GR 148211; (July, 2006) (Digest)
G.R. No. 148211 ; July 25, 2006
SINCERE Z. VILLANUEVA, petitioner, vs. MARLYN P. NITE, respondent.
FACTS
Respondent Marlyn Nite obtained a loan from petitioner Sincere Villanueva and issued an Asian Bank Corporation (ABC) check as security. The check was dishonored upon presentment due to a material alteration. Respondent, through a representative, made a partial payment of P235,000, with the balance agreed to be paid by December 8, 1994. However, merely six days after receiving the partial payment, petitioner filed a collection suit against ABC alone for the full check value, without impleading respondent. The RTC ruled in petitioner’s favor, ordering ABC to pay. Respondent discovered the judgment only when her bank account was garnished, prompting her to seek annulment of the RTC decision before the Court of Appeals.
ISSUE
Whether the Court of Appeals correctly annulled the RTC decision on the ground of extrinsic fraud and for lack of jurisdiction over an indispensable party.
RULING
The Supreme Court affirmed the CA decision. Annulment of judgment under Rule 47 is proper based on extrinsic fraud or lack of jurisdiction. Extrinsic fraud exists when a party is deliberately kept from participating in the suit or presenting their case. The Court found extrinsic fraud in petitioner’s act of hastily filing the suit against only the bank, despite knowing of the partial payment and agreed settlement with respondent, and despite widespread knowledge that respondent was abroad. This intentional exclusion prevented respondent from defending her interests. Furthermore, the RTC judgment was void for lack of jurisdiction over an indispensable party. The loan contract was strictly between petitioner and respondent; no privity existed between petitioner and the drawee bank, ABC. Under the Negotiable Instruments Law, a check does not operate as an assignment of funds, and the payee-holder generally cannot sue the bank. Respondent, as the drawer and real party-in-interest, was an indispensable party under Rule 3, Section 7 of the Rules of Court. Any judgment rendered without joining an indispensable party is a nullity. Thus, the annulment was proper.