G.R. No. L-22506 February 28, 1969
ENCARNACION M. SIAYNGCO assisted by her husband, JULIO SIAYNGCO, petitioners, vs. MARTIN COSTIBOLO and THE HON. COURT OF APPEALS, respondents.

FACTS

Respondent Martin Costibolo filed a complaint in the Court of First Instance of Leyte seeking the annulment, on the ground of extrinsic fraud, of a decision of the Justice of the Peace Court of Dagami, Leyte, in Civil Case No. 46. In that case, petitioners Encarnacion M. Siayngco and Julio Siayngco had obtained a money judgment against Costibolo based on his confession of judgment. Costibolo alleged that he confessed judgment based on the Siayngcos’ representation and promise that they would not ask for a writ of execution within five years, giving him time to pay. However, after the judgment became final, the Siayngcos secured a writ of execution, leading to the attachment and advertisement for sale of his properties. Costibolo’s prior petition for relief from judgment was denied for being filed beyond the reglementary period. In the annulment case, after Costibolo presented his evidence and rested, the Siayngco spouses orally moved for dismissal (a demurrer to evidence), arguing the alleged fraud could not have influenced the 1954 judgment. They expressly reserved their right to present evidence if their motion was denied. The trial court denied the motion and, without receiving the Siayngcos’ evidence, rendered judgment annulling the prior judgments and awarding Costibolo damages. The Court of Appeals affirmed this decision.

ISSUE

Whether the trial court erred in rendering judgment on the merits against the petitioners (defendants) without allowing them to present their evidence after denying their demurrer to the plaintiff’s evidence.

RULING

Yes. The Supreme Court reversed the decision of the Court of Appeals. The Court held that an action for annulment of judgment based on extrinsic fraud involves a two-stage hearing: first, to determine if the judgment should be annulled due to fraud, and second, to try the case on its merits if annulment is granted. When the petitioners filed their demurrer to evidence with an express reservation to present their own evidence if the demurrer was denied, they could not be deemed to have waived their right to present evidence at the second hearing on the merits. The trial court’s denial of the demurrer was effectively a ruling that the judgment should be annulled due to fraud. At that point, the case should have proceeded to the second hearing for the reception of both parties’ evidence on the merits of the original obligation. The Court directed the remand of the case to the trial court for further proceedings.