Gochan v. Mancao
REITERATIONFacts
The Antecedents: Felix Gochan, Amparo Alo, and Jose A. Cabellon were co-owners of Lot Nos. 1028 and 1030 in Cebu City. Petitioners are successors-in-interest of Gochan, while respondent Charles Mancao bought several lots (1028-D-1, 1028-D-3, 1028-D-4, and 1028-E) from the children of Angustias Velez and Eduardo Palacios, who acquired them from Alo. In 1998, petitioners, along with Mae Gochan, filed a case for legal redemption (Civil Case No. CEB-22825) against spouses Bonifacio Paray, Jr. and Alvira Paray (sister of respondent), who purchased lots (1028-DD to 1028-VV, and 1030-I) from the heirs of Alo. These lots were alleged by the respondent to be 'ROAD LOTS' serving Subdivision Psd-21702, and thus 'beyond the commerce of men' as per Article 420 of the Civil Code and Presidential Decree (P.D.) No. 957. Respondent claimed his standing to question the compromise agreement arose from being a subdivision lot owner prejudiced by the appropriation of road lots, which were subject to a warranty of perpetual use by his predecessor-in-interest, Amparo Alo. Procedural History: On November 20, 1998, the parties in Civil Case No. CEB-22825 executed a Compromise Agreement, whereby the Spouses Paray conveyed their shares to petitioners for Php650,000.00. On November 27, 1998, the Regional Trial Court (RTC) Branch 17 of Cebu City approved the agreement and rendered judgment in accordance with its terms. This decision was annotated on December 29, 1999. Claiming adverse effects on his lots, respondent Charles Mancao filed a suit before the Court of Appeals (CA) for 'Declaration of Nullity of Final Decision and Compromise Agreement and the Registration of the Same Documents with the Register of Deeds,' alleging that the subject lots were road lots beyond the commerce of men and that the compromise agreement was null and void ab initio. The CA, in its June 28, 2007 Decision and March 10, 2008 Resolution, annulled and set aside the RTC judgment based on compromise, finding that petitioners committed extrinsic fraud by excluding respondent and other co-owners from participating in the trial, and that the subject lots were road lots for public use. Petitioners then filed the instant petition for certiorari under Rule 45 before the Supreme Court. The Petition: Petitioners assailed the CA's Decision and Resolution, arguing that the CA erred in finding extrinsic fraud, in assuming the lots were residential subdivision road lots, and in applying White Plains Association, Inc. v. Legaspi and Presidential Decree (P.D.) No. 957 and Presidential Decree (P.D.) No. 1216. They contended that respondent was not a co-owner and thus not an indispensable party in the legal redemption case, and that the reasons relied upon by respondent did not constitute extrinsic fraud or lack of jurisdiction. Petitioners also raised issues of forum shopping and litis pendentia, and argued that respondent was estopped from claiming the lots were beyond the commerce of men given his participation in a public auction for tax delinquency on some of the lots.
Issue(s)
Whether the Court of Appeals erred in finding that extrinsic fraud was present, justifying the annulment of the Regional Trial Court (RTC) judgment based on compromise. Whether the exclusion of the respondent from the legal redemption case constituted extrinsic fraud. Whether a petition for annulment of judgment under Rule 47 of the Rules of Civil Procedure was the correct legal remedy for the respondent.
Ruling
The Supreme Court GRANTED the petition, REVERSED AND SET ASIDE the June 28, 2007 Decision and March 10, 2008 Resolution of the Court of Appeals, and thereby reinstated the judgment based on compromise dated November 27, 1998, of the Regional Trial Court, Branch 17, Cebu City.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that the Court of Appeals erred in finding that extrinsic fraud was present. The Court reiterated that extrinsic fraud, as a ground for annulment of judgment under Rule 47 of the Rules of Civil Procedure, must be a fraudulent act of the prevailing party committed outside of the trial that prevents the defeated party from fully exhibiting his side of the case. Applying the definitions from Ancheta v. Guersey-Dalaygon and City Government of Tagaytay v. Guerrero, the Court found that respondent failed to prove with sufficient particularity any specific trick, artifice, or device employed by petitioners that precluded him from fully and completely presenting his case to the trial court. Mere allegations of extrinsic fraud, without being fully substantiated by a preponderance of evidence, are insufficient to warrant the annulment of a final judgment, as emphasized in Metropolitan Bank & Trust Company v. Hon. Alejo and Espinosa v. Court of Appeals. The Court concluded that the CA's findings were grounded entirely on speculation, surmises, or conjectures, which is an exception to the rule on conclusiveness of CA factual findings. On Issue 2: The Supreme Court held that the mere fact that respondent was not impleaded as a party in Civil Case No. CEB-22825 (the legal redemption case) is not indicative of extrinsic fraud. The Court clarified that in an action for legal redemption under Article 1620 of the New Civil Code, only the redeeming co-owner and the buyer are considered indispensable parties, to the exclusion of the seller/co-owner, as established in Fidel Lagman, et al. v. Lydia Data, et al. and Robles v. Court of Appeals. Since a seller/co-owner is not even an indispensable party, a third person like the respondent, who merely alleged that his lots were affected, certainly does not have the legal standing to participate or intervene in a legal redemption case. Therefore, his exclusion from the case did not entitle him to seek annulment of judgment on the ground of extrinsic fraud, as he lacked the legal personality to be impleaded in the first place. On Issue 3: The Supreme Court determined that a petition to annul the Regional Trial Court (RTC) judgment under Rule 47 of the Rules of Civil Procedure was not the correct legal remedy for the respondent. The Court emphasized that an action to annul a final judgment is an extraordinary remedy, equitable in character, and is not to be granted indiscriminately, as reiterated in Salting v. Velez and Antonino v. Register of Deeds of Makati City. It is a recourse allowed only in exceptional cases where no adequate or appropriate remedy is available through no fault of the petitioner. The issues raised by the respondent, such as whether the subject lots are road lots, whether they are beyond the commerce of men, or whether a right of way was granted, are factual and legal issues that are not proper subjects of a suit for legal redemption and would muddle the issues in an annulment proceeding. These matters require a full-blown trial, which could be pursued through other legal avenues like a direct attack on the certificates of title, an easement case, or the pending injunction case (Civil Case No. CEB-22996) before Cebu RTC Branch 10.
Main Doctrine
The Supreme Court clarified the strict interpretation of 'extrinsic fraud' as a ground for annulment of judgment under Rule 47 of the Rules of Civil Procedure. It held that extrinsic fraud must be definitively established by a preponderance of evidence, involving a fraudulent act by the prevailing party that prevents the unsuccessful party from fully presenting their case, and not merely the non-inclusion of a party who is not indispensable to the original action. The Court reiterated that a petition for annulment of judgment is an extraordinary remedy, available only when ordinary remedies are no longer viable, and is not a substitute for other appropriate legal actions to resolve factual and legal issues concerning property rights.