FRANCISCO MAGNO, ESPERANZA MAGNO, EULOGIO MAGNO, AMELIA MAGNO VASQUEZ, ULPIANO VASQUEZ, JOSE O. MAGNO, NICANOR P MAGNO, FELECITAS O. MAGNO, AND LOURDES O. MAGNO, PETITIONERS, VS…

A petition for review on Certiorari
of the judgment of the Court of Appeals promulgated on December
2, 1967.

Before the Bulacan Court of First Instance, in Civil Case No. 3198-M (Bulacan Case), which was an action between members of the
same family for partition of war damage payments received from the United
States Government, judgment by default was rendered on September 9, 1966 in
favor of petitioners herein, as
the plaintiffs in the said case, and against private respondent Donato M. Vergara and his
father-in-law, Meliton Magno,
jointly and severally, as defendants therein. 
Judgment having become final, the corresponding Writ of Execution was
issued and the properties of private
respondent were levied upon and scheduled for sale at public auction.

Private respondent resorted to an action for annulment of
judgment and of Writ of Execution before the Court of First Instance of Nueva Ecija in Civil Case No. 275
(Annulment Suit) against petitioners and the Nueva Ecija Provincial Sheriff, as defendants, upon the main
contention that judgment in the Bulacan Case was
procured by means of extrinsic fraud committed by petitioner Francisco Magno against private respondent.  Essentially, the extrinsic fraud allegedly
consisted in assurances made by Francisco Magno to
private respondent during a confrontation between them that it was never the
intention of petitioners to involve private respondent in the suit and that he
would be excluded therefrom.  Convinced, private respondent was lured into
inaction only to discover later that judgment was rendered against him and
execution against his properties ordered. 
Private respondent also prayed for a Writ of Preliminary Injunction to
restrain the enforcement of the judgment and of the Writ of Exe­cution pending
the determination of the Annulment Suit.

Petitioners moved to dismiss the Annulment Suit and opposed the
Injunction on the principal ground that the Nueva Ecija Court
had no jurisdiction to interfere by Injunction and to nullify a final judg­ment
of the Bulacan Court,
which is a Tribunal of concurrent and coordinate jurisdiction.  In deferring determination of said Motion,
respondent Judge ruled that the matters
alleged in the Complaint are reflective of extrinsic fraud “which, if
true, would evince the nullity of the Decision under litigation”.  They are “too evidentiary which could be
resolved by the Court after having allowed both parties to adduce their
respective evidence pertinent to this contentious issue.” Respondent Judge
granted the Injunction prayed for upon the filing of a bond of P1,000.00.

In petitioners’ Motion for the reconsideration of the aforesaid Order,
they averred that “there is no necessity of reception of evidence to prove
the allegations of the complaint in order to resolve the defendants’ motion to
dismiss because the ground of the said motion to dismiss which is lack of
jurisdiction assumes arguendo the truth of the said
allegations; and under said assumption, it is the defendant’s stand that the
Court has no jurisdiction to review,
much less set aside, the final and executory
decision”^[1]
of the Bulacan Court. 
Reconsideration was denied by respondent trial Judge.

The Court of Appeals, in Certiorari
and Prohibition proceedings thereafter filed before it by petitioners, upheld
the jurisdiction of the Nueva Ecija
Court, stating:

“x x x we
are satisfied that, at the very least, the complaint for annulment before the Nueva Ecija court alleges
ultimate facts which, if substantiated, could probably constitute extrinsic
fraud (Vide: II Moran, Comments on the Rules of Court, 1963 ed., p. 230,
and cases cited).  It follows that the
propriety of the action for annulment aforesaid and the competence of the Nueva Ecija court to take
cognizance thereof must be conceded. x x x“^[2]

Petitioners assail the
foregoing conclusion and contend:

I

The respondent Court of Appeals erred in disposing of case CA-G.R.
No. 39715-R and dismissing the petitioners’ petition on the basis of a legal
point which was not in issue before it because the legal proposi­tion that a
court of first instance may set aside the judgment of another court of first
instance on the ground of extrinsic fraud in the procurement of the said
judgment is admitted all along by the petitioners.

II

The respondent Court of Appeals erred in not holding that the
allegations of the complaint in Civil Case No. 275, having been hypothetically
admitted in the motion to dismiss, a hearing on the merits in order to prove
the said allegations is not necessary for the purpose of resolving the said
motion to dismiss.

III

The respondent Court of Appeals erred in not holding that the
allegations of the complaint in Civil Case No. 275 of the Court of First
Instance of Nueva Ecija, even granting them to be true, do not constitute extrinsic fraud, or
stated in another way, do not state a cause of action as to justify the
respondent Court of First Instance of Nueva Ecija, in exercising its jurisdiction to interfere with and
annul the final and executory judg­ment of the Court
of First Instance of Bulacan in Civil Case No.
3198-M.

We find the foregoing
bereft of merit.

In regards to the first
assignment of error, although petitioners now admit that if, indeed, there was
extrinsic fraud, the judgment of the Bulacan Court
can be set aside by the Nueva Ecija
Court, the record shows that before the Appellate Court they had argued
“that the respondent Judge has no jurisdiction to interfere with, much
less annul, the final and executory decision of x x x the Court of First Instance
of Bulacan x x x because they have co-equal and concurrent
jurisdiction”.  To prevent further
discussion on that point, we wish to state that the authority of a Court of
First Instance to take cognizance of a suit to annul a final and executory Decision rendered by another Court of First
Instance is beyond doubt.  This was the
doctrine enunciated in Dulap et al. vs. Court of
Appeals, et al.^[3] wherein it was held that since the cause of
action in an annulment suit is entirely different from the action which gave
rise to the judgment sought to be annulled, a direct attack against it being
the main object of such proceeding, there is no plausible reason, why the venue
of the action to annul the judgment should necessarily follow the venue
of the previous action.  This ruling was
reiterated in the subsequent cases of Gianan vs.
Imperial, et al.^[4]
and Francisco vs. Aquino.^[5]
The con­clusion follows that, as admitted even by the petitioners, the Nueva Ecija Court
has the power to annul the judgment of the Bulacan Court if, as alleged,
extrinsic fraud attended the procurement of the same.

We will now discuss the third error assigned.  The issue raised is whether the allegations
in the Complaint filed before the Nueva
Ecija Court constitute extrinsic fraud as to justify said Court in
exercising its jurisdiction to interfere with and set aside the judgment of the
Bulacan Court and to enjoin the exe­cution thereof.

The portions of the
Complaint in the Nueva Ecija Court pertinent to the allegation of extrinsic
fraud read:

“(6)    Under date of
August 31, 1965, the defendants filed an amended complaint in said Civil Case
No. 3198-M, accompanied by a motion to admit the same, bearing the date of
September 1, 1965; and in said amended complaint, the defendants as plaintiffs
therein included the plaintiff herein, Dr. Donato M. Vergara, as a co-defendant; and the defendants herein
alleged in their amended complaint that Meliton Magno is the father-in-law of Dr. Vergara,
which is true; and that they were living together in the same house in Barrio Sto. Cristo, San Antonio, Nueva Ecija, which is not true,
because Dr. Vergara lived and is still living in his
own house in Barrio San Roque, San Isidro, Nueva Ecija; defendants also
alleged in their amended complaint that
plaintiff Dr. Vergara conspired with his
father-in-law Meliton Magno
to defraud the defendants by having the war damage check indorsed to him and
then depositing it in his own savings account with the Philippine National Bank
on October 13, 1964, which is not true, because said check was not indorsed to
the plaintiff herein and plaintiff had not deposited it in his own savings
account, as in fact he had not and has not opened any savings account with the
Philippine National Bank.  Defendants
prayed in their amended complaint that plaintiff Dr. Vergara
be held solidarily liable with Meliton
Magno for the claims stated therein.  A true copy of said amended complaint,
together with its annexes, is hereto attached as Annex ‘C’ and made part
hereof.

(7)     Immediately after
plaintiff Dr. Vergara and his wife, who is a carnal
niece of defendant Francisco Magno, learned of his
inclusion as co-defendant in the amended complaint in Civil Case No. 3198-M, plaintiff and his wife sought defendant
Francisco Magno and remonstrated with him, asking him
why plaintiff should be involved in said case when he had nothing to do with it
except to identify his father-in-law before Mr. Corrado
Sevilla who in turn identified him with the
Philippine National Bank for the purpose of collecting the war damage check;
and on that occasion defendant Francisco Magno
assured the plaintiff and more especially Mrs. Vergara
who is Francisco Magno’s carnal niece that it was
never his intention to involve the plaintiff in the case or to require him to
pay any amount claimed therein; and that plaintiff’s inclusion as co-defendant
of his father-in-law must have been the thought of defendants’ lawyers, because
the plaintiff had signed on the check in question; and on that occasion
defendant Francisco Magno unequivocably
told plaintiff and his wife not to worry or be bothered with his inclusion in
the case, and not to mind it, and assured them that he would take care that plaintiff
was taken out of the case and was not prejudiced.

(8)     With said assurances
of defendant Francisco Magno, which plaintiff and his
wife believed in good faith, they paid no more attention to the case, nor
followed its developments, nor paid any attorney’s fee to the lawyer defending Meliton Magno to defend herein
plaintiff in said case.”

Additionally, private
respondent contended that he was never informed of the pre-trial thereby misleading the Bulacan Court into believing certain false
allegations as true, to wit:

“(12)  Although the
records of Civil Case No. 3198-M show that Atty. Pablo received notice of the
pre-trial, plaintiff was never informed of the same; and because of plaintiff’s
absence during the taking of defendants’ evidence, the Court was misled into
holding in its decision that Meliton Magno indorsed the war damage check to the plaintiff and that the plaintiff then
deposited the check in his account with the Philippine National Bank, which is
not true, as has already been stated. 
The Court was also misled to make the finding that plaintiff acted with
gross bad faith in depositing the war damage money in his account with the
Philippine National Bank, which as has already been stated is not true.”

We agree with the Court of Appeals that the
foregoing allegations contain ultimate facts which, if substantiated, could
constitute extrinsic fraud.  Extrinsic
fraud is one which prevents the losing party from defending the action brought against
him.^[6]

“Among the instances given in the books of extrinsic or
collateral fraud are such as these: Keeping the unsuccessful party away from court by a false promise of compromise, or purposely keeping him in ignorance of the suit;
or where an attorney fraudulently pretends to represent a party, and connives
at his defeat, or being regularly employed, corruptly sells out his client’s
interest”^[7] (Italics ours)

So
also has it been held:

“We think it sufficiently appears from the testimony of Baker
that he was misled by the statement of Judge Walker, who was the attorney for
Craddock and Stotts. 
He had a right to assume from his version of their conversation that the
case would not be taken up without notifying him.  It appears that he thought that the court had
no jurisdiction because an attempt was made to foreclose in the same action a
mortgage on real estate which was situated in another district in the same
county.  He says it was understood that
he should be notified when the case was to be taken up, and did not appear at
the adjourned term because no depositions had been taken by either party, and
he relied upon his understanding that the case would not be taken up without
notice to him.  He stated that Craddock
was only present during a part of the conversation that he had with Judge
Walker.  Judge Walker was not a witness
in the case, and there is nothing to contradict the testimony of Baker.  It is true Craddock contradicted his
testimony in regard to some other matters which occurred during the
conversation, but we do not think there is any contradiction of Baker’s
testimony with regard to the postponement of the trial.  There was no negligence on his part in
placing reliance upon the statements made to him, and, while we do not think
that any fraud was intended to be practiced upon Montague, the result was
that Montague was deprived of his right to appear and defend the action and
this constituted a fraud in law.  This
principle has been recognized in the case of Lawson v. Bettison,
12 Ark. 401.  Relief against fraud in judgment and decrees
has also been recognized as a ground for equitable jurisdiction.  Where by mistake or fraud a party has
gained an unfair advantage in proceedings in a court which must operate to make
that court an instrument of injustice, courts of equity will interfere and restrain him from
reaping fruits of the advantage thus improperly gained.  In the application of the principle an
injunction will be granted
against a judgment taken in violation of an agreement to continue the case,
where there is a good defense to the action.  Beams v. Denham, 2 Scam. (III) 58; Sanderson
v. Voelcker, 51 Mo. App. 328; Brooks v. Twitchell, 182 Mass.
443, 65 N.E. 843, 94 Am St. Rep. 662.”^[8]
(Italics ours)

True, private respondent
had hired the legal services of Atty. Simeon S. Pablo who, on October
15, 1965, had filed
an Answer wherein defendants Meliton Magno and Donato Vergara interposed a counterclaim for attorney’s fees,
moral and exemplary damages in the total amount of P99,000.00.  That, however, was prior to the pre-trial
which neither private respondent nor his counsel was able to attend, and before
private respondent had remonstrated with petitioner Francisco Magno regarding the former’s
inclusion as party litigant.  Private
respondent can­not be faulted with negligence for relying on the promises of
petitioner Francisco Magno considering the close
relationship between them.  It should
also be recalled that it was a default judgment that was rendered against private
respondent and Meliton Magno,
thereby lending truth to private respondent’s contention that he no longer
followed up the developments in the case, with the result that he was deprived
of the opportunity to appear and present his defense to the action.

By moving to dismiss, petitioners, as defendants in the Annulment
Suit hypothetically admitted the truth of the ultimate facts alleged in the
Complaint therein.  Thus, they admitted
that “Francisco Magno unequivocally told
plaintiff (private respondent) and his wife not to worry or be bothered with
his inclusion in the case, and not to mind it, and assured them that he would
take care that plaintiff was taken out of the case and was not
prejudiced”.^[9]
They also admitted that “with said assurances of defendant Francisco Magno, which plaintiff (private respondent) and his wife
believed in good faith, they paid no more attention to the case nor followed
its development.”^[10]
They also admitted that “defendant Francisco Magno
convinced and lured the plaintiff (private respondent) not to resist the
action, only to take advantage of the decision thereafter procured by him by
seeking its execution and satisfaction.”^[11]

With those ultimate facts hypothetically admitted by petitioners,
it has to be held that the Complaint in the Annulment Suit has sufficiently
made out a cause of action for
extrinsic fraud, with the result that the competence of the Nueva Ecija Court to take cognizance of that action and to
issue the Writ of Preliminary Injunction has to be upheld.

However, what petitioners
hypothetically admitted are only ultimate facts because the law does not re­quire
probative or evidentiary facts to be alleged in the complaint.^[12] Evidentiary facts, at best factual, to prove
the material elements of extrinsic fraud must still be established in a
full-dress trial.  Private respondent’s
defense that he had not deposited the war damage payments in his own personal
account and did not profit therefrom should be
fully ventilated.

After having concluded
that the Complaint filed by private respondent before the Nueva
Ecija Court alleges ultimate facts which, if proven,
can justify the annulment of the judgment of the Bulacan
Court, the second error assigned by petitioners becomes obviously
tangential.  It can not be alleged, as petitioners
do, that since those allegations of ultimate facts have been admitted by them
in their Motion to Dismiss, then those facts cannot support the annulment of
the judgment of the Bulacan Court.  The
fallacy of that reasoning is so obvious that we find no need to dwell on it at
length.

WHEREFORE, the
Decision of the Court of Appeals, subject of this review, is hereby
affirmed; the jurisdiction of the Court of First Instance of Nueva Ecija to entertain Civil
Case No. 275 for annulment of judgment and to issue the Writ of Preliminary
Injunction is hereby upheld; and
this case is hereby remanded to said trial
Court for appropriate action pursuant to the tenor of this judgment.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, and
Guerrero, JJ., concur.

^[1]
p. 95, Rollo.

^[2]
Decision, p. 30, Rollo.

^[3]
42 SCRA 537 (1971).

^[4]
55 SCRA 755 (1974).

^[5]
72 SCRA 140 (1976).

^[6]
Tarca vs. Carretero,
52 O.G., 3558; Jones vs. Jones, 254 SW 2d 260, cited in 46 Am Jur 2 d, Judgments, subsection 825, p.
979.

^[7]
US vs. Throckmorton, 98
U.S. 65, 25 L. ed. 96; Donovan v. Miller, 88 Pac. 82, 84; Varela vs.
Villanueva et al., 50 O.G. p. 4242, cited in 2 Moran, 1979 ed., p. 237.

^[8]
Montague v. Craddock, 193 SW. 
268, 270 cited in 30 A Am. Jur. 738.

^[9]
p. 38, Rollo.

^[10]
Ibid.

^[11]
p. 42, Rollo.

^[12]
Pomeroy, Code Remedies, 5th ed., Sec. 420; Sutherland’s Code Pleading, p. 82,
41 Am. Jur. 292.