G.R. No. L-30150 August 31, 1971
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, petitioner, vs. HON. WALFRIDO DE LOS ANGELES, et al., respondents.

FACTS

Private respondents sold lots to Araceli W. Vda. de Del Rosario, who then mortgaged them to the Philippine Commercial and Industrial Bank (PCIB). Due to Del Rosario’s failure to pay the full purchase price, private respondents filed a complaint for reconveyance or rescission against her and PCIB. On January 25, 1965, the trial court rendered a summary judgment ordering the rescission of the sales and the reconveyance of the lots to private respondents, but expressly preserving PCIB’s mortgage rights as a mortgagee in good faith. This decision became final. Subsequently, PCIB foreclosed the mortgage on some lots and was the highest bidder. On May 4, 1966, PCIB assigned its mortgage rights and its rights as highest bidder over the subject lots to petitioner NIDC, which annotation was duly made on the certificates of title.
Private respondents later filed a motion in the same case to cancel the NIDC’s annotated encumbrance, arguing the mortgage lien was extinguished. The NIDC, although notified and having entered its appearance and filed opposition, was not formally substituted as a party for PCIB. On March 31, 1967, the respondent judge granted the motion and ordered the cancellation. The NIDC appealed this order. The respondent judge, however, dismissed NIDC’s appeal in an order dated May 28, 1968, ruling it was ineffective and out of time since NIDC was not properly substituted and PCIB itself did not appeal. Subsequent orders directed NIDC to surrender the titles and declared them cancelled for non-compliance.

ISSUE

Whether the respondent judge acted without jurisdiction in issuing the orders dated March 31, 1967, May 28, 1968, November 9, 1968, and January 27, 1969, which cancelled NIDC’s annotated rights and dismissed its appeal.

RULING

Yes, the respondent judge acted without jurisdiction. The core legal principle is that an assignment of credit and its accessory rights, such as a mortgage, does not extinguish the obligation but merely substitutes the assignee in the place of the assignor. Article 1634 of the Civil Code explicitly recognizes that credits and other incorporeal rights in litigation may be assigned pendente lite. Consequently, NIDC validly stepped into the shoes of PCIB, acquiring all rights adjudicated in the final judgment in favor of PCIB. The trial court’s 1965 decision, which had become final, conclusively established PCIB’s (and by assignment, NIDC’s) mortgage lien as valid and superior.
The respondent judge’s March 31, 1967 order, which cancelled NIDC’s annotation based on a theory that the rights were in custodia legis and thus unassignable, constituted an unauthorized amendment of that final judgment. A court loses jurisdiction to alter a final and executory judgment. The subsequent orders, including the dismissal of NIDC’s appeal, flowed from this void initial order. While NIDC was not formally substituted, it was the real party-in-interest and an indispensable party to any proceeding affecting the assigned rights; it was duly notified and participated in the hearings. The trial court’s failure to recognize NIDC’s vested rights acquired from PCIB through a lawful assignment was a grave abuse of discretion equivalent to lack of jurisdiction. Therefore, all impugned orders are null and void.