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[G.R. No. 160445. September 15, 2004]

MERCADO vs. PRESIDING JUDGE, RTC, BR. 60, MAKATI CITY

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated SEP 15 2004 .

G.R. No. 160445 (JOSE TEOFILO MERCADO and AGNES R. MERCADO, vs. THE HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 60, MAKATI CITY and SECURITY BANK CORPORATION.)

This is a petition for review on certiorari assailing the Court of Appeals' Decision dated May 27, 2003 in CA-G.R. SP No. 71570 dismissing the petition for annulment of judgment rendered by the Regional Trial Court (RTC), Branch 60, Makati City, in Civil Case No. 95-724 for declaration of nullity of extra-judicial foreclosure proceedings.

On April 22, 1993, spouses Teofilo and Agnes Mercado, petitioners, obtained a loan of P35,000,000.00 from the Security Bank Corporation, respondent. To secure the loan, they executed in favor of respondent bank a real estate mortgage over their property [1] cralaw covered by Transfer Certificate of Title No. 169833. When they failed to pay the loan, respondent foreclosed the mortgage extra-judicially.

Thereupon, petitioners filed with the RTC a complaint for declaration of nullity of extra-judicial foreclosure proceedings on the grounds of lack of notice and non-compliance with the publication requirement.

Respondent bank filed its answer with compulsory counterclaim.

In its Decision dated July 10, 1998, the trial court declared that the foreclosure of the real estate mortgage is void and awarded petitioners P2,000,000.00 by way of moral damages and attorney's fees. In the same Decision, the trial court granted the counterclaim and awarded respondent bank the following amounts:

� P35,000,000.00 as the amount of the loan covered by the Real Estate Mortgage dated April 22, 1993 and the Promissory note dated April 22, 1993

� 17% of P35,000,000.00 per annum from December 24, 1993 until the amount of the loan is fully paid (as interest)

� 12% on the interest-on the loan per annum from June 13, 1995 until the interest is fully paid (as interest on interest)

� 2% on the loan and of the interest thereon per month from April 22, 1994 until the loan is fully paid (as penalty).

Forthwith, respondent bank filed a notice of appeal but it was dismissed by the trial court for its failure to pay the appeal fee. Petitioners did not appeal. When the Decision became final and upon respondent bank's motion, the trial court issued an order of execution.

Petitioners filed a motion for reconsideration but it was denied. The trial court then appointed a special sheriff to execute its Decision with respect to respondent's counterclaim.

Thereupon, petitioners filed with the Court of Appeals a petition for certiorari and prohibition with prayer for a temporary restraining order and preliminary injunction, [2] cralaw but it was dismissed. In due time, they filed with this Court a petition for review on certiorari. [3] cralaw Finding that the Court of Appeals did not commit a reversible error, this Court denied the petition.

Instead of submitting to the verdict of this Court, petitioners filed with the trial court an urgent motion to quash the notices of levy and the sheriff's sale but it was denied. Hence, the scheduled execution sale was conducted and the property was sold to respondent bank, being the highest bidder. On May 23, 2001, the certificate of sale issued by the sheriff was registered in the Registry of Deeds.

Undaunted, petitioners, on July 10, 2002, filed with the Court of Appeals a petition for annulment of the trial court's Decision granting respondent bank's counterclaim. During its pendency, the trial court issued a writ of possession in favor of respondent bank.

In their petition, petitioners alleged, among others, that they were denied their right to due process, claiming that their failure to appeal from the Decision of the trial court was due to their former counsel's gross negligence.

The Court of Appeals dismissed the petition with the following disquisition:

"Glaringly apparent in the instant case is the failure of petitioners not only to appeal the assailed Decision of the trial court but also to avail of the remedies of new trial and petition for relief before resorting to the petition for annulment of judgment. Having failed to avail of and exhaust said remedies, petitioners could not now utilize the present remedy as substitute for lost appeal, new trial or petition for relief. In the same manner, as petitioners had filed various motions and petitions with the trial court, this Court and the Supreme Court, it cannot be said that they have used to the hilt such other appropriate remedies afforded them by law and so they could not now resort to the present remedy to assail a decision that had long become final and executory. [4] cralaw

x x x

"As regards the issue of jurisdiction, We hold that it was within the jurisdiction of the respondent Court to adjudicate private respondent's counterclaim both as to the amount and the nature thereof. Private respondent's counterclaim is in the nature of a 'compulsory' counterclaim as it arises out of, or is necessarily connected with, the transaction or occurrence constituting the subject matter of petitioner's claim in the main action before the lower court (Section 7, Rule 6 of the 1997 Rules of Civil Procedure)." [5] cralaw

Hence, the instant petition for review on certiorari.

On January 12, 2004, we issued a Resolution denying the petition for failure of petitioners to show that the Appellate Court committed a reversible error.

Petitioners filed a motion for reconsideration alleging that the Court of Appeals, in dismissing their petition for annulment of judgment, erroneously relied on technical rules of procedure, thereby sacrificing the greater interests of justice and equity. They also claimed that their former counsel's gross negligence constitutes extrinsic fraud, a ground for annulling the trial court's judgment in favor of respondent bank.

On March 24, 2004, we issued a Resolution granting petitioners' motion for reconsideration and reinstating their petition. In the same Resolution, we required respondent bank to comment on the petition.

In its comment, respondent averred that the issues raised in the instant petition are mere rehash of the issues they raised before the Court of Appeals. As to the negligence of petitioners' counsel, respondent pointed out that the same can hardly be considered an extrinsic fraud since they actively pursued and succeeded in the recovery of the award of P2,000,000.00 representing moral damages and attorney's fees through their former counsel. Assuming that their counsel refused to file a motion for reconsideration of the trial court's Decision or an appeal, still, petitioners are not left without a remedy. They have the option to terminate the services of their counsel and hire another. Instead, they waited for four (4) years before they filed their petition for annulment of judgment.

On June 7, 2004, acting on the instant petition and on respondent bank's comment, we issued a Resolution denying the petition for petitioners' failure to show that the Court of Appeals committed a reversible error in dismissing the petition for annulment of the RTC judgment.

Hence, the present motion for reconsideration of our Resolution. This time, petitioners claim that respondent bank's only remedy is a separate action for the recovery of the amount it spent in foreclosing the mortgage, which is only P48,420,590.27, not the sums alleged in its counterclaim.

We find no compelling reason to grant petitioners' motion for reconsideration.

The Court of Appeals was correct in holding that before a petition for annulment of judgment can prosper, petitioners must first file an appeal, a motion for new trial or a petition for relief as required by the Revised Rules of Court. Having failed to do so, they cannot avail of an action for annulment of judgment, otherwise, they would benefit from their own inaction or negligence. [6] cralaw

It bears emphasis at this point that an action for annulment of judgment cannot and is not a substitute for the lost remedy of appeal. [7] cralaw

Petitioners' contention that their failure to appeal from the trial court's Decision was due to the negligence of their former counsel lacks merit. Records show that they participated actively, through their counsel, in the proceedings before the trial court. As party litigants, they were expected to be vigilant of their interests and, therefore, should monitor the progress of the case. Thus, they should have constantly communicated with their counsel to be advised of the status of their case. This way, they would not have lost their opportunity to appeal.

Granting that petitioners' petition for annulment of judgment is in order, still the same is dismissible. For the remedy of annulment of judgment to prosper, either one of the following grounds must be present: (1) extrinsic fraud or (2) lack of jurisdiction or denial of due process. Petitioners argue that their counsel's negligence constitutes extrinsic fraud. We are not convinced. Extrinsic fraud can be committed by a counsel against his client when the latter is prevented from presenting his case to the court. [8] cralaw This situation is not present in the case at bar.

We reiterate that in G.R. No. 151816, we ruled that the Court of Appeals did not commit reversible error in dismissing petitioners' petition for certiorari and prohibition assailing the trial court's order of execution of its Decision in favor of respondent bank.

In fine, this Resolution should now write finis to the instant case.

WHEREFORE, petitioners' instant motion for reconsideration is hereby DENIED with finality.

SO ORDERED.

Very truly yours,

(Sgd.) JULIETA Y. CARREON
Clerk of Court


Endnotes:

[1] cralaw Located at no. 36 Narra Avenue, South Forbes Park, Makati City.

[2] cralaw Docketed as CA-G.R. SP No. 55117.

[3] cralaw Docketed as G.R. No. 151816.

[4] cralaw Rollo at 55.

[5] cralaw Id. at 57.

[6] cralaw Republic vs. Sandiganbayan, G.R. No. 140615, February 19, 2001, 352 SCRA 250.

[7] cralaw Pinlac vs. Court of Appeals, G.R. No. 91486, January 19, 2001, 349 SCRA 650.

[8] cralaw Rexlon Realty Group, Inc. vs. Court of Appeals, G.R. No. 128412, March 15, 2002, 379 SCRA 306.


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