Title
Legarda vs. Court of Appeals
Case
G.R. No. 94457
Decision Date
Oct 16, 1997
Victoria Legarda lost her property due to her counsel's gross negligence, rendering the default judgment void. However, reconveyance was denied as the property was sold to innocent third parties in good faith.
legarda
court of appeals
resolution

Case Summary (G.R. No. 107606)

Factual Background

The parties contracted for the lease of a house owned by Victoria Legarda at 123 West Avenue, Quezon City. Private respondent New Cathay House, Inc. paid a deposit and down payment of P72,000.00 on November 23, 1984 but the lessor allegedly refused to sign the written lease. New Cathay filed a complaint for specific performance with preliminary injunction and damages. Legarda engaged Dean Antonio Coronel as counsel. Coronel obtained a ten-day extension to file an answer but failed to do so. The case proceeded to a default judgment on March 25, 1985 awarding specific performance and various damages.

Trial Court Proceedings and Execution

A copy of the March 25, 1985 judgment was served on Coronel on April 9, 1985. No action was taken and the judgment became final and executory. The trial court issued a writ of execution on May 8, 1985. At public auction the sheriff adjudged the property to Roberto V. Cabrera, Jr., as highest bidder for P376,500.00 and issued a Certificate of Sale dated June 27, 1985. After Legarda failed to redeem within the one-year redemption period, the sheriff executed a Final Deed of Sale dated July 8, 1986, which Cabrera registered with the Register of Deeds on July 11, 1986, resulting in issuance of Transfer Certificate of Title No. 350892 in his name and cancellation of Legarda’s TCT No. 270814.

Court of Appeals Proceedings

Coronel filed a petition for annulment of judgment in the Court of Appeals on October 23, 1986. On November 29, 1989 the Court of Appeals denied the petition, concluding that the trial court judgment was not procured by extrinsic fraud and that the lawyer’s conduct amounted to ordinary negligence which nevertheless bound the client. The appellate decision became final on December 21, 1989 when no motion for reconsideration or appeal was filed.

Petition to the Supreme Court and the Gancayco Decision

After new counsel was retained, Victoria Legarda filed a petition for certiorari under Rule 65, Rules of Court, before the Supreme Court, alleging that her loss arose from the gross, reckless and inexcusable negligence of Dean Coronel and that she had been deprived of due process. On March 18, 1991 the Supreme Court First Division, through Justice Gancayco, granted the petition. The Court nullified the March 25, 1985 trial judgment, the November 29, 1989 Court of Appeals decision, the sheriff’s Certificate of Sale of June 27, 1985, and the subsequent Final Deed of Sale. The First Division ordered New Cathay House, Inc. to reconvey the property to Legarda and directed the Register of Deeds to cancel the registration in the name of Cathay and to restore title to Legarda. The decision characterized counsel’s omissions as reckless, inexcusable and gross negligence and commanded that Coronel show cause why he should not be held administratively liable.

Transfers and Third-Party Purchasers

Before promulgation of the March 18, 1991 decision, the record showed successive transfers of the property to apparently innocent purchasers for value. Cabrera sold to Nancy Saw on March 21, 1990; Saw sold to Lily Tanlo Sy Chua on August 7, 1990; and the Chuas sold to Janet Chong Luminlun by contract dated April 3, 1992, with TCTs issued to each transferee (TCT Nos. 31672, 31673 and 99143 respectively). None of those titles bore an annotation of lis pendens according to the record, and each transferee dealt with a clean Torrens certificate.

Motion for Reconsideration by New Cathay House and Core Issues

New Cathay House, Inc. moved for reconsideration of the Gancayco decision. It argued that reconveyance was impossible and unconstitutional because it did not own the property and because ownership had passed to innocent third parties for value prior to promulgation of the decision. It further contended that Cabrera acted in his private capacity at the auction, that the sale price paid at the auction extinguished Legarda’s liability under Article 1240, Civil Code of the Philippines, and that proceedings leading to the sale had been regular and attended by notice and publication in conformity with the Rules of Court. The motion also noted that Cabrera had not been impleaded as a party prior to the March 18, 1991 judgment and that the Court had lacked jurisdiction over him at the time of that judgment.

En Banc Resolution and Disposition

The Court, En Banc, granted the motion for reconsideration. It vacated and set aside the March 18, 1991 First Division decision. The Court entered judgment dismissing the petition for review and affirmed the November 29, 1989 decision of the Court of Appeals in CA-G.R. No. SP-10487. Costs were assessed against Victoria Legarda. The resolution was authored by Justice Romero and concurred in by Justices Regalado, Davide, Jr., Melo, Mendoza, Francisco, Panganiban, and Torres, Jr. Several justices filed dissenting or separate opinions.

Majority’s Legal Reasoning

The majority grounded its disposition on the principles of finality of judgments, the protection afforded purchasers under the Torrens system, and the narrow scope for annulling final judgments. It reiterated that judgments become ipso facto final when no appeal is perfected within the reglementary period and that final judgments not void must be respected for reasons of public policy and certainty. The Court stated that judgments are void only when rendered without jurisdiction or obtained by extrinsic fraud or collusion. It held that the proceedings before the trial court and the Court of Appeals had been regular; that Legarda had been given opportunity to be heard; and that the auction sale and subsequent registrations were regular and supported by the sheriff’s Certificate of Sale and Final Deed of Sale. The majority emphasized the doctrine that one dealing with Torrens-registered property need not go beyond the certificate of title, citing Sandoval v. Court of Appeals, and observed that no notice of lis pendens had been annotated on the titles of the successive transferees. The majority concluded that ordering reconveyance to Legarda would unlawfully deprive innocent purchasers of their property without due process.

Doctrine on Void Judgments and Annulment for Fraud

The Court analyzed the legal standard for annulling a final judgment for fraud. It explained that annulment on fraud grounds requires extrinsic or collateral fraud not litigated or resolved in the original case. The majority found no extrinsic fraud on the record. It observed that Legarda’s initial appellate petition alleged fraud but that her later Supreme Court petition pivoted to alleged counsel negligence. That shift, together with the absence of proof of extrinsic fraud, rendered annulment inappropriate. The Court thus confined the remedy to the narrow categories of void judgments recognized by precedent.

Dissenting Opinion of Justice Hermosisima

Justice Hermosisima dissented. He emphasized that Coronel’s negligence was gross, pervasive and inexcusable, that the lawyer was effectively suspended for his conduct, and that Legarda had been deprived of her day in court. He viewed the judgment by default as void for lack of due process and therefore treated all incidents arising from it—the writ of execution, the auction sale, the Deed of Sale and the title issued to Cabrera—as likewise voi

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