[G.R. No. 153710. September 2, 2002]

SPS. ZOTOMAYOR vs. PEDRO RUBIO, et al.

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated 02 SEPT 2002.

G.R. No. 153710 (Sps. Vivencio Javier and Feliza Zotomayor vs. Pedro, Venancio, Candelaria, Elvira, Ben & Julia, all surnamed Rubio, The Honorable Court of Appeals.)

Before us is a petition for review under Rule 45 with a prayer for Preliminary Injunction which seeks to set aside the resolution of the Court of Appeals dated May 23, 2002 which dismissed for lack of merit a Petition for Reopening/Annulment of Judgment filed before it, the pertinent portions of which held:

Plaintiffs-appellees have now filed a Petition for Reopening/Annulment of Judgment under Rule 47 of the 1997 Rules of Civil Procedure, praying to give due course to herein petition by reopening, reconsidering and setting aside the decision rendered in this case.

Unfortunately for plaintiffs-appellees, there is no such remedy in the Court of Appeals as a petition to reopen a case where a decision has already been rendered. The proper remedy is appeal to the Supreme Court by petition for review on certiorari under Rule 45, to be taken within the 15-day reglementary period.

Likewise, there is no such remedy in the Court of Appeals as a petition to annul its own judgment. Rule 47 applies only to annulment by the Court of Appeals of judgment 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 (Section 1 of Rule 47, underlining supplied).

WHEREFORE, premises considered, plaintiffs-appellees’ Petition for Reopening/Annulment of Judgment is DISMISSED outright for absolute lack of merit.[1]

The pertinent facts as culled from the records are as follows:

On May 15, 1979, petitioner spouses Vivencio and Feliza Javier secured two loans from a certain Tito Santos (now deceased), husband of Rufina Santos, now also deceased, who are both predecessors-in-interest of herein private respondents, all surnamed Rubio. The two loans granted by Tito Santos were in the total amount of One Hundred Three Thousand Eight Hundred Nine and Fifty-Six Centavos (P103,809.56) as evidenced by a promissory note which was to mature on May 15, 1980.

According to the agreement of the parties in their “Kasunduan,” Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56) of the loan was to be paid in the form of gravel and sand to be extracted by Tito Santos from the quarry-concession of the then debtors and herein petitioners Javier, granted to them by the Bureau of Mines. Under the terms of their “Kasunduan,” Tito Santos was to avail of the concession of petitioner-spouses until the value of the gravel and sand extracted reached the amount of Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56). The other loan amounting to Forty Thousand Pesos (P40,000.00) was to be paid within a period of one (1) year and was secured by a real estate mortgage on petitioners’ property consisting of Ten Thousand Two Hundred Eleven (10,211) square meters situated at Bo. Oogong, Sta. Cruz, Laguna and covered by TCT No. T-84259.

The parties also agreed that, despite full payment of Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56) in the form of gravel and sand, if the other loan of Forty Thousand Pesos (P40,000.00) remained unpaid after one year, then Tito Santos (predecessor-in-interest of private respondents) had the option to either continue extracting from the quarry until such time as the value of the extracted materials reached Forty Thousand Pesos (P40,000.00) or foreclose the property covered by the mortgage. In any case, it was agreed that once the loan was fully paid, the real estate mortgage, executed on May 16, 1979, was to be discharged.[2]

However, Tito Santos failed to extract quarry materials from petitioners’ concession since the latter’s permit from the Bureau of Mines had already expired on April 26, 1979. For petitioners’ failure to pay the first loan of Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56), Tito Santos commenced a collection suit docketed as Civil Case SC-2096 against the spouses Javier.

Before the case could be decided on the merits, however, the parties executed a compromise agreement wherein the spouses Javier admitted their indebtedness of Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56) and obligated themselves to pay the same.

On April 24, 1986, the trial court rendered judgment based on the compromise agreement. When petitioners again failed to comply with the judgment within the specified time, a writ of execution was issued. Petitioners, in partial satisfaction thereof, issued a check in the amount of Fifty Thousand Pesos (P50,000.00).

In the meantime, in 1981, since petitioners also reneged on their obligation to pay their second loan of Forty Thousand Pesos (P40,000.00) which was secured by the real estate mortgage, Tito Santos foreclosed on petitioners’ property. The foreclosure was annotated on petitioners’ TCT No. T-84259.

In 1984, Tito Santos died. In 1989, Rufina Santos, his surviving spouse, had petitioners’ TCT No. T-84259 cancelled and a new title (TCT No. T-116652) issued in her name.

In December 1990, herein petitioners filed a complaint against Rufina Santos for “Annulment of Certificate of Title and Damages” before the Regional Trial Court of Laguna.

In their complaint, petitioners alleged that their entire indebtedness to Tito Santos for One Hundred Three Thousand Eight Hundred Nine and Fifty-Six Centavos (P103,809.56) had been fully paid in the form of gravel and sand quarried by Santos from their concession. They also alleged that Tito Santos, despite petitioners’ full payment of their loan, still foreclosed on the mortgage.

In her answer to the complaint, Rufina Santos denied that petitioners paid their loan of P103,809.56 in the form of quarry materials and alleged by way of affirmative defense that petitioners, in the action against them for collection of sum of money docketed as Civil Case No. SC-20965, even admitted their failure to pay the two loans within the period agreed upon.

Private respondents also declared that the mortgage on petitioners’ property was foreclosed due to the non-payment of the Forty Thousand Pesos (P40,000.00) loan and only after several chances to pay were given to herein petitioners. They contended that petitioner-spouses’ action was a mere ploy to pre-empt private respondents’ intended petition for a writ of possession.

After trial on the merits, the trial court on November 27, 1995 ruled for the then plaintiffs (petitioners herein) and declared the new title issued in the name of Rufina Santos as null and void.

In ruling favorably for the petitioners, the trial court simply held that the contract entered into by the parties with respect to the Forty Thousand Pesos (P40,000.00) loan was not a real estate mortgage but a contract of antichresis. There being no mortgage to foreclose, according to the court, the new transfer certificate of title issued in the name of Rufina Santos was null and void.

Rufina Santos died during the pendency of the case and was duly substituted by her legal heirs, private respondents in this case.

The trial court’s decision was appealed by herein private respondents to the Court of Appeals.

Before the appellate court, private respondents asserted that the trial court erred when it ruled that a contract of antichresis existed between the parties since the language of the Deed of Real Estate Mortgage executed between them was explicit that petitioners were indebted to private respondents in the amount of Forty Thousand Pesos (P40,000.00) and that the lot in Laguna was the security for its payment.

According to private respondents, neither the facts of the case nor the evidence supported the conclusion of the trial court. They claimed that Tito Santos, during his lifetime, neither acquired possession of the mortgaged property nor profited from the fruits thereof during the interval between the execution of the mortgage and its execution,[3] two of the indispensable attributes of antichresis.

Private respondents also pointed out that the trial court’s decision was void since its ruling went beyond the issues raised by the parties in their respective pleadings.

The Court of Appeals found the appeal meritorious and reversed the trial court. The appellate court held that since issues in a case are determined by the allegations in the pleadings and only issues contained in the pre-trial brief and pre-trial order should be threshed out during the trial, the trial court erred when it resolved the validity of the mortgage contract since the records showed that the only issues for determination during the trial were simply: (1) whether the second loan of Forty-Thousand Pesos (P40,000.00) was ever paid by petitioners to Tito Santos and (2) whether or not the foreclosure of the real estate mortgage on the Oogong property was attended by fraud, deceit and misrepresentation.

The appellate court criticized the trial court for deciding the case not on the issues presented by the parties but on a question which was not even the issue in the case before it.

The Court of Appeals also assailed the conclusion of the trial court on the existence of a contract of antichresis. In ruling for the private respondents, the appellate court reasoned out:

In any event, the conclusion of the trial court that the contract entered into by Tito Santos and appellee-spouses is a contract of antichresis is without factual and legal basis. Under Article 2132 of the Civil Code, a contract is one of antichresis when “the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest of the loan, if owing, and thereafter to the principal of his credit.” Thus, when a contract of loan with security does not stipulate that the creditor would apply the fruits of his debtor’s “immovable” to the interest of the loan when owing, and thereafter to the principal, the contract is not a contract of antichresis but a contract of mortgage.

To be sure, the “Kasunduan” which supplemented the Deed of Real Estate Mortgage executed by appellee-spouses and Tito Santos gave the latter the option to extract quarry materials from the concession of the former and apply the value thereof to the payment of the P40,000.00 portion of appellee-spouses’ loan. The aforesaid agreement, however, does not qualify the subject contract of mortgage as one of antichresis. First, the use of the concession is not the “immovable” contemplated by law, the fruits of which is to be applied towards the payment of the interest of the loan, if owing, and thereafter to the principal. Second, the concession for quarry extraction is merely a privilege granted to appellee-spouses by the government. It is not an immovable property that can be used as security for the payment of an obligation. Third, and more importantly, the concession was in fact not used as security for appellee-spouses’ loan. Rather, it is the property of appellee-spouses as a collateral for the P40,000.00 portion of the loan. Thus, the “Kasunduan” was merely a mode of payment, separate and distinct from the real estate mortgage. [Emphasis supplied][4]

As to the central issue of whether the Forty Thousand Pesos (P40,000.00) loan secured by mortgage was ever paid, the appellate court found that while several receipts were presented by petitioners during trial, such receipts did not show that they were issued with reference to the quarry materials extracted by Tito Santos but merely indicated the number of hauling trips taken during the corresponding period stated therein. Furthermore, the receipts presented did not bear the signatures of either petitioners or private respondents but that of a third person.

The Court of Appeals also took into account the fact that petitioner spouses, in an earlier collection case filed against them, admitted the existence and non-payment of the debt due the private respondents despite the supposed receipts. The appellate court also ruled out fraud, deceit or misrepresentation in the foreclosure of the Oogong property.[5]

All told, the Court of Appeals, in its decision dated July 5, 2001, reversed the trial court and dismissed the complaint for annulment of title and damages filed by petitioners. The appealed case was decided without the appellee’s brief since the appellees (herein petitioners) failed to file one despite sufficient notice.

Petitioners herein filed a “Manifestation with Motion for Reconsideration” with the Court of Appeals praying that they be given a chance to submit their appellees’ brief in view of the fact that they did not know that their counsel failed to file it.

On October 3, 2001, the Court of Appeals denied the aforestated Motion for Reconsideration and held:

Considering that a decision has already been rendered, appellees’ prayer that they be given a chance to submit their brief is DENIED.

Considering further that the motion (should be period) for filing a motion for reconsideration is non-extendible, their prayer that they be likewise extended ‘consideration’ is also DENIED.[6]

Undaunted, petitioners, assisted by a new counsel, filed on March 13, 2002 a Petition for Reopening and/or Annulment of Judgment under Rule 47 of the 1997 Rules of Civil Procedure which the appellate court again dismissed for lack of merit on the ground that both were improper remedies.

Hence, the instant petition.

Before this Court, petitioners insist that, in the interest of substantial justice, the reopening of the case or annulment of judgment should be allowed. They argue that the decision rendered by the Court of Appeals was null and void since such was rendered without their appellees’ brief. This allegedly prevented them from presenting their side of the controversy, thus depriving them of due process.

Furthermore, petitioners maintain that the negligence of their counsel should not bind them since they were allegedly given false promises to purposely keep them ignorant of the developments in the suit.

The petition is without merit.

While it is true that a “motion to reopen” is not specifically prescribed as a remedy under the Rules of Court, it is still an accepted procedural recourse, deriving validity and acceptance from long established usage. However, it is also a settled rule that this remedy may be availed of only after either or both parties have formally offered and closed their evidence but before judgment.[7]

In the case at bar, the motion to reopen was filed after judgment, thus rendering it an improper remedy.

Moreover, Section 1, Rule 47 of the 1997 Rules of Civil Procedure explicitly provides:

SECTION 1. Coverage. 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. (Emphasis Supplied)

The appellate court was therefore correct when it held that the extraordinary action to annul a final judgment applies only to the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts but never as a remedy to annul its own judgments.

More importantly, the remedy of annulment under Rule 47 is restricted to the grounds specifically provided for by the Rules of Court: a) lack of jurisdiction and b) extrinsic fraud.

The extrinsic fraud which will invalidate a final judgment must refer to some fraudulent act of the prevailing party committed outside trial which prevents the losing party from presenting his side. It does not refer to the negligence of the petitioner’s lawyer[8]. The Court of Appeals was therefore correct in dismissing the petition since petitioners’ allegation on the existence of extrinsic fraud had neither factual nor legal basis.

The assertion of petitioners on the lack of due process (allegedly since their case was decided without their having filed their appellees’ brief due to the negligence of their counsel) must also fail.

A review of the records reveals that the Court of Appeals dispensed with the appellees’ brief only after sufficient notice had been given to herein petitioners. Losing a case on account of counsel’s negligence is a bitter pill to swallow for any litigant. But then, the Court is duty bound to observe its rules and procedures. Time and again, this Court has held that rules of procedure, especially those prescribing specific time frames within which certain acts must be done, should not be taken lightly nor ignored for such rules are necessary for the proper, efficient and orderly discharge of judicial functions.

As to the issue of negligence of counsel, suffice it to say that clients are bound by the mistakes and omissions of their counsel whom they themselves hired[9] although in the case at bar, we seriously doubt if the filing of the appellees’ brief in the Court of Appeals would have made much difference in the face of the convincing evidence of non-payment by petitioners herein (appellees in the Court of Appeals) of their financial obligations to Tito Santos.

WHEREFORE, there being no reversible error, the petition is hereby DENIED.

SO ORDERED.

Very truly yours,

(Sgd.) JULIETA Y. CARREON

Clerk of Court

[4] Court of Appeals Decision dated July 5, 2001, Rollo, pp. 26-27.

[6] Court of Appeals Resolution dated May 23, 2002, Rollo, pp. 17-18.

[7] Alegre v. Hon. Manuel Reyes, 161 SCRA 226 [1988].

[8] Salonga vs. Court of Appeals, March 13, 1997, 80 SCAD 472.

[9] Paramount Vinyl Products Corporation vs. National Labor Relations Commission and Paramount Independent Workers Union, 190 SCRA 525 [1990].