G.R. No. L-27940, June 10, 1971
FRANCISCO MILITANTE, III, plaintiff-appellant, vs. ANTERO EDROSOLANO and MANUEL BELLOSILLO, defendants-appellees.

FACTS

Plaintiff-appellant Francisco Militante III filed a damages suit against defendant Antero Edrosolano for breach of a contract of carriage. Militante secured a preliminary attachment on Edrosolano’s properties. However, defendant Manuel Bellosillo filed a third-party claim, asserting he had already bought Edrosolano’s equipment. Militante discovered that Bellosillo had earlier filed a collection case against Edrosolano based on a promissory note, obtained a default judgment, and later executed on that judgment to acquire Edrosolano’s assets at a sheriff’s sale.
Militante’s complaint alleged this prior lawsuit was a fraudulent collusion between Edrosolano and Bellosillo. He claimed the promissory note was fictitious, the summons in that case was served irregularly, and Edrosolano deliberately allowed a default judgment. The execution sale, which transferred valuable properties for a fraction of their worth, occurred only after Militante had filed his own case and obtained the attachment order. Militante argued this scheme was designed to defraud creditors, including himself, by making Edrosolano appear judgment-proof.

ISSUE

Whether the complaint states a cause of action for the annulment of a judgment allegedly obtained through fraud and collusion, given that the plaintiff’s own claim against one defendant is still pending and unconcluded.

RULING

Yes, the complaint states a cause of action. The Supreme Court reversed the lower court’s order of dismissal. In resolving a motion to dismiss, the court hypothetically admits the truth of the material allegations in the complaint. The allegations here detail a collusive scheme where a prior judgment was secured through a fictitious cause of action and extrinsic fraud, specifically to place assets beyond the reach of a creditor (Militante).
The legal logic is that a cause of action exists if the complaint shows a legal right of the plaintiff, a correlative duty of the defendant, and an act or omission violating that right. Militante, as a pending creditor, has a legal interest in preventing the fraudulent depletion of his debtor’s assets. The alleged fraud—a concocted debt and a sham lawsuit resulting in a default judgment and execution—constitutes extrinsic or collateral fraud, which is a proper ground for a separate action to annul the judgment. The Court cited precedent, including Anuran v. Aquino, which holds that a creditor may attack a judgment fraudulently obtained by his debtor with a third party to evade obligations.
The pendency of Militante’s main case against Edrosolano does not negate his present cause of action. The alleged fraud, if proven, prejudices his right to potentially satisfy a future judgment. To require him to wait for a final judgment in his own case before challenging the fraudulent conveyance would sanction the very injustice he seeks to prevent, as the assets would have already been wrongfully transferred. The complaint sufficiently pleads a cause of action for annulment of judgment based on extrinsic fraud, warranting a full trial on the merits. The case was remanded for further proceedings.