FRANCISCA LAZO, PLAINTIFF-APPELLANT, VS. J.M. TUASON & CO., INC. AND SHERIFF OF QUEZON CITY, DEFENDANTS-APPELLEES.

Lazo versus J.M. Tuason and Company

The Case

This is Francisca Lazo against J.M. Tuason and Company, Incorporated, and the Sheriff of Quezon City. Lazo bought a small parcel of land inside the Tatalon Estate and later found herself ejected by a final judgment in favor of the estate owner. She then filed a new suit to annul that judgment on the ground of fraud and to compel the company to sell her the land under a compromise agreement. The case matters because it shows how the courts treat a party who sleeps on her rights: a final judgment will not be reopened on a claim of fraud that could have been raised earlier, and a preferential right to buy that was not pleaded as a compulsory counterclaim in the ejectment suit is forever barred by prior judgment.

Procedural History

J.M. Tuason and Company sued Francisca Lazo for recovery of the land before the Court of First Instance of Quezon City. The trial court rendered judgment ordering her to vacate, to remove her constructions, and to pay monthly rental. The judgment became final and execution was ordered. Lazo moved to stay the execution, her motion was denied, and the trial court disallowed her appeal from the denial. She then filed a petition for mandamus with preliminary injunction in the Court of Appeals to compel the trial court to approve her appeal. The Court of Appeals dismissed the petition, holding that an order of execution of a final judgment is not appealable.

After that decision became final, the trial court issued a writ of demolition. Lazo filed a petition for prohibition with preliminary injunction in the Court of Appeals to restrain enforcement of the judgment and the demolition order. The Court of Appeals again denied her, holding that a writ of prohibition will not lie to restrain enforcement of a final and executory judgment, and that the orders denying suspension of the writ and ordering demolition may not be reviewed by certiorari.

Lazo then filed a new suit before the same Court of First Instance for annulment of the judgment on the ground of fraud, to enjoin its execution, to declare the orders of execution and demolition void, and to compel specific performance under the compromise agreement. The trial court dismissed the complaint for failure to state a cause of action, citing the ruling in the earlier Sanvictores case, and treating her request for an extension of time to vacate as an admission that she was satisfied with the judgment. Lazo appealed to the Court of Appeals, which certified the case to the Supreme Court on questions of law.

Facts

On November 17, 1949, Francisca Lazo bought five hundred square meters of land in Barrio Tatalon, Quezon City, for 1,500 pesos, from the late Agustin de Torres, husband of Rufina Guerrero. The land was part of the Tatalon Estate. On March 16, 1953, the Deudors, one of whom was Rufina Guerrero as widow and successor of Agustin Torres, entered into a compromise agreement with J.M. Tuason and Company, later approved by the Court of First Instance. In consideration of 1,201,063 pesos, the Deudors gave up their claim over the estate, but the agreement provided that the company would recognize the contracts of sale entered into by the Deudors over the lands. The buyer listed by the Deudors could continue the contract of sale by paying the company the current prices under conditions set by the latter.

On March 23, 1957, J.M. Tuason and Company sought to eject Lazo through an action for recovery based on alleged ownership. On November 13, 1959, the trial court ordered Lazo to vacate the land, remove her constructions, and pay 120 pesos monthly rental from April 1948 until restoration of the land. The judgment became final and execution was ordered on January 12, 1961. Lazo moved to stay execution, but her motion was denied and her appeal from the denial was disallowed. Her mandamus petition in the Court of Appeals was dismissed.

On January 27, 1962, upon motion of the company, the trial court issued a writ of demolition. Lazo moved to stay enforcement and was given until April 1, 1962 to vacate voluntarily, failing which the sheriff would demolish her house. Her prohibition petition in the Court of Appeals was denied. On March 27, 1962, she filed a new suit for annulment of the judgment on the ground of fraud. She alleged that she had been assured by the company's investigation department that the ejectment case was a mere formality to drive out squatters and that any decision would not be executed against her, so she took no step to vacate or appeal.

Issues

• Whether or not the complaint to annul the judgment on the ground of fraud states a cause of action, considering Lazo's undue delay in asserting the fraud.
• Whether or not the portion of the complaint seeking to enforce an alleged preferential right to buy the land under the compromise agreement is barred by prior judgment.

Applicable Provisions

Section 1, paragraph f, of Rule 8 of the old Rules of Court provides:

The complaint must state that the plaintiff has a cause of action against the defendant.

This provision is the ground on which the trial court dismissed the complaint for failure to state a cause of action.

Section 1, paragraph g, of Rule 8 of the old Rules of Court provides:

The complaint must state that the plaintiff has not released or waived the claim sued upon.

The Court uses this provision to treat Lazo's conduct as a release, waiver, and abandonment of her claim to annul the judgment.

Ruling

On the first issue, the Court held that the complaint to annul the judgment on the ground of fraud must fail. Although Lazo claimed she never took steps to vacate or appeal because she was assured the judgment would not be executed against her, the execution order of January 12, 1961 already showed the intent to ease her out of the land in disregard of that assurance. The writ of demolition of January 27, 1962 left no doubt about the company's intentions. Yet she sought only suspension of the enforcement of the writ, and she asked to be given until April 1, 1962 to vacate, which plainly supported the conclusion that she acquiesced to the judgment. Her delay from January 12, 1961 to March 27, 1962, under the continuous threat of ejectment, amounted to laches. The Court explained that laches or unreasonable delay on the part of the plaintiff in enforcing a right is persuasive of a want of merit, since it is human nature for one to assert his rights once threatened or invaded, and may according to the circumstances be destructive of the right itself. These considerations rendered the complaint subject to dismissal for lack of cause of action or for release, waiver, and abandonment of the claim.

On the second issue, the Court held that the portion of the complaint seeking to enforce the alleged preferential right to buy the land under the compromise agreement is barred by prior judgment, because it should have been interposed as a compulsory counterclaim in the ejectment suit. The Court relied on its earlier ruling in the Sanvictores case, where it held that the preferential right claimed under the compromise agreement was in the nature of a compulsory counterclaim which should be raised in the ejectment suit itself, otherwise it is barred after finality of the judgment in that suit.

Doctrine

First, a final and executory judgment may not be annulled on the ground of fraud where the party alleging fraud had clear notice of the adverse party's intent to enforce the judgment and yet delayed for an unreasonable time before asserting the fraud. Such unreasonable delay is laches, and laches may be destructive of the right itself. The complaint is then dismissible for lack of cause of action or for release, waiver, and abandonment of the claim.

Second, a preferential right to buy land under a compromise agreement, asserted by a buyer against the estate owner, is in the nature of a compulsory counterclaim in the ejectment suit filed by that owner. If the buyer fails to raise it in that suit, the claim is barred by prior judgment after the judgment in the ejectment suit becomes final.

Disposition

The Supreme Court affirmed the order of dismissal appealed from, without costs. J.M. Tuason and Company won.

Remember This

The single line to memorize is that laches or unreasonable delay in enforcing a right is persuasive of a want of merit and may be destructive of the right itself. Examiners like to use this case on the annulment of final judgments for fraud and on the compulsory counterclaim rule for preferential rights under the Tatalon compromise agreement.