Arcelona v.

CA (1997) Jemz Cadeliña

Law 125 – Civil Procedure A2025

Case Name Arcelona v. CA (1997)

Topic Parties > Indispensable Parties

Case No. | Date G.R. No. 102900 | October 2, 1997

Petitioner/s Marcelino Arcelona, Tomasa Arcelona-Chiang, and Ruth Arcelona

Respondent/s Court of Appeals, Regional Trial Court of Dagupan City, Branch XL,
and Moises Farnacio

Ponente Panganiban, J.

Case Summary

Six siblings co-owned a fishpond they inherited from their deceased parents. The petitioners
resided in the USA and the other three siblings, referred to collectively as Olanday, at al.,
resided in the Philippines. Olanday, et al. entered into a contract of lease over the fishpond.
The lessee appointed Private Respondent Farnacio as caretaker-tenant of the fishpond.
Upon the lease contract’s termination, the lessee surrendered possession to the lessors. The
private respondent, intending to maintain himself as tenant of the fishpond, instituted a
civil case for peaceful possession and maintenance of security of tenure plus damages
against Olanday, et al. The CA and the SC affirmed the RTC, which ruled in favor of the
Private Respondent. Petitioners then filed with Respondent Court of Appeals a petition for
annulment of the aforesaid judgment against private respondent and the implementing
sheriff on the ground that they were indispensable parties but were not impleaded. The CA
denied the petition; leading to the case at bar.

The relevant issue is W/N a final judgement may be annulled for lack of jurisdiction over
the person of indispensable parties. The Public Respondent CA argues that extrinsic fraud
is the sole ground for annulment of judgement and that the petition did not contain such
ground. The petitioners argue that jurisprudence provides that a final judgement may also
be annulled or lack of jurisdiction (a) over the subject matter or (b) over the persons of
necessary or indispensable parties, or (c) lack of due process.

The Supreme Court ruled in favor of the petitioners. The Court held that a final judgement
may also be annulled for lack of jurisdiction. Jurisdiction over the person of a party
defendant is assured upon the service of summons in the manner required by law or
otherwise by his voluntary appearance. Co-owners in an action for the security of tenure of
a tenant are encompassed within the definition of indispensable parties; thus, all of them
must be impleaded. In the case at bar, the petitioners, as co-owners of the undivided
fishpond, were indispensable parties. Since they were never served summons, the court did
not acquire jurisdiction over their person and cannot be bound by the decision rendered
therein. Furthermore, the burden to implead or to order the impleading of indispensable
parties is placed on private respondent and on the trial court, respectively. Since no evidence
was presented to prove that petitioners were aware of the civil case filed against Olanday et
al., they cannot be faulted for not intervening therein.

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Decision

Granted. The petitioners were indispensable parties.

Doctrine

• Rule 3, Section 7 of the Rules of Court. Compulsory joinder of indispensable

parties. - Parties in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants.
• An indispensable party is one whose interest will be affected by the court’s action in the
litigation, and without whom no final determination of the case can be had. The party’s
interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party to the proceeding is
an absolute necessity. In his absence there cannot be a resolution of the dispute of the
parties before the court which is effective, complete, or equitable. (Servicewide
Specialists Incorporated vs. CA)
• A person is not an indispensable party, however, if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not
necessarily be directly or injuriously affected by a decree which does complete justice
between them. Also, a person is not an indispensable party if his presence would merely
permit complete relief between him and those already parties to the action, or if he has
no interest in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple litigation

Relevant Facts

● The petitioners, together with their three sisters (collectively referred to as Olanday, et al.),
are co-owners pro-indiviso of a fishpond which they inherited from their parents.
o The petitioners are natural-born Filipinos who are now residing in the USA.
o Olanday, et al. reside in the Philippines.
● Olanday et al. entered into a contract of lease over the fishpond with Tandoc.
o The lease contract was for three years and was renewed for another two years.
o Tandoc appointed Private Respondent Moises Farnacio as caretaker-tenant of the
fishpond.
o After termination of the lease contract, Tandoc surrendered possession to Olanday
et al.
● Private Respondent Farnacio instituted a civil case for "peaceful possession, maintenance
of security of tenure plus damages, with motion for the issuance of an interlocutory order"
against Olanday, et al., before Respondent Regional Trial Court of Dagupan City.
o The case was intended to maintain private respondent as tenant of the fishpond.
o The RTC rendered a decision in favor of private respondent; the Court of Appeals
and the SC affirmed.

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● Petitioners then filed with Respondent Court of Appeals a petition for annulment of the
aforesaid judgment against private respondent and the implementing sheriff.
o The CA denied.

Issue/s, Held and Ratio

1. W/N a final judgment may be annulled for lack of jurisdiction Yes

over the person of indispensable parties :

Arguments
● Petitioners contend that:
o CA erred in decreeing that the sole and only ground for annulment of judgement is
extrinsic fraud.
o Being co-owners of the subject property, they are indispensable parties and, thus,
the RTC’s judgement is void insofar as they are concerned for want of jurisdiction
over their persons and for lack of due process.
o As non-residents, they are entitled to extra-territorial services, which is a due
process requirement.
▪ Since they were never served with summons, to bar them from questioning
the proceedings of the lower court will be compounding injustice.
● Public respondent CA contends that:
o Annulment of judgment, as the Supreme Court had occasion to rule, rests on a
single ground: extrinsic fraud.
o There is nothing in the petition that extrinsic fraud indeed vitiated the proceedings.
o Accordingly, the petition suffers from a basic and fundamental infirmity that
deprives petitioners of a valid cause of action against respondents.

Court of Appeals erred in limiting the ground(s) for annulment of judgment to

only one
• Macabingkil vs. People's Homesite and Housing Corporation
o To set aside a final and executory judgment, there are three remedies available
to a litigant:
§ First, a petition for relief from judgment under Rule 38 of the Rules of
Court on grounds of fraud, accident, mistake and excusable negligence.
§ Second, direct action to annul the judgment on the ground of extrinsic
fraud; and third a direct action for certiorari or collateral attack to annul
a judgment that is void upon its face or void by virtue of its own recitals.
§ Third, either a direct action, as certiorari, or by a collateral attack
against the challenged judgment (which is) is void upon its face, or that
the nullity of the judgment is apparent by virtue of its own recitals.
• On the one hand, extrinsic fraud is the ground to annul a voidable final judgment; the
declaration of nullity of a patently void final judgment, on the other, is based on
grounds other than extrinsic fraud.

Jurisdiction over the Persons of Indispensable Parties

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• Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint.
• On the other hand, jurisdiction over the person of a party defendant is assured upon
the service of summons in the manner required by law or otherwise by his voluntary
appearance.
• As a rule, if a defendant has not been summoned, the court acquires no jurisdiction
over his person, and a personal judgment rendered against such defendant is null and
void.
• A decision that is null and void for want of jurisdiction on the part of the trial court is
not a decision in the contemplation of law and, hence, it can never become final and
executory.
• Rule 3, Section 7 of the Rules of Court defines indispensable parties as parties-in-
interest without whom there can be no final determination of an action.
o As such, they must be joined either as plaintiffs or as defendants.
o The general rule with reference to the making of parties in a civil action
requires, of course, the joinder of all necessary parties where possible, and the
joinder of all indispensable parties under any and all conditions, their presence
being a sine qua non for the exercise of judicial power.
o It is precisely "when an indispensable party is not before the court (that) the
action should be dismissed."

In the case at bar

• Petitioners are co-owners of an undivided fishpond.
o Thus, it is not possible to show over which portion the tenancy relation of
private respondent has been established and ruled upon.
• The petitioners should have been properly impleaded as indispensable parties.
o A tenant who fails to implead all the co-owners cannot establish with finality
his tenancy over the entire co-owned land.
o Co-owners in an action for the security of tenure of a tenant are encompassed
within the definition of indispensable parties; thus, all of them must be
impleaded.
• Clearly, the decision in civil case cannot bind petitioners and cannot adjudicate the
entire co-owned property, not even that portion belonging to Olanday et al., ownership
of the property being still pro-indiviso.
• A person who was not impleaded in the complaint cannot be bound by the decision
rendered therein, for no man shall be affected by a proceeding in which he is a stranger.
• The nullity of a decision arising from lack of jurisdiction may be determined from the
record of the case, not necessarily from the face of the judgment only.
• In the assailed trial court's decision, referrals were made to crucial evidence which if
scrutinized would readily reveal that there were indispensable parties omitted.
o First, the decision referred to the subject property "as Lot No. 3312 of the
Cadastral Survey.'' This lot was particularly described in private respondent's
Complaint. Obviously, such description was copied by private respondent from
the transfer certificate of title over the subject fishpond naming all the co-
owners, including the herein petitioners and the fact of their foreign residences.

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o Second, Respondent Court of Appeals ruled that private respondent "in his
motion to dismiss (before said Court) alleged that petitioners knew of the
lessee.”
o Third, both the private respondent and the trial court knew of the obvious
omission of petitioners as party defendants. Private respondent himself
provided clear evidence in his memorandum that he knew of the existence of
other co-owners who were not impleaded. He also knew that in executing the
lease, Pacita Olanday represented only her sisters (Maria and Natividad) who
were residing in the Philippines.
• The burden to implead or to order the impleading of indispensable parties is placed on
private respondent and on the trial court, respectively.
• Since no evidence was presented to prove that petitioners were aware of the civil case
filed against Olanday et al., they cannot be faulted for not intervening therein.

2. W/N estoppel and laches has set in against the petitioners: No

• No laches attach when the judgment is null and void for want of jurisdiction.
● As regard estoppel, it can be invoked only in highly exceptional and legitimate cases. The
essential elements of estoppel in respect to the party claiming it are: (a) lack of knowledge
and of the means of knowledge of the truth as the facts in question; (b) reliance, in good
faith, upon the conduct or statements of the party to be estopped; and (c) action or inaction
based thereon of such character as to change the position or status of the party claiming
the estoppel, to his injury, detriment, or prejudice.
● In the case at bar, the absence of the first element in this case. Inasmuch as there is no
proof that petitioners had knowledge of the pending tenancy case filed by private
respondent, it is only fair that they should not be held in estoppel for failing to intervene
in and to question the jurisdiction of the trial court in the civil case. Thus, private
respondent may not say that he was misled into believing that petitioners knew of the lease
contract and of the litigation of the civil case. Undisputedly, from the evidence on record,
petitioners had no such knowledge.

3. W/N extraneous proof can be used as grounds in annulling a No

judgement:

● In an action to declare a judgment void because of lack of jurisdiction over the parties or subject
matter, only evidence found in the records of the case can justify the annulment of the said
judgment.
● The reason for the rule of exclusion of extraneous proof to show that the judgment complained
of is utterly void for lack of jurisdiction The doctrine that the question of jurisdiction is to be
determined by the record alone, thereby excluding extraneous proof seems to be the natural
unavoidable result of that stamp of authenticity which, from the earliest times, was placed upon
the ‘record,’ and which gave it such ‘uncontrollable credit and verity that no plea, proof, or
averment could be heard to the contrary.’

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● Any rule, would be disastrous in its results, since to permit the court’s record to be contradicted
or varied by evidence dehors would render such records of no avail and definite sentences would
afford but slight protection to the rights of parties once solemnly adjudicated.’”
● Note however that when the action for annulment of judgment is grounded on extrinsic fraud,
extraneous evidence is admissible.

Ruling

WHEREFORE, the petition for certiorari is GRANTED. The Decision of Respondent

Court of Appeals is hereby REVERSED and SET ASIDE. The decisions in Civil Case No. D-
7240, AC-G.R. SP-05237-CAR and G.R. No. L-71217 are ANNULLED and SET ASIDE for lack
of jurisdiction. No costs.

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