G.R. No. 137566. February 28, 2001.
ROBERTO G. ROSALES, as successor-in-interest of NAPOLEON S. ROSALES and LUIS BUSTILLO, petitioners, vs. THE HON. COURT OF APPEALS and NATIONAL DEVELOPMENT CORPORATION, as substituted plaintiff and the successor-in-interest of CONTINENTAL BANK, respondents.

FACTS

Continental Bank filed a complaint for collection and judicial foreclosure against Atlas Timber Company, Napoleon Rosales, and Luis Bustillo based on a promissory note secured by real estate mortgages. Defendants admitted the loan but claimed the bank failed to release the full P1,000,000.00, delivering only P424,000.00 and retaining the balance, which prevented them from completing their plant. The trial court rendered judgment ordering payment of the full loan amount with interest and attorney’s fees, and upon default, the foreclosure of the mortgaged properties. A writ of execution was issued, and the properties were sold at public auction to the bank as the highest bidder.
Petitioners later filed an action for annulment of the trial court’s orders and the sheriff’s sale, alleging extrinsic fraud and lack of jurisdiction. They claimed they were not notified of the hearing for the confirmation of the sale because their counsel had withdrawn without notice. The Court of Appeals dismissed the petition, ruling that the proper remedy was an appeal from the trial court’s orders and that the action for annulment was filed out of time. Petitioners elevated the case to the Supreme Court via a petition for review.

ISSUE

Whether the Court of Appeals erred in dismissing the petition for annulment of judgment.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic is anchored on the rules governing remedies and the finality of judgments. An action for annulment of judgment based on extrinsic fraud is not a substitute for a lost appeal. Petitioners failed to timely appeal the trial court’s orders confirming the sheriff’s sale. The alleged fraud—their counsel’s withdrawal without notice—did not constitute extrinsic fraud, which requires a deliberate scheme to prevent a party from presenting their case. Here, petitioners were represented by other counsel, and there was no showing the bank prevented them from participating. Moreover, the action for annulment was filed nearly twenty years after the questioned orders, far beyond the four-year prescriptive period. The Court emphasized the importance of the finality of judgments and that litigants must exercise diligence in pursuing their remedies within the reglementary periods provided by law.