Case Summary (G.R. No. 159926)
Procedural Background and Antecedents
After the loan indebtedness reached approximately P15.13 million, the Bank initiated extrajudicial foreclosure proceedings on August 13, 2001 and a sheriff’s sale was set for October 8, 2001. Pinausukan filed a civil action for annulment of the real estate mortgages in the Regional Trial Court (Civil Case No. 01‑0300) on October 4, 2001 and sought injunctive relief. The case had intermittent hearings with the petitioner presenting a witness on May 30, 2002, but multiple resets occurred. Counsel and parties informed the RTC in August 2002 of settlement efforts; counsels failed to appear on a scheduled hearing of September 5, 2002, and the RTC dismissed the case for failure to prosecute on October 31, 2002. That dismissal became final. A subsequent notice of extrajudicial sale was issued June 24, 2003, and the petitioner learned that its counsel had not informed it of the RTC’s dismissal. On July 24, 2003, Pinausukan filed a petition for annulment of judgment in the Court of Appeals (CA), alleging extrinsic fraud in the form of gross negligence and failure of its counsel to notify the corporation, and suggesting the counsel had changed office without notifying the petitioner. The CA dismissed the petition on July 31, 2003 for failure to attach affidavits of witnesses as required by Rule 47, Section 4 of the Rules of Court; a motion for reconsideration was denied on September 12, 2003.
Central Issue Presented
Whether the CA erred in dismissing the petition for annulment of judgment where the petitioner alleged that its counsel’s gross negligence deprived it of its day in court and whether the formal requirement to attach affidavits of witnesses should be relaxed under the circumstances.
Applicable Law and Constitutional Basis
Primary constitutional and procedural basis: the 1987 Philippine Constitution (as the decision postdates 1990), and the Rules of Court—specifically Rule 47 (1997 Rules of Civil Procedure) governing petitions for annulment of judgment. Legislative and historical authorities referenced include Act No. 136, Republic Act No. 296, and Batas Pambansa Blg. 129 (which vested exclusive original jurisdiction over annulment petitions in the Court of Appeals). Relevant doctrinal and statutory points from the Civil Code and Rules of Court cited in the decision (e.g., Article 1431 on estoppel, Rule 131 on evidence, Rule 133 on hearings by affidavits/depositions) are applied as part of the procedural framework.
Nature and Statutory Requirements of Annulment of Judgment
Annulment of judgment is an extraordinary equitable remedy available only when ordinary remedies (new trial, appeal, petition for relief) are no longer available through no fault of the petitioner. Under Rule 47, the grounds for annulment are strictly limited to (1) extrinsic fraud and (2) lack of jurisdiction. The petition must be verified and must plead with particularity the facts and law relied upon. It must be filed within four years from discovery when based on extrinsic fraud. The petition must include a certified true copy of the final judgment or order and the affidavits of witnesses or documents supporting the alleged extrinsic fraud so the CA can determine prima facie merit and whether to give the petition due course.
Definition and Limits of Extrinsic vs. Intrinsic Fraud
Extrinsic fraud is conduct by the prevailing party that prevents the losing party from fully presenting its case—examples include acts that keep a party away from court, false promises of compromise, concealment of suit, or collusion by an attorney of the winning party. The hallmark is that the fraudulent scheme deprived the petitioner of its day in court. Intrinsic fraud involves deceitful acts or evidence presented at trial (forgery, perjury) that could have been contested during the trial and thus do not justify annulment because the losing party had an opportunity to defend at the trial.
Verification versus Affidavits; Purpose of Affidavits
Rule 47 separately requires verification of the petition and the submission of affidavits of witnesses. Verification attests to the truthfulness of the petition’s allegations and is not a substitute for the affidavits of witnesses. Affidavits serve to particularize factual circumstances of extrinsic fraud, especially when such facts are outside the record, enabling the CA to determine whether the petition has prima facie merit and whether the matter should proceed or be dismissed outright.
Court’s Analysis of Procedural Defect
The CA correctly dismissed the petition for failing to attach the affidavits of witnesses required under Rule 47, Section 4. The Supreme Court affirmed that the petitioner’s verified petition did not dispense with the separate affidavit requirement. Verification by Roxanne confirmed the correctness of pleading allegations but could not replace the witness affidavits that must describe the extrinsic fraud in detail and furnish facts not of record to enable the CA’s screening function.
Court’s Analysis of Substantive Defect — Negligence of Counsel
On the merits, the Court held that the allegations, even if true, amounted to mistake and gross negligence by the petitioner’s own counsel rather than extrinsic fraud by the adverse party. Extrinsic fraud, for purposes of Rule 47, must emanate from an act of the adverse party (or its agents) and must be of such nature as to have deprived the petitioner of its day in court. Neglect or malpractice by the petitioner’s own lawyer does not satis
Case Syllabus (G.R. No. 159926)
Case Overview
- A petition seeking annulment of a judgment (order of dismissal) was filed by petitioner Pinausukan Seafood House, Roxas Boulevard, Inc. (hereafter "Pinausukan") after the dismissal of its action in the Regional Trial Court (RTC) for failure to prosecute.
- The Court of Appeals (CA) dismissed Pinausukan’s petition for annulment for procedural deficiency under Rule 47 (failure to attach affidavits of witnesses) and denied reconsideration; the Supreme Court affirmed those CA resolutions.
- The dispositive holding emphasizes that extrinsic fraud, as a ground for annulment of judgment, must emanate from an act of the adverse party and must have deprived the petitioner of its day in court; negligence of a petitioner’s own counsel does not constitute extrinsic fraud for Rule 47 purposes.
Parties and Representation
- Petitioner: Pinausukan Seafood House, Roxas Boulevard, Inc. (“Pinausukan”).
- Respondents: Far East Bank & Trust Company (now Bank of the Philippine Islands, referred to as “the Bank”) and Hector Il. Galura.
- Counsel of record for Pinausukan in the RTC: Atty. Michael Dale T. Villaflor.
- Verifying officer for the CA petition: Roxanne de Guzman-San Pedro (one of Pinausukan’s directors and Executive Vice President for Finance and Treasurer).
Relevant Property and Security Instruments
- Subject property: a 517 square meter parcel of land in Pasay City, registered under Transfer Certificate of Title No. 126636 in the name of Pinausukan.
- Four real estate mortgages were executed by Bonier de Guzman (then President of Pinausukan) in favor of the Bank on various dates in 1993, to secure loans (itemized loan amounts are identified in the source material).
- The unpaid obligation secured by the mortgages had ballooned to P15,129,303.67 as of June 2001.
Antecedent Events and RTC Proceedings (Civil Case No. 01-0300)
- The Bank commenced extrajudicial foreclosure proceedings on August 13, 2001 at the Office of the Ex Officio Sheriff, RTC, Pasay City.
- A notice of sheriff’s sale fixed the public auction for October 8, 2001 at the main entrance of the Hall of Justice of Pasay City.
- Anticipating the sale, Pinausukan, represented by Zsae Carrie de Guzman, filed an action for annulment of the real estate mortgages in the RTC on October 4, 2001 (Civil Case No. 01-0300), alleging that Bonier took loans in his personal capacity and mortgaged corporate property without corporate consent (no board resolution).
- Pinausukan sought injunctive relief (TRO or writ of preliminary injunction) to enjoin the Bank and the sheriff from proceeding with foreclosure and auction.
- Pinausukan presented its first witness, Zsae Carrie de Guzman, on May 30, 2002; subsequent hearings were reset several times, and parties informed the RTC in August 2002 of settlement attempts.
- Counsels failed to appear on the scheduled September 5, 2002 hearing despite agreeing to it. On October 31, 2002, the RTC dismissed Civil Case No. 01-0300 for failure to prosecute.
- The RTC order of dismissal attained finality.
Extrajudicial Sale Notice and Discovery of Dismissal
- On June 24, 2003, the sheriff issued a notice of extrajudicial sale concerning Pinausukan’s property; Pinausukan received the notice about a week later.
- Upon inquiry, Pinausukan learned that Atty. Villaflor, its counsel of record, had not informed it of the RTC order of dismissal dated October 31, 2002.
- Pinausukan claimed surprise and asserted counsel’s gross and palpable negligence in not keeping track of the case or appriseing the corporation of developments.
Petition for Annulment in the Court of Appeals
- On July 24, 2003, Pinausukan filed a petition for annulment of the RTC order of dismissal in the CA, verified by Roxanne de Guzman-San Pedro.
- The verified petition alleged that counsel’s gross negligence amounted to extrinsic fraud and deprived Pinausukan of its right to present evidence in Civil Case No. 01-0300 through no fault of the corporation.
- The petition recited that the registry return receipt indicated Atty. Villaflor received the October 31 order on November 28, 2002, but that he had changed offices and failed to notify the petitioner of his change of address.
CA Resolution and Denial of Reconsideration
- On July 31, 2003, the CA dismissed Pinausukan’s petition for annulment.
- The CA’s grounds for dismissal: failure to attach affidavits of witnesses attesting to and describing the alleged extrinsic fraud as required by Section 4, Rule 47 of the Rules of Court; observed distinction between a verified petition (relating to correctness of allegations) and the separate requirement of affidavits of witnesses under Rule 47.
- On September 12, 2003, the CA denied Pinausukan’s motion for reconsideration.
Issues Raised by Petitioner on Appeal to the Supreme Court
- Whether the requirement to attach affidavits of witnesses to a petition for annulment should be relaxed in the circumstances.
- Whether the verification by Roxanne could substitute for the required affidavits, as it would merely repeat the allegations under oath.
- Whether negligence of counsel (Atty. Villaflor), on whom Pinausukan relied entirely, should not preclude relief by way of annulment.
- Whether Pinausukan should be given an opportunity to prove in the RTC that Bonier had no authority to mortgage corporate property.
Supreme Court Holding — Result and Rationale (Affirmance)
- The Supreme Court affirmed the CA’s resolutions promulgated on July 31, 2003 and September 12, 2003 and ordered the petitioner to pay the costs of suit.
- The appeal lacked merit because:
- Pinausukan’s petition was procedurally defective for failure to attach the affidavits of witnesses or documents supporting the cause of action as required by Rule 47, Section 4; verification by Roxanne did not substitute for required affidavits.
- Substantively, the alleged negligence of Atty. Villaflor did not constitute extrinsic fraud under Rule 47 because extrinsic fraud must be an act of the adverse party and must have prevented the petitioner from having its day in court; negligence of one’s own counsel is not extrinsic fraud and is not actionable as a ground for annulment of