ROBERTO G. ALARCON, PETITIONER, VS. THE COURT OF APPEALS AND BIENVENIDO JUANI, RESPONDENTS.

Alarcon versus Juani

The Case

This is a petition for review on certiorari brought by Roberto Alarcon against the Court of Appeals and Bienvenido Juani. Alarcon had sued to annul a deed of sale over a portion of his land, and the trial court, on the parties' own admissions at pre-trial, declared that deed void as a forgery and cancelled the titles issued under it. The Court of Appeals later annulled that partial decision on a finding of extrinsic fraud. The Supreme Court therefore had to decide whether the appellate court was right to set aside a judgment that had long become final. The case matters because it fixes the boundaries of the action to annul a judgment: what extrinsic fraud really is, and when the four-year period to file begins to run.

Procedural History

Roberto Alarcon filed a complaint for annulment of a deed of sale with damages before the Regional Trial Court of Malolos, Bulacan, against Bienvenido Juani, Edgardo Sulit and Virginia Baluyot. At the pre-trial, the parties and their counsel made admissions of fact, and on the strength of those admissions the trial court rendered a partial decision declaring the deed of sale void from the beginning and the three transfer certificates of title null and void, and ordering the Register of Deeds to cancel them. No motion for reconsideration and no appeal were filed, so the partial decision became final and executory. Execution nonetheless stalled because the defendants refused to surrender their owner's duplicate titles.

Bienvenido Juani then went up to the Court of Appeals by a petition for annulment of the partial decision. The Court of Appeals granted the petition, set aside the partial decision together with the trial court's later orders, found extrinsic fraud because Juani, an unlettered man, was not apprised of the proceedings, and remanded the case for a new trial. Alarcon came to the Supreme Court by petition for review on certiorari.

Facts

Sometime in 1976, before leaving for Brunei to work, Roberto Alarcon left with his father, Tomas Alarcon, a special power of attorney to administer, mortgage or sell his properties in Baliwag, Bulacan, among them a parcel covered by a transfer certificate of title. Upon his return, he discovered that a portion of two thousand five hundred square meters had been sold to Bienvenido Juani, Edgardo Sulit and Virginia Baluyot under a deed of sale purportedly executed by his father on March 27, 1985 for a nominal consideration of five thousand pesos. The buyers registered the deed, Alarcon's title was cancelled, and new titles were issued in their names.

Alarcon attacked the sale on three grounds: his father's signature was forged, there was no consideration, and the special power of attorney had already been revoked on June 9, 1984. He also discovered that the signature of the notary public who attested the sale was falsified. Juani answered that he had been the tiller-occupant of the land for almost ten years and had been lured by Tomas Alarcon into giving up his rights as tiller in exchange for ownership of the portion, and that he never knew of the revocation.

At the pre-trial held in June and August 1986, the parties and their counsel admitted that the deed of sale was a forged document, that it was that forged document which was registered, and that the three titles were issued on the strength of it. On those admissions the trial court rendered its partial decision on August 1, 1986. Juani's petition to annul that decision was filed only on April 17, 1995, some nine years later.

Issues

• Whether or not the petition for annulment of judgment filed before the Court of Appeals was filed on time.
• Whether or not there was extrinsic or collateral fraud that would justify setting aside the partial decision of the trial court.

Applicable Provisions

Section 1 of Rule 47 of the Rules of Court, on coverage, provides:

This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner.

This is the very remedy Juani invoked, so its limits govern the whole case.

Section 2 of Rule 47, on the grounds for annulment, provides:

The annulment may be based only on the grounds of extrinsic fraud and lack of jurisdiction. Extrinsic fraud shall not be a valid ground if it was availed of, or could have been availed of, in a motion for new trial or petition for relief.

This confines the action to extrinsic fraud and lack of jurisdiction, and it is on extrinsic fraud alone that the Court of Appeals rested.

Section 3 of Rule 47, on the period for filing the action, provides:

If based on extrinsic fraud, the action must be filed within four years from its discovery; and if based on lack of jurisdiction, before it is barred by laches or estoppel.

This supplies the four-year period whose starting point is the heart of the dispute.

Ruling

On the first issue, the Court held that the petition for annulment was filed out of time. The partial decision was rendered on August 1, 1986, while the petition was filed on April 17, 1995, nine years later. The Court rejected the appellate court's reckoning from 1995, when Juani's wife received a copy of the order, because Juani was represented by a competent lawyer who must have apprised him of the developments in the case. The judgment had long become final and executory, no appeal or motion for reconsideration having been filed.

On the second issue, the Court held that there was no extrinsic fraud. Fraud is extrinsic when it is employed to deprive a party of his day in court, preventing him from asserting his right to property; it is extrinsic where it prevents a party from having a trial or from presenting his entire case, or where it operates upon matters pertaining not to the judgment itself but to the manner in which it was procured. Here Juani was not deprived of a trial. The partial decision itself recites that all the parties and their respective counsel appeared at the pre-trial, and the transcript shows his counsel, Atty. Venancio Reyes, presenting evidence, interposing objections and making admissions, in no way remiss in his duties. The Court restated the governing rule:

The general rule is that the client is bound by the mistakes of his counsel, save when the negligence of counsel is so gross, reckless and inexcusable that the client is deprived of his day in court.

That exceptional negligence was not attendant. The admissions made at pre-trial were conclusive upon the parties making them, and their purpose is to expedite trial and relieve the parties and the court of the costs of proving facts. The Court therefore found for the petitioner.

Doctrine

First, an action to annul a judgment of a Regional Trial Court under Rule 47 lies only on the grounds of extrinsic fraud and lack of jurisdiction, and only where the ordinary remedies are no longer available through no fault of the petitioner. Second, extrinsic fraud means fraud that deprives a party of his day in court, preventing him from having a trial or presenting his entire case, or that operates on the manner in which the judgment was procured, not on the judgment itself. Third, a client is bound by the acts and mistakes of his counsel, save where the negligence is so gross, reckless and inexcusable that the client is deprived of his day in court. Fourth, the four-year period for annulment based on extrinsic fraud runs from the discovery of the fraud, and a party who was represented by counsel cannot claim to have discovered the fraud only years later. Fifth, admissions of fact made at pre-trial are conclusive upon the parties making them.

Disposition

The Supreme Court granted the petition, set aside the decision of the Court of Appeals, and upheld the partial decision of the trial court in favor of Roberto Alarcon.

Remember This

The one line to memorize: extrinsic fraud is fraud that deprives a party of his day in court, and a client is bound by his counsel's conduct of the case. Examiners use this case to test the grounds and the four-year period for annulment of judgment under Rule 47, and the rule that pre-trial admissions are conclusive.