Sian v. Philippine National Bank
REITERATIONFacts
The Antecedents: Nimfa Sian initiated a case in the Regional Trial Court (RTC) seeking the cancellation of mortgage liens annotated on three titled properties. The respondent in this action was the Philippine National Bank (PNB), specifically its Bacolod branch, which had acquired the properties through a dacion en pago from Maybank Philippines, Inc. (formerly PNB-Republic Bank). The core of the dispute revolved around the validity of these mortgage liens and the subsequent transfer of interest in the properties. Procedural History: The case began with Nimfa Sian's petition to the RTC. After summons was served on Maybank, PNB filed a motion to substitute Maybank, asserting its acquired legal interest in the properties, and simultaneously moved to dismiss the petition due to alleged defects in verification and certification against forum shopping. Nimfa Sian opposed these motions. Following Nimfa's death and her substitution by her estate, represented by Charito J. Sian-Parreño, the parties filed a joint manifestation to submit the pending incident for resolution. The RTC initially denied PNB's motion for substitution, finding no supporting documentation for the dacion en pago, and denied the motion to dismiss. However, it then granted the petition to cancel the mortgage liens. PNB's motion for reconsideration was denied. Subsequently, PNB filed a petition for annulment of judgment with the Court of Appeals, which set aside the RTC's orders, citing a denial of due process for not allowing PNB to present evidence. The Petition: Petitioner, the Intestate Estate of Nimfa Sian, filed the instant Petition for Review on Certiorari with this Court, challenging the Court of Appeals' decision to annul the RTC's orders. The petitioner argues that the Court of Appeals erred in allowing a petition for annulment of judgment when PNB allegedly failed to avail itself of the remedy of appeal. Furthermore, the petitioner contends that the appellate court erroneously held that a lack of due process was a valid ground for annulment in this instance and that the RTC's proceedings did not, in fact, constitute a denial of due process. The core of the petitioner's argument is that the Court of Appeals should not have set aside the RTC's decision, which had granted the cancellation of the mortgage liens.
Issue(s)
Whether the Court of Appeals erred in granting the petition for annulment of judgment filed by PNB, considering PNB's failure to appeal the Regional Trial Court's order and the arguments regarding the void nature of the RTC's order. Whether PNB was denied due process by the Regional Trial Court in the proceedings for the cancellation of mortgage liens. Whether the trial court's denial of PNB's Motion for Substitution was proper, and its impact on PNB's ability to challenge the subsequent order.
Ruling
The petition is DENIED. The Court of Appeals correctly set aside the Regional Trial Court's orders. The Regional Trial Court's order granting the petition for cancellation of mortgage liens without affording PNB an opportunity to file an Answer and present evidence constitutes a denial of due process, rendering the order void. A void judgment may be assailed at any time, and PNB's failure to appeal does not bar its petition for annulment.
Ratio Decidendi
On the availability of annulment of judgment despite failure to appeal: The Court reiterated that while Section 2 of Rule 47 of the Rules of Court provides that annulment of judgment may be based on extrinsic fraud and lack of jurisdiction, jurisprudence recognizes denial of due process as an additional ground. The Court cited Arcelona v. Court of Appeals, which clarified that a patently void judgment, void on its face or by virtue of its own recitals, can be set aside on grounds of want of jurisdiction or non-compliance with due process of law. Therefore, PNB's argument that it could no longer avail of a petition for annulment of judgment due to its failure to appeal the RTC's order fails because the RTC's order was void. A void order may be assailed at any time, either collaterally or in a direct action, unless barred by laches. Furthermore, one need not be a party to the judgment sought to be annulled if they can prove they would be adversely affected by it, or even where there was no fraud, parties have been allowed to file petitions for annulment to question their non-inclusion in the original case. On the denial of due process: The Court found that the trial court's order granting the petition for cancellation of mortgage liens, even while Maybank (PNB's predecessor-in-interest) had not been given the chance to file an Answer and thus there was no joinder of issues, deprived Maybank of due process of law. This rendered the RTC's order void. The Court emphasized that the short-circuiting of the procedural process denied the petitioner due process, as it was not able to allege its defenses in an answer and prove them in a hearing. Fairness in litigation dictates that all doubts should be resolved in favor of fairness, and the RTC's action was contrary to this principle. The RTC incorrectly considered the case submitted for resolution based on a joint manifestation concerning PNB's motion for substitution, not the merits of the petition for cancellation of mortgage liens. On the trial court's denial of substitution: The Court noted that Section 19 of Rule 3 of the Rules of Court, concerning the transfer of interest, uses the word "may," indicating that the substitution of parties is discretionary. Therefore, the trial judge's denial of PNB's Motion for Substitution, under the circumstances, could not be seriously assailed. However, this denial did not preclude PNB from questioning the subsequent void order that granted the petition for cancellation of mortgage liens without due process.
Main Doctrine
A trial court order granting a petition for cancellation of mortgage liens without affording the respondent bank an opportunity to file an Answer and present evidence constitutes a denial of due process, rendering the order void. A void judgment may be assailed at any time, even through a petition for annulment of judgment, regardless of whether the party seeking annulment failed to appeal the original order.