vs. Court of Appeals, 187 SCRA 646, 651, July 20, 1990 — Cited for the rule that laches bars a party from invoking lack of jurisdiction for the first time on appeal to annul proceedings in which he actively participated.
• Garment and Textile Export Board vs. Court of Appeals, 268 SCRA 258, 297, February 13, 1997 — Cited for the rule that a litigant cannot invoke the jurisdiction of a court to secure affirmative relief and later repudiate that same jurisdiction.
• Linzag vs. Court of Appeals, 291 SCRA 304, 313, June 26, 1998 — Cited for identity of cause of action and the application of res judicata.
• Carlet vs. Court of Appeals, 275 SCRA 97, 106, July 7, 1997 — Cited for res judicata and the prohibition against a second cycle of review.
• Veloso Jr. vs. Court of Appeals, 261 SCRA 196, 202, August 28, 1996 — Cited for the law of the case principle, under which a controlling legal principle established by final judgment remains binding between the same parties.

• Article 1391, Civil Code — Provides that an action for annulment shall be brought within four years from the discovery of the fraud. The Court applied this provision to hold that petitioner’s action for annulment based on extrinsic fraud had prescribed because discovery occurred no later than 1970.
• Section 13, Republic Act No. 26 — Requires that notice be sent to the occupant of the land covered by the title sought to be reconstituted; the Court held this requirement mandatory and jurisdictional, such that failure to serve notice renders the order of reconstitution null and void.
• Section 12(e), Republic Act No. 26 — Petitioner alleged violation of this provision because he and his predecessor-in-interest were not named in the Petition for Reconstitution as occupants or persons in possession of the disputed land and were not notified of the proceedings.
• Section 3, Rule 47, 1997 Rules of Civil Procedure — Provides that an action for annulment of judgment based on extrinsic fraud must be filed within four years from its discovery or, if based on lack of jurisdiction, before it is barred by laches. The Court cited this provision as the codification of the rules applied in the case.

Melo, Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.