G.R. No. L-72306, October 6, 1988
DAVID P. FORNILDA, ET AL., petitioners, vs. THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL REGION, PASIG, JOAQUIN C. ANTONIO, DEPUTY SHERIFF, RTC, 4JR TANAY, RIZAL AND ATTY. SERGIO I. AMONOY, respondents.

FACTS

The petitioners are heirs of Alfonso I. Fornilda. The controverted six parcels of land, originally part of the estate of Julio M. Catolos, were adjudicated to Alfonso and Asuncion M. Pasamba in an intestate proceeding where respondent Atty. Sergio I. Amonoy served as counsel. Shortly after the project of partition was approved, Alfonso and Asuncion mortgaged these properties to Amonoy to secure payment of his attorney’s fees. Upon their deaths and non-payment of the debt, Amonoy foreclosed the mortgage, acquired the properties at the auction sale as the sole bidder, and later obtained a writ of possession.
Petitioners challenged the foreclosure through an action for annulment of judgment, arguing the mortgage and subsequent sales were void under Article 1491(5) of the Civil Code, which prohibits attorneys from acquiring properties involved in litigation they handled. The trial court and the Court of Appeals dismissed the annulment case, upholding the validity of the transactions and applying res judicata. The respondent trial court then issued orders granting a writ of possession and authorizing the demolition of petitioners’ houses, prompting this certiorari petition.

ISSUE

Whether the mortgage contract and the subsequent foreclosure sale are null and void for violating the prohibition under Article 1491(5) of the Civil Code.

RULING

Yes. The Supreme Court granted the petition, setting aside the challenged orders. The legal logic is anchored on the absolute prohibition in Article 1491(5) of the Civil Code, which disqualifies attorneys from acquiring by purchase or assignment the property and rights in litigation handled by them. This prohibition is based on public policy to prevent conflicts of interest and ensure fidelity in fiduciary relationships. The Court ruled that this disqualification extends not only to direct purchases but also to acquisitions through a mortgage contract that effectively leads to ownership via foreclosure.
Since the mortgage was executed by Amonoy’s clients to secure his fees for the very intestate proceedings where the properties were in litigation, the contract was void from its inception for having an unlawful cause. Consequently, all proceedings stemming from this void contract, including the foreclosure judgment and the auction sale, were also null and void. The trial court in the foreclosure case never acquired jurisdiction over the subject matter because the void mortgage could not validly be its basis. Thus, the principle of res judicata did not apply, as a void judgment can be assailed at any time. Applying Article 1412 of the Civil Code, where only one party (Amonoy) is at fault in an illegal contract that is not criminal, the innocent party (the heirs) may demand the return of what was given. The Court ordered the return of the properties to the petitioners.