Case Digest: AFPMBAI vs. RTC of Marikina

G.R. No. 183906 : February 14, 2011

AFP MUTUAL BENEFIT ASSOCIATION, INC. Petitioner, v. REGIONAL TRIAL COURT, MARIKINA CITY, BRANCH 193 and SOLID HOMES, INC., Respondents.

ABAD, J.:

FACTS:

Investco, Inc. (Investco) entered into a contract to sell to Solid Homes, Inc. (Solid Homes) certain properties in Quezon City and in Marikina City. But, because Solid Homes defaulted in payments, Investco sued for specific performance and damages. During the pendency of the action, Investco sold the properties to the Armed Forces of the Philippines Mutual Benefits Association, Inc. (AFPMBAI).

Solid Homes filed an action against the Register of Deeds, AFPMBAI, and Investco with the Regional Trial Court (RTC), which rendered a decision, directing the Register of Deeds to cancel Solid Homes’ notice of lis pendens on AFPMBAI’s titles and declared AFPMBAI a buyer in good faith and for value.

Solid Homes filed a petition for relief from judgment claiming that Investco and AFPMBAI committed extrinsic fraud involving AFPMBAI’s alleged failure to disclose its knowledge of a prior sale between Investco and Solid Homes. The RTC issued an order, giving due course to Solid Homes’ petition.

ISSUES: Whether or not the RTC’s grant of Solid Homes’ petition for relief based on AFPMBAI’s alleged fraud in acquiring its titles to the subject property is barred by res judicata.

HELD:

Petition is meritorious.

CIVIL LAW: Fraud

The extrinsic fraud that will justify a petition for relief from judgment is that fraud which the prevailing party caused to prevent the losing party from being heard on his action or defense. Such fraud concerns not the judgment itself but the manner in which it was obtained. For example, the petition of a defending party would be justified where the plaintiff deliberately caused with the process server’s connivance the service of summons on defendant at the wrong address and thus succeeded in getting a judgment by default against him.

Here, the fraud that Solid Homes proposed as ground for its petition for relief is Investco and AFPMBAI’s alleged prior knowledge of the sale of the disputed lands to Solid Homes, which fraud goes into the merit of the case rather than on Solid Homes’ right to be heard on its action. In effect the RTC will rehear the issue of whether or not AFPMBAI was a buyer in good faith, an issue barred by res judicata.

Petition is GRANTED.

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