G.R. No. L-37317 November 24, 1978
SANTIAGO LAXAMANA, deceased, substituted by RITA CANILAO VDA. DE LAXAMANA, et al., petitioners, vs. HON. COURT OF APPEALS, JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, BRANCH VII; CITY SHERIFF OF MANILA, and ELEUTERIO MALLARI, deceased substituted by JULIANA FERNANDO, et al., respondents.

FACTS

This case originated from a dispute over a small parcel of land, Lot 8-A, in Sampaloc, Manila, between Eleuterio Mallari and his nephew-in-law, Santiago Laxamana. Mallari filed an action to establish ownership over Lots 8-A and 8-B. During the trial, Laxamana and his counsel, despite notice, failed to appear at the hearing on December 21, 1961. The trial court proceeded to hear Mallari’s evidence ex-parte and subsequently rendered a decision on February 22, 1962, declaring Mallari the owner of the lots and ordering Laxamana to vacate and pay rentals.
Laxamana filed a petition for relief from judgment, alleging his lawyer misplaced the notice of hearing. The trial court denied this petition, finding the neglect inexcusable and noting a prior notarial agreement limiting Laxamana’s claim. Laxamana later filed a second motion for reconsideration, alleging his lawyer had fraudulently connived with the Mallaris, supported by affidavits. While motions were pending, the parties indicated a potential amicable settlement by dividing the land, but this did not materialize. The trial court eventually denied all of Laxamana’s motions. The Court of Appeals dismissed Laxamana’s subsequent petition for certiorari.

ISSUE

Whether the trial court’s decision, having become final and executory, can be set aside on the grounds of extrinsic fraud and denial of due process.

RULING

Yes. The Supreme Court reversed the lower courts’ rulings. The legal logic centers on the principle that a final judgment can be annulled if procured through extrinsic or collateral fraud, which prevents a party from having a full and fair presentation of their case, thereby constituting a denial of due process. The Court found that Laxamana’s allegations, if true, constituted precisely this type of fraud. Extrinsic fraud exists when the act of the successful party, such as inducing the opposing counsel to commit professional infidelity or to “sell out” his client’s interest, prevents the losing party from having an adversary trial or from interposing a timely appeal.
The Court held that Laxamana’s repeated claims—that his lawyer was bribed by the adverse party, preventing him from presenting his evidence at trial and from perfecting an appeal—warranted a re-examination. This alleged skullduggery, which prevented Laxamana from having his day in court, vitiates the final judgment. Consequently, the Court set aside the 1962 decision, the writ of execution, and the appellate court’s resolutions. The case was remanded to the trial court to allow Laxamana’s heirs to cross-examine witnesses and present evidence, after a final effort for amicable settlement.