Diona v. Balangue
REITERATIONFacts
The Antecedents: Respondents obtained a loan of P45,000.00 from petitioner Leticia Diona, secured by a Real Estate Mortgage over their property. The loan was payable in six months. Upon respondents' failure to pay despite demand, petitioner filed a complaint with the Regional Trial Court (RTC) seeking payment of the principal obligation with 12% annual interest, actual damages, attorney's fees, and foreclosure of the mortgaged property in case of non-payment. Procedural History: Respondents were declared in default by the RTC for failure to file responsive pleadings. The RTC, in its October 17, 2000 Decision, ordered respondents to pay the principal amount of P45,000.00 with 5% monthly interest, attorney's fees, and costs, with a provision for foreclosure. Respondents later filed a Motion to Set Aside Judgment, claiming lack of proper summons, which the RTC denied, ordering the issuance of a Writ of Execution. Subsequently, respondents filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale, arguing that the 5% monthly interest was not agreed upon and was excessive. The RTC granted this motion, modifying the interest rate to 12% per annum. Petitioner appealed this modification to the Court of Appeals (CA) via a Petition for Certiorari. The CA, in a decision, declared the 5% monthly interest award void for want of jurisdiction but also found the subsequent reduction to 12% per annum to be a grave abuse of discretion. Thereafter, respondents filed a Petition for Annulment of Judgment with the CA, seeking to nullify the portion of the RTC Decision awarding the 5% monthly interest. The CA granted this petition, annulling the portion of the RTC Decision awarding the 5% monthly interest and ordering the judgment debt to be recomputed at 12% per annum. Petitioner's motion for reconsideration was denied. The Petition: Petitioner seeks review of the CA's resolutions through a Petition for Review on Certiorari under Rule 45 of the Rules of Court. She argues that the CA erred in granting the Petition for Annulment of Judgment, contending that it was used as a substitute for a lost appeal and that the RTC Decision had already become final and executory. Petitioner asserts that the grounds for annulment, namely extrinsic fraud or lack of jurisdiction, were not met, and that the respondents' failure to avail of ordinary remedies was due to their own fault or negligence, not that of their counsel. She also invokes the doctrine of immutability of judgment, arguing that the RTC's erroneous award, though admitted as a mistake, could no longer be corrected as the judgment had become final.
Issue(s)
Whether the Court of Appeals erred in granting the respondents' Petition for Annulment of Judgment as a substitute for a lost appeal, considering the principles governing annulment of judgment and the finality of judgments. Whether the award of 5% monthly interest by the RTC, when only 12% per annum was prayed for in the complaint and the respondents were declared in default, constitutes a violation of due process and is void for having been rendered in excess of jurisdiction, and whether the respondents waived their right to contest this award. Whether the negligence of the respondents' former counsel, in failing to file an answer, question the interest rate, and file an appeal, constitutes excusable negligence warranting the annulment of judgment, and whether the doctrine of immutability of judgment applies in this case.
Ruling
The Supreme Court denied the petition and affirmed the resolutions of the Court of Appeals. The Court held that the award of 5% monthly interest was void for having been rendered in excess of jurisdiction and in violation of the respondents' right to due process. The Court found that the respondents' former counsel was grossly negligent, which prevented them from availing of ordinary remedies, thus justifying the annulment of the void portion of the judgment.
Ratio Decidendi
On the propriety of Annulment of Judgment and the finality of judgments: The Court affirmed that a Petition for Annulment of Judgment under Rule 47 is a remedy for exceptional circumstances where a party, without fault, failed to avail of ordinary remedies. While typically based on extrinsic fraud or lack of jurisdiction, jurisprudence recognizes lack of due process as an additional ground. The doctrine of immutability of judgment ordinarily applies to final and executory decisions, it does not apply to void judgments. On the violation of due process and excess of jurisdiction: The Court reiterated the principle that courts cannot grant a relief not prayed for in the pleadings or in excess of what is sought, especially when a defendant is declared in default. Section 3(d), Rule 9 of the Rules of Court strictly limits the relief that may be granted to a party in default to what has been prayed for in the complaint. The RTC's award of 5% monthly interest was not supported by the pleadings or evidence, as the mortgage did not stipulate any interest and the complaint explicitly prayed for 12% per annum. This award, therefore, was a clear violation of the respondents' right to due process, as they were not informed of the possibility of such an exorbitant interest rate and were deprived of the opportunity to refute it. The respondents did not contest their principal obligation but only the excessive interest rate. Their waiver of presenting evidence due to default should not be construed as a waiver to contest a patently erroneous award that transgresses their right to due process. On the role of counsel's negligence and the nature of the relief granted: The Court acknowledged that while the negligence of counsel generally binds the client, an exception exists when such negligence is so gross that it amounts to a deprivation of property without due process. The Court found the former counsel's actions, from failing to file an answer after an extension to not questioning the exorbitant interest rate and failing to appeal, to be grossly negligent. This negligence prevented the respondents from availing of ordinary remedies, justifying the annulment of the void portion of the judgment. The CA's action in annulling this portion of the judgment and ordering a recomputation at the legal rate was therefore proper and equitable, preventing an unconscionable situation where respondents would lose their property and still owe a large sum due to an illegal award.
Main Doctrine
A judgment that grants a relief not prayed for in the complaint, especially when the defendant is declared in default, violates the defendant's right to due process and may be annulled for having been rendered in excess of jurisdiction.