The Supreme Court ruled that a party who actively participates in all stages of a court case is barred by estoppel from later challenging the court’s jurisdiction, even if the court may have initially lacked it. This decision reinforces the principle that fairness and judicial efficiency require parties to raise jurisdictional issues promptly, preventing them from exploiting procedural technicalities after unsuccessfully engaging in litigation on the merits.

Mortgage Dispute: Can a Party Challenge Jurisdiction After Years of Litigation?

This case revolves around a complaint for judicial foreclosure of mortgage filed by Jaycee P. Baluyut (respondent) against Rita Quizon-Arciga and Relia Q. Arciga (petitioners). The core dispute arose from a loan Relia obtained from Jaycee, secured by a real estate mortgage (REM) on a property co-owned with Rita. The petitioners initially contested the mortgage’s validity, arguing that Relia lacked the authority to mortgage the property on behalf of Rita. However, after participating in the trial and losing, they later attempted to challenge the Regional Trial Court’s (RTC) jurisdiction, claiming that the complaint failed to properly allege the property’s assessed value. This omission, they argued, meant the RTC never had the authority to hear the case.

The petitioners’ main arguments centered on two points: first, that the gross negligence of their previous counsel constituted extrinsic fraud, and second, that the respondent’s failure to indicate the assessed value of the property in her complaint and to pay the proper docket fees prevented the RTC from acquiring jurisdiction. According to the petitioners, these were sufficient grounds to support their petition for annulment of judgment to question the RTC’s void decision. In addition, petitioners averred that the monthly interest of 8% is void for being iniquitous, exorbitant, unconscionable and contrary to law.

The Court of Appeals (CA) dismissed the petition for annulment of judgment, citing the failure to demonstrate the unavailability of other remedies and the absence of extrinsic fraud or jurisdictional defects. The CA also noted that the petition was barred by laches (unreasonable delay) and that the petitioners failed to allege facts supporting their claim of lack of jurisdiction with particularity. Subsequently, petitioners’ Motion for Reconsideration was denied, leading to the elevation of the case to the Supreme Court.

The Supreme Court anchored its decision on the principles governing actions for annulment of judgments under Rule 47 of the Rules of Court. This rule stipulates that annulment is available only when ordinary remedies like new trial, appeal, or petition for relief are no longer accessible through no fault of the party seeking it. Moreover, the grounds for annulment are limited to extrinsic fraud and lack of jurisdiction. In this case, the petitioners’ claim of extrinsic fraud rested on the alleged gross negligence of their counsel, which the Court found insufficient because the fraud must be attributable to the prevailing litigant, not the party’s own counsel.

The Court then addressed the crucial issue of jurisdiction. It acknowledged that a complaint for foreclosure of REM, being a real action, must indeed be filed with the appropriate court based on the assessed value of the property. The pertinent provisions of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, dictate that if the assessed value exceeds Twenty thousand pesos (P20,000.00), the RTC has jurisdiction; otherwise, the first-level court is the proper venue. The Court cited respondent’s complaint:

x x x x

2. That on December 5, 2002, the [petitioners] executed an Extrajudicial Settlement of Estate/Partition with Special Power of Attorney involving a parcel of land situated at Barangay Sta. Cruz, Concepcion, Tarlac containing an area of 15,620 square meters as described in and covered by Transfer Certificate of Title No. 395377 x x x;

3. That then on August 11, 2005, [petitioner] Relia Q. Arciga borrowed from [respondent] the sum of five hundred thousand pesos (P500,000.00), payable within the period of five (5) months from the said date and with an agreed interest thereon at the rate of eight percent (8%) per month;

4. That to secure the prompt and full payment of the principal and interest, the [petitioner] made and executed on that same day, and by virtue of an Extrajudicial Settlement/Partition with Special Power of Attorney which was executed between the defendants, a Real Estate Mortgage in favor of [respondent] on the parcel of land mentioned above, x x x.

x x x x

6. That the time for payment of said loan is overdue, and the [petitioner] failed, and refused and still fails and refuses, to pay the principal obligation and the interest due, notwithstanding repeated demands of the [respondent].

The Court agreed with petitioners that the RTC had no jurisdiction to hear and resolve the complaint since the complaint did not contain any allegation on the assessed value of the subject property. Without such allegation, it cannot be readily determined whether the RTC or the Municipal Trial Court had exclusive original jurisdiction over respondent’s complaint. Courts are not authorized to take judicial notice of the assessed value, or even the market value of a land subject of litigation.

However, despite acknowledging this jurisdictional flaw, the Supreme Court invoked the principle of estoppel, citing the case of Lagundi v. Bautista. The Court reiterated the doctrine established in Tijam v. Sibonghanoy, which holds that estoppel by laches may prevent a party from raising the issue of jurisdiction when it is brought up only after the party has actively participated in the trial and lost. The Court emphasized that estoppel sets in when a party participates in all stages of a case before challenging the jurisdiction of the lower court. One cannot belatedly reject or repudiate its decision after voluntarily submitting to its jurisdiction, just to secure affirmative relief against one’s opponent or after failing to obtain such relief.

The Court highlighted that the petitioners had actively participated in the proceedings before the RTC, contesting the validity of the REM and presenting themselves as witnesses. They only assailed the validity of the REM on the ground that the EJS-SPA executed by Rita in favor of her daughter, Relia, only authorized the latter to mortgage the property in favor of a certain Amelia Pineda. Even after the RTC’s decision became final and executory, they did not question its jurisdiction but instead opposed the issuance of a writ of possession, arguing that their right to redeem the property had not lapsed and that the 8% monthly interest was void. It was only twelve (12) years since the filing of the complaint in 2008 before they raised the issue of lack of jurisdiction, and even then, only in their motion for reconsideration after the CA had already dismissed their petition.

FAQs

What was the key issue in this case?	The central issue was whether the petitioners could challenge the Regional Trial Court’s (RTC) jurisdiction after actively participating in the trial and losing on the merits. They argued the RTC lacked jurisdiction because the complaint did not specify the assessed value of the property.
What is estoppel in the context of jurisdiction?	Estoppel prevents a party from challenging a court’s jurisdiction if they actively participate in the case without raising the jurisdictional issue promptly. This principle is based on fairness and preventing parties from exploiting technicalities after losing on the merits.
What is extrinsic fraud, and how does it relate to annulment of judgment?	Extrinsic fraud involves acts preventing a party from fully participating in a trial, such as being kept away from court or a false promise of compromise. It is a ground for annulment of judgment, but the fraud must be attributable to the prevailing party, not the losing party’s own counsel.
Why did the Supreme Court deny the petition for annulment of judgment?	The Court denied the petition because the petitioners had actively participated in the trial without raising the issue of jurisdiction until after they lost. They were thus estopped from challenging the RTC’s authority.
What is the significance of the assessed value of the property in foreclosure cases?	The assessed value of the property determines which court has jurisdiction over a foreclosure case. If the value exceeds P20,000, the RTC has jurisdiction; otherwise, the Municipal Trial Court does.
Can a party raise the issue of jurisdiction at any time in the proceedings?	While generally, the issue of subject matter jurisdiction can be raised at any time, even on appeal, the principle of estoppel provides an exception. If a party actively participates in the proceedings without promptly questioning jurisdiction, they may be barred from doing so later.
What are the practical implications of this ruling?	This ruling underscores the importance of promptly raising any jurisdictional concerns at the outset of litigation. Parties cannot wait until they have lost on the merits to challenge a court’s authority.
What should a complaint for judicial foreclosure of mortgage include to ensure proper jurisdiction?	A complaint for judicial foreclosure must include a clear allegation of the assessed value of the property. This ensures that the court can properly determine whether it has jurisdiction over the case.

In conclusion, the Supreme Court’s decision in this case reaffirms the importance of timely raising jurisdictional issues and the application of estoppel to prevent parties from belatedly challenging a court’s authority after actively participating in the proceedings. This ruling serves as a reminder to litigants to diligently assess jurisdictional concerns and to promptly raise them to avoid being barred from doing so later in the litigation process.

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: Rita Quizon-Arciga and Relia Q. Arciga vs. Jaycee P. Baluyut, G.R. No. 256612, June 14, 2023