Encarnacion v. Johnson
REITERATIONFacts
The Antecedents: Respondent Thomas Johnson initiated legal proceedings in the Supreme Court of British Columbia, Canada, against spouses Narvin and Mary Edwarson (Mary being the daughter of Mateo Encarnacion, the original petitioner). Johnson alleged that the Edwarsons defrauded him by convincing him to invest in a fraudulent vehicle leasing company, failing to deposit promised profits, and providing no accounting for his funds. The Canadian court issued a default judgment against Narvin and Mary, ordering them to pay Johnson substantial sums, including damages and costs. Procedural History: Johnson subsequently filed an action in the Regional Trial Court (RTC) of Olongapo City, Philippines, for the recognition and enforcement of the Canadian judgment and a Mareva injunction. The RTC initially granted Johnson's petition to litigate as a pauper litigant, with a lien for filing fees. The court then issued orders restraining Narvin and Mary, and later Mateo Encarnacion, from disposing of assets, and ordered the annotation of these orders on properties belonging to them. After Narvin and Mary failed to answer despite summons by publication, the RTC declared them in default and rendered judgment in accordance with the Canadian court's decision. Writs of execution were issued and amended to include properties registered in Mateo's name. Mateo filed an Affidavit of Third Party Claim, asserting ownership over 14 levied properties. The RTC issued a further amended writ of execution to explicitly include Mateo's properties. Mateo then filed a petition for annulment of judgment with the Court of Appeals (CA), which was denied. Mateo died during the pendency of the CA proceedings and was substituted by his heirs, the petitioners herein. The Petition: The petitioners, heirs of Mateo Encarnacion, filed a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to nullify the CA's decision that denied their petition for annulment of judgment. They argued that the entire proceedings in the RTC should be annulled due to lack of jurisdiction and extrinsic fraud, citing issues such as allowing indigent litigation, defective certification against forum shopping, improper service of summons by publication, recognition of a foreign injunction as an attachment, promulgation of a final order without evidence, levy on properties of a non-party, and allowing a foreigner to acquire lands. The Supreme Court, while denying the petition for annulment of judgment on procedural grounds (lack of standing and failure to exhaust other remedies), nullified the auction sales of the properties to the respondent, a foreign citizen, for violating the constitutional prohibition against alien ownership of land in the Philippines.
Issue(s)
I. Whether an action for annulment of judgment is the proper remedy of a third-party claimant of properties levied and sold under execution sale. II. Whether respondent, an alien, may own private lands by virtue of an execution sale.
Ruling
The Supreme Court denied the petition for review on certiorari. However, it nullified the auction sales conducted on June 23, 2004, and November 29, 2006, and the proceedings that led to the acquisition of ownership by the respondent over the lands, for being a flagrant violation of the constitutional prohibition against foreign ownership of private lands. The RTC was directed to proceed with the execution of the decision, exclude the respondent from participating in any public auction sale of lands, and order the delivery of the proceeds of any public auction sale to the respondent.
Ratio Decidendi
I. On whether an action for annulment of judgment is the proper remedy of a third-party claimant: The Court held that an action for annulment of judgment is an extraordinary remedy available only when ordinary remedies are no longer available through no fault of the petitioner, and only on grounds of extrinsic fraud or lack of jurisdiction. Petitioners failed to show their standing to file the petition, as Mateo was not adversely affected by the foreign judgment recognition itself, but by the execution sale of his alleged properties. Furthermore, the proper recourse for a third-party claimant whose property has been wrongfully levied is to file a separate action to vindicate their claim, as provided under Section 16, Rule 39 of the Rules of Court, not an annulment of judgment. The Court noted that Mateo admitted he was only questioning the levy and sale of his properties, not the judgment itself, indicating that the issue was with the execution, not the judgment. The CA correctly pointed out that the February 17, 2005 Order was not a final order, and the proper remedy for irregularities in the writ of execution would be to move to quash the writ or file a petition for certiorari. II. On whether respondent, an alien, may own private lands by virtue of an execution sale: The Court ruled that the execution sales conducted on June 23, 2004, and November 29, 2006, wherein respondent Thomas Johnson, a Canadian citizen, was declared the highest bidder, are void. Section 7, Article XII of the Constitution unequivocally prohibits aliens from acquiring private lands in the Philippines, except in cases of hereditary succession. This prohibition extends to participation in execution sales, as what cannot be legally done directly cannot be done indirectly. The Court cited several cases, including Matthews v. Taylor, Muller v. Muller, and Frenzel v. Catito, which consistently upheld this constitutional prohibition. Therefore, the acquisition of land by an alien through an execution sale is a violation of the Constitution and renders the sale inexistent and void from the beginning, pursuant to Articles 1409(1) and (7) of the Civil Code.
Main Doctrine
An action for annulment of judgment is not the proper remedy for a third-party claimant whose properties were levied and sold under execution; the proper recourse is to file a separate action to vindicate their claim. However, an execution sale of private lands to an alien is void for being contrary to the constitutional prohibition against foreign ownership of land.