G.R. No. 80892 - Islamic Da'wah Council of the Philippines vs. Court of Appeals

Case Summary (G.R. No. 80892)

Petitioner, Respondents and Immediate Disputes

Petitioner (the Council) foreclosed a mortgage executed by Freddie and Marconi Da Silva and obtained RTC approval of a compromise transferring the property to the Council; TCT No. 328021 was thereafter issued to the Council.
Respondents (heirs of Jesus Amado Araneta) claim prior purchase and continuous possession by Jesus Amado Araneta, contend title had been in trust or held in Fred Da Silva’s name, and maintain that transactions culminating in foreclosure were tainted by fraud and collusion. They filed a petition for annulment of the foreclosure judgment in the Court of Appeals and asserted adverse claims and lis pendens annotations at the Register of Deeds.

Key Dates and Proceedings (selected)

Feb 15, 1984: Mortgage executed by Freddie and Marconi Da Silva in favor of the Council.
Feb 5, 1985: Parties submitted compromise agreement in foreclosure case.
Feb 12, 1985: RTC approved the compromise; TCT No. 328021 later issued to Council.
Aug 8 and Aug 13, 1985: Araneta filed lis pendens and affidavit of adverse claim recorded on TCT No. 328021.
Oct 9, 1985: Council filed Civil Case No. Q-46196 (Quieting of Title, Recovery of Possession, Damages).
July 6, 1987: Heirs filed petition for annulment of judgment (challenge to foreclosure judgment) with the Court of Appeals.
Nov 10, Dec 2 and 3, 1987: CA issued temporary restraining order and denied Council’s motions; CA gave due course to annulment petition.
Supreme Court decision: Petition for certiorari by the Council was dismissed and CA orders were affirmed.

Procedural Posture and Relief Sought

The Council sought certiorari under Rule 65 to annul the CA resolutions that gave due course to the heirs’ petition for annulment of judgment and restrained the RTC from proceeding with the quieting case. The Council claimed lack of CA jurisdiction to entertain annulment because the foreclosure judgment had been executed and title transferred; also argued lack of locus standi by the heirs, absence of cause of action, and other procedural defenses (litis pendentia, lack of capacity, statute of frauds, abandonment/waiver).

Governing Law and Rules Applied

Rule 65, Rules of Court (certiorari jurisdiction): Supreme Court’s review is limited to jurisdictional error or grave abuse of discretion by the CA.
Batas Pambansa Blg. 129 (Judiciary Reorganization Act of 1980), Sec. 9(2): vests exclusive original jurisdiction in the Court of Appeals over actions for annulment of judgments of Regional Trial Courts. The Court quotes the statutory text to emphasize that only the CA may take cognizance of annulment actions of RTC judgments.
Applicable jurisprudence recognized and applied by the Court: Anuran v. Aquino, Militante v. Edrosolano, Garchitorena v. Sotelo, and related authorities cited to define who may bring an annulment action and the effect of execution/transfer of property on the availability of annulment relief.

Issue 1 — Whether the Court of Appeals had jurisdiction to entertain the petition for annulment of the RTC foreclosure judgment

The Supreme Court framed review under Rule 65 as confined to determining whether the CA acted without jurisdiction or with grave abuse of discretion in giving due course to the annulment petition.
The Court relied on Batas Pambansa Blg. 129, Sec. 9(2), which grants the Court of Appeals exclusive original jurisdiction over actions for annulment of RTC judgments. Because the remedy for annulment of judgment in this case was against an RTC decision, jurisdiction resided exclusively in the CA. The CA therefore had authority to take the petition and act upon it; the Supreme Court found no jurisdictional defect or grave abuse by the CA in accepting the petition.

Issue 2 — Who may institute an action for annulment of judgment; standing and cause of action

The Court examined whether only parties to the original judgment can file for annulment. It cited Militante v. Edrosolano and the early Anuran v. Aquino doctrine to hold that a person need not be a party to the original action to seek annulment of a judgment. The essential requirement is that the petitioner must demonstrate that the judgment was obtained by extrinsic or collateral fraud and that the petitioner is adversely affected by that judgment.
The heirs of Araneta, though not parties to the foreclosure, alleged prima facie facts of fraud and collusion between the Da Silvas and the Council, and claimed a substantial interest in the property adversely affected by the foreclosure judgment. The Court concluded that these allegations, if proven by a preponderance of evidence, would constitute a cause of action for annulment of judgment.

Issue 3 — Whether an annulment remedy is foreclosed because the judgment had already been executed and title transferred

The Council argued that annulment is unavailable once the judgment has been fully executed and property transferred. The Court rejected this contention. It relied on Garchitorena v. Sotelo, where the annulment of a foreclosure judgment was affirmed even though ownership and Torrens title had passed through subsequent purchasers by the time of appellate review. The Court emphasized that execution or transfer of the property does not bar relief where extr

Case Syllabus (G.R. No. 80892)

Facts

On February 15, 1984 Freddie and Marconi Da Silva, as mortgagors, and Islamic Da'Wah Council of the Philippines (hereafter "the Council"), as mortgagee, executed a real estate mortgage over a 4,754 sq.m. parcel of land in Cubao, Quezon City, covered by Transfer Certificate of Title (TCT) No. 30461, as security for the payment of a one million peso promissory note in favor of the mortgagee.
The mortgagors were unable to pay their obligation, prompting the Council to institute foreclosure proceedings in the Regional Trial Court (RTC), docketed as Civil Case No. Q-43746.
On February 5, 1985 the parties submitted a compromise agreement stipulating that, due to the Da Silvas' inability to pay and for additional consideration of P500,000.00, the Da Silvas would cede, transfer and convey the mortgaged land to the Council.
On February 12, 1985 the RTC approved the compromise agreement. Thereafter, the Register of Deeds of Quezon City issued TCT No. 328021 in the name of the Council.
Subsequently, on August 8, 1985 Jesus Amado Araneta filed with the Register of Deeds a notice of lis pendens in connection with Civil Case No. Q-47989 entitled "Islamic Da'Wah Council of the Philippines v. Jesus Amado Araneta" for ejectment. That complaint was converted to an action for collection of rentals with damages but later withdrawn by the Council.
On August 13, 1985 Araneta filed with the Register of Deeds an affidavit of adverse claim in connection with Civil Case No. Q-43469 entitled "Marconi Da Silva, et al. v. Jesus Amado Araneta, et al." for recovery of possession. The notice of lis pendens and adverse claim were annotated at the back of TCT No. 328021 by the Register of Deeds.
On October 9, 1985 the Council filed in the RTC of Quezon City a complaint for Quieting of Title, Recovery of Possession and Damages with Preliminary Mandatory Injunction against Araneta, praying inter alia for cancellation of the annotations at the back of TCT No. 328021. That case was docketed as Civil Case No. Q-46196.

Procedural History

While Civil Case No. Q-46196 was pending, on July 6, 1987 the heirs of Jesus Amado Araneta filed with the Court of Appeals a petition to annul the judgment in Civil Case No. Q-43746 (foreclosure).
The heirs narrated a series of events and factual assertions in support of their petition (see separate section).
On November 10, 1987 the Court of Appeals issued a temporary restraining order enjoining the trial judge from hearing Civil Case No. Q-46196 until further orders and ordered the parties to appear for a pre-trial conference.
The Council filed a motion for reconsideration and later a Supplement to Motion for Reconsideration with Motion to Dismiss, raising jurisdictional and substantive objections to the annulment petition.
On December 2, 1987 the Court of Appeals denied the Council's motion for reconsideration for lack of merit.
On December 3, 1987 the Court of Appeals summarily denied the additional grounds reiterated by the Council at hearing.
The Council filed a petition for certiorari in the Supreme Court challenging the Court of Appeals' issuance of the orders dated November 10 and December 2 and 3, 1987.

Allegations and Factual Assertions by the Heirs of Araneta (Private Respondents)

Jesus Amado Araneta purchased the 4,754 sq.m. parcel of land in Cubao from the Spouses Garcia on December 20, 1953, and he and his family were always in possession thereafter.
For reasons known only to Araneta and Fred Da Silva (an employee of Araneta), title was placed in Fred Da Silva’s name as evidenced by TCT No. 30461, although Araneta's owner's duplicate copy was always in his possession.
On January 31, 1963, the parties decided to terminate the trust created over the property; Da Silva executed a deed of sale over the parcel in favor of Araneta but no consideration was given by Araneta and any recital of consideration in the deed was alleged to be fictitious.
The Register of Deeds refused to register the deed of sale because the title was in the name "Fred Da Silva married to Leocadia Da Silva" and thus presumed conjugal; as the wife had died, the conjugal partnership should first be liquidated.
On February 1, 1984 Freddie and Marconi Da Silva (two of the three surviving children of Fred Da Silva, who died in 1963) filed a petition, docketed as LRC record Case No. Q-2772, for issuance of a new copy of the owner's duplicate of TCT No. 30461. Judge Vera granted the petition on March 24, 1984.
Araneta learned of the petition and filed a motion to re-open, asserting he possessed the owner's duplicate copy and explaining his reasons; the motion was granted and on December 7, 1984 the land registration court ordered the Da Silvas to (a) return to the Register of Deeds the second owner's duplicate copy, and (b) neither enter into any transaction concerning that second owner's duplicate nor utilize the title other than to return it to the Register of Deeds.
On November 11, 1985 the Da Silvas manifested before the land registration court that the title to the property was transferred to the Council based on the compromise agreement in Civil Case No. Q-43746.
Upon Jesus Amado Araneta’s death in 1985, his heirs substituted him and, on motion of the heirs, Judge Vera consolidated Civil Cases Nos. Q-2772 and Q-43469, both raffled to his sala, with Civil Case No. Q-46196; however, the judge hearing Q-46196 would not heed the consolidation order.
The heirs alleged that the Da Silvas, with the connivance of the Council, executed a purported promissory note secured by a real estate mortgage with onerous terms made to pave the way for foreclosure by confession of judgment, and that the Council knew of Araneta’s ownership claim since the Council’s former executive officer and secretary general was the Da Silvas’ lawyer in their cases against the Aranetas.
The heirs prayed that (1) the judgment in Civil Case No. Q-43746 be annul