The Supreme Court has clarified the application of extrinsic fraud in cases involving the legal redemption of property, particularly concerning road lots within subdivisions. The Court emphasized that not impleading a party who alleges their property rights are affected by a legal redemption case does not automatically constitute extrinsic fraud. This ruling underscores the importance of proving deliberate deception that prevents a party from presenting their case fully in court, especially when other legal remedies are available.

Road Lots or Private Property? A Battle Over Redemption Rights and Alleged Fraud

This case revolves around a dispute over several lots originally part of a subdivision plan in Cebu City. Petitioners, successors-in-interest of Felix Gochan, initiated a case for legal redemption against the Spouses Paray, who had purchased several lots from the heirs of Amparo Alo, a co-owner of the original property. Respondent Charles Mancao, a buyer of other lots within the same subdivision, claimed the redemption adversely affected his property because the redeemed lots were designated as road lots. He filed a suit to nullify the compromise agreement and the subsequent court decision, alleging extrinsic fraud due to his exclusion from the original case and the nature of the lots as public roads.

The Court of Appeals sided with Mancao, finding that the petitioners had committed extrinsic fraud by excluding him and other co-owners from the redemption case, thereby preventing them from protecting their rights. The CA reasoned that since the lots were road lots and thus beyond the commerce of man, the compromise agreement was an attempt to illegally appropriate public property. However, the Supreme Court reversed this decision, holding that the CA erred in its application of extrinsic fraud.

The Supreme Court emphasized that a final and executory judgment can only be invalidated through a petition to annul it based on extrinsic fraud or lack of jurisdiction. It reiterated the definition of extrinsic fraud as any fraudulent act committed outside the trial that prevents a party from fully presenting their case. The Court distinguished this from intrinsic fraud, which pertains to issues that could have been litigated during the trial.

In this case, the Court found that the mere fact that Mancao was not impleaded in the legal redemption case did not constitute extrinsic fraud. According to Article 1620 of the New Civil Code, the right of redemption is granted to a co-owner when shares are sold to a third person, aiming to minimize co-ownership. The Court has previously held that only the redeeming co-owner and the buyer are indispensable parties in an action for legal redemption. Thus, Mancao’s exclusion did not automatically indicate fraud.

The Supreme Court quoted Article 1620 of the New Civil Code to underscore the law governing redemption by co-owners:

Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common.

This provision highlights the parameters within which redemption rights can be exercised.

Even if Mancao had the right to be impleaded, the Court stated that he failed to prove any specific deceit or subterfuge employed by the petitioners that prevented him from presenting his case. The burden of proving extrinsic fraud lies with the claimant, and Mancao did not provide sufficient evidence to substantiate his allegations. The CA’s findings were based on speculation and conjecture rather than concrete evidence of fraudulent actions.

Furthermore, the Court pointed out that Mancao had other available legal remedies to protect his alleged rights over the road lots. He could have pursued a direct attack on the certificates of title, filed an easement case, or participated in the pending Civil Case No. CEB-22996. An action to annul a final judgment is an extraordinary remedy that should not be granted indiscriminately, especially when other adequate remedies exist.

The Court also cited Ancheta v. Guersey-Dalaygon to further clarify what constitutes extrinsic fraud:

Fraud takes on different shapes and faces. In Cosmic Lumber Corporation v. Court of Appeals, the Court stated that “man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary.” There is extrinsic fraud within the meaning of Sec. 9 par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy.

This highlights that extrinsic fraud must actively prevent a fair hearing or submission of the case.

The Supreme Court emphasized that annulling final judgments is an extraordinary remedy, not to be granted lightly. This is because it undermines the principle of finality of judgments, which is essential for the effective administration of justice. Litigation must end at some point, and final judgments should not be easily overturned.

Moreover, the court addressed the claim that the properties in question were road lots. They pointed out that if Mancao believed that the properties were indeed road lots open for public use then he should have filed the appropriate case to open it. Instead, Mancao’s action to file a petition to annul the RTC was the wrong legal remedy.

FAQs

What was the key issue in this case?	The central issue was whether the exclusion of a subdivision lot owner from a legal redemption case involving road lots constituted extrinsic fraud, warranting the annulment of the judgment.
What is extrinsic fraud?	Extrinsic fraud is a fraudulent act committed outside the trial that prevents a party from fully presenting their case to the court, affecting the manner in which the judgment is obtained.
Who are the indispensable parties in a legal redemption case?	According to the Supreme Court, the indispensable parties are the redeeming co-owner and the buyer of the property being redeemed.
What is the remedy against a final judgement?	A final and executory judgment can only be invalidated through a petition to annul it based on extrinsic fraud or lack of jurisdiction.
What is the meaning of intrinsic fraud?	Intrinsic fraud refers to acts of a party at a trial which prevented a fair and just determination of the case, and which could have been litigated and determined at the trial or adjudication of the case.
What is Article 1620 of the New Civil Code about?	Article 1620 grants a co-owner the right of redemption when shares are sold to a third person, aiming to minimize co-ownership.
Why did the Supreme Court reverse the Court of Appeals’ decision?	The Supreme Court reversed the CA because Mancao failed to prove extrinsic fraud with sufficient evidence, and he had other available legal remedies to protect his alleged rights.
What is the significance of proving extrinsic fraud?	Proving extrinsic fraud is crucial because it is a ground for annulling a final judgment, but it requires concrete evidence of deceit that prevented a party from presenting their case.

In conclusion, the Supreme Court’s decision emphasizes the stringent requirements for proving extrinsic fraud and highlights the importance of pursuing appropriate legal remedies. This case serves as a reminder that not all procedural omissions constitute fraud and that parties must substantiate their claims with concrete evidence. The decision underscores the sanctity of final judgments and the need to exhaust all other available legal avenues before seeking the extraordinary remedy of annulment.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Virginia Y. Gochan, et al. vs. Charles Mancao, G.R. No. 182314, November 12, 2013