G.R. No. 100710 - Abella vs. Commission on Elections

Case Summary (G.R. No. 100710)

Procedural Posture

Petitioner filed a Petition for Review on Certiorari under Rule 45, assailing two Court of Appeals (CA) resolutions: (1) dismissal of petitioner’s Petition for Annulment of Judgment (Rule 47) as insufficient in form and substance and for not invoking the appropriate remedy; and (2) denial of petitioner’s Motion for Reconsideration. The CA held petitioner should have sought relief under Rule 38 (petition for relief from judgment), filed an action for quieting of title, or intervened in the underlying case.

Relevant Facts

Spouses Acampado obtained loans from petitioner on November 21, 1995 and January 30, 1996 and executed a Real Estate Mortgage and an Amendment of Real Estate Mortgage, which were annotated on TCT No. V-41319 before the inception of the underlying suit.
On June 3, 1996, Sy Tan Se filed a Complaint for Declaration of Nullity of TCT No. V-41319 in RTC Branch 172 (Civil Case No. 4930-V-96). Petitioner was not impleaded or notified of that action.
The Acampados defaulted; extrajudicial foreclosure ensued with a sheriff’s sale on June 17, 1997 where petitioner was the highest bidder and obtained a Certificate of Sale dated July 15, 1997. After the redemption period expired, petitioner sought to consolidate ownership and requested issuance of a new TCT; it was then informed of the RTC’s August 12, 1998 decision annulling TCT No. V-41319 for having proceeded from an illegitimate source.

Dispositive RTC Ruling at Issue

The RTC’s August 12, 1998 decision declared TCT No. V-41319 null and void “for having proceeded from an illegitimate source,” effectively annulling the registered title and canceling any annotations thereon, including the mortgage annotation recorded in favor of petitioner.

Court of Appeals Ruling

The CA dismissed the petition for annulment of judgment on the ground that petitioner knew of the RTC decision by October 1998 and therefore should have sought relief under Rule 38, filed an action for quieting of title, or intervened in the underlying case. The CA denied reconsideration and thereby prompted the present appeal to the Supreme Court.

Issues Presented to the Supreme Court

Whether a petition for annulment of judgment under Rule 47 is the proper remedy in the circumstances. 2) Whether the RTC judgment in Civil Case No. 4930-V-96 should be annulled for lack of jurisdiction due to non-joinder of petitioner as an indispensable party.

Supreme Court’s Analysis — Proper Remedy (Rule 47 vs Rule 38, Quieting, Intervention)

Rule 38 (petition for relief from judgment) is available only to a person who is a party to the same case; it allows a party aggrieved by fraud, accident, mistake, or excusable negligence to pray that the judgment be set aside in the same case. Because petitioner was never a party or even summoned in Civil Case No. 4930-V-96, Rule 38 was not available. The Court relied on precedent (Lagula v. Casimiro) that Rule 38 applies only when the one deprived of his right is a party to the case.
An action for quieting of title is inappropriate here because the central grievance was deprivation of procedural due process in the annulment of a title and its annotations by an adjudication in which petitioner, an indispensable party, was not heard. Quieting of title addresses a cloud on title, which presupposes a semblance of title affecting the party’s rights; it does not remedy the absence of due process resulting from a judgment of another co-equal court. Interfering with the judgment via quieting of title would require modification of another court’s decision, which courts must not do.
Intervention was not a realistic or effective remedy because it depends on the mortgagee’s knowledge of the pendency of the case. Petitioner denied any prior knowledge and specifically alleged concealment by the private respondent. Where extrinsic fraud (e.g., purposeful concealment) is alleged and can be shown by a preponderance of evidence, annulment of judgment under Rule 47 is an appropriate remedy. Given the unavailability of Rule 38, the inappropriateness of quieting of title to cure a deprivation of due process, and the alleged concealment that prevented intervention, the Court concluded a petition for annulment of judgment under Rule 47 was proper.

Supreme Court’s Analysis — Indispensable Party and Jurisdiction

The Court emphasized that petitioner, as the registered mortgagee with an annotated mortgage on the TCT prior to the institution of Civil Case No. 4930-V-96, was an indispensable party. The cancellation of the TCT necessarily carried with it cancellation of the mortgage annotation and thus materially affected petitioner’s real rights. A mortgage is a real right; its annotation in the Torrens system provides public notice and protection to third parties.
The joinder of indispensable parties is mandated by Section 7, Rule 3 of the Revised Rules of Civil Procedure. Jurisprudence cited in the decision repeatedly holds that courts cannot render valid final judgments in the absence of indispensable parties; a court’s actuations without such parties are null and void for want of authority to act.
The Court rejected the contention that the mortgagee could not be indispensable because the mortgage might be invalid under Article 2085(2) (relating to the ownership requirement), noting that at the time the mortgage was constituted there was an existing Torrens title in the Acampados’ names and third parties have the right to rely on the face of the Torrens title. Seno v. Mangubat was invoked to underscore the reliance interest of innocent third parties dealing with registered land.
Because the RTC failed to implead petitioner, an indispensable party, it

Case Syllabus (G.R. No. 100710)

Case Before the Court

Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing:
- The March 25, 1999 Resolution of the Court of Appeals in CA-GR SP No. 50638 which denied petitioner Metropolitan Bank and Trust Company’s petition for annulment of judgment for being insufficient in form and substance, and dismissed it outright (Section 2, Rule 47, 1997 Rules of Civil Procedure).
- The January 27, 2000 Court of Appeals Resolution denying petitioner’s Motion for Reconsideration.
The Court of Appeals’ March 25, 1999 Resolution observed petitioner knew of the challenged RTC decision sometime in October 1998 and held that petitioner should have sought relief under Rule 38 rather than a petition for annulment under Rule 47; consequently, the CA denied the petition for annulment of judgment.
This petition was submitted to the Supreme Court for resolution, with memoranda filed by the parties; the case was deemed submitted for resolution on January 25, 2001. (See docketing and memorandum dates and counsel names as reflected in the source.)

Essential Facts

On November 21, 1995 and January 30, 1996, spouses Raul and Cristina Acampado obtained loans from Metropolitan Bank and Trust Company in the amounts of P5,000,000 and P2,000,000, respectively.
As security, the Acampados executed a Real Estate Mortgage and an Amendment of Real Estate Mortgage in favor of petitioner over a parcel of land covered by Transfer Certificate of Title (TCT) No. V-41319, with the contracts registered in the Registry of Deeds of Valenzuela City on November 20, 1995 and January 23, 1996.
On June 3, 1996, respondent Sy Tan Se filed a Complaint for Declaration of Nullity of TCT No. V-41319 against the Acampados, docketed in the Regional Trial Court (RTC), Valenzuela, Branch 172, as Civil Case No. 4930-V-96.
Petitioner, although the registered mortgagee and with the mortgage annotation appearing on TCT No. V-41319 prior to Civil Case No. 4930-V-96, was not joined as a party to that action and was not notified of the case’s existence.
The Acampados defaulted; extrajudicial foreclosure proceedings were initiated on April 19, 1997. The sheriff conducted an auction sale on June 17, 1997 wherein petitioner submitted the highest and winning bid; Certificate of Sale was issued in petitioner’s favor on July 15, 1997; the sale was entered in the Registry of Deeds on July 28, 1997.
After the redemption period lapsed on July 28, 1998, petitioner executed an Affidavit of Consolidation of Ownership to secure issuance of a new TCT in its name. Upon presentation, petitioner learned of the RTC Decision dated August 12, 1998 in Civil Case No. 4930-V-96 annulling TCT No. V-41319.
The dispositive portion of the RTC Decision declared TCT No. V-41319 null and void for having proceeded from an illegitimate source, with costs against the defendant (defendant Raul Acampado).
On January 27, 1999, petitioner filed with the Court of Appeals a Petition for Annulment of the RTC Decision; the CA dismissed it as insufficient in form and substance and later denied reconsideration.

Procedural History

Civil Case No. 4930-V-96 (RTC, Valenzuela, Branch 172): Complaint for Declaration of Nullity of TCT No. V-41319 filed by Sy Tan Se against Raul and Cristina Acampado; RTC rendered Decision on August 12, 1998 annulling TCT No. V-41319.
Post-judgment extrajudicial foreclosure proceedings and sheriff’s sale in which petitioner was the winning bidder and obtained Certificate of Sale (June–July 1997) and entered sale in Registry of Deeds (July 28, 1997).
Petitioner executed Affidavit of Consolidation of Ownership on July 28, 1998; discovery of RTC Decision followed.
Petition for Annulment of Judgment filed by petitioner in the Court of Appeals on January 27, 1999; CA dismissed petition on March 25, 1999 for insufficiency in form and substance, reasoning alternative remedies existed and petitioner had knowledge in October 1998.
Motion for Reconsideration denied by the CA on January 27, 2000.
Petition for Review on Certiorari filed in the Supreme Court; case decided September 10, 2001 (G.R. No. 141970).

Issues Presented

Whether a petition for annulment of judgment under Rule 47 of the 1997 Rules of Civil Procedure is the proper remedy available to petitioner under the circumstances.
Whether the judgment of the trial court in Civil Case No. 4930-V-96 (the RTC decision annulling TCT No. V-41319) should be annulled.

Court of Appeals Ruling (as assailed)

The CA dismissed petitioner’s Petition for Annulment of Judgment as insufficient in form and substance pursuant to Section 2, Rule 47, 1997 Rules of Civil Procedure.
The CA held petitioner knew of the RTC Decision sometime in October 1998 and should have sought relief by way of a petition for relief from judgment under Rule 38 instead of seeking annulment under Rule 47.
The CA denied petitioner’s Motion for Reconsideration on January 27, 2000.

Petitioner’s Contentions (as presented)

Petitioner contends that annulment of the RTC Decision was the appropriate and only effective remedy available because:
- It was never made a party to Civil Case No. 4930-V-96 despite being the registered mortgagee and an indispensable party.
- There was an allegation of extrinsic fraud arising from the deliberate exclusion and concealment of petitioner from the nullity proceedings, depriving it of due process.
- Other remedies cited by respondents (Rule 38 petition for relief, an action for quieting of title, or intervention in the nullity case) were unavailable, inappropriate, or ineffective under the facts.

Supreme Court Ruling (Disposition)

The Supreme Court granted the petition.
The assailed Resolutions of the Court of Appeals were reversed.
The Decision of the Regional Trial Court in Civil Case No. 4930-V-41319 (Civil Case No. 4930-V-96) was nullified and set aside.
No costs were imposed.
The Decision was authored by Justice Panganiban and was concurred in by Justices Melo (Chairman)