The Supreme Court clarified that a final judgment in a forcible entry case binds not only the parties involved but also their successors-in-interest, even if they were not directly impleaded. However, this ruling on possession does not automatically determine ownership. A separate action to claim ownership can still be pursued, provided it’s based on solid evidence like a valid sales agreement, as demonstrated in this case where a signed certification of sale prevailed over a later-obtained title.

From Ejectment to Ownership: When Can a Property Title Be Challenged?

This case revolves around a long-standing dispute over three adjacent parcels of land in Davao City, originally owned by the Estrellado and Barredo families. The core issue arose when J.S. Francisco & Sons, Inc. (the Franciscos) filed forcible entry cases against the Estrellados, claiming ownership based on sales agreements dating back to the 1960s and 1970s. While the Municipal Trial Court in Cities (MTCC) ruled in favor of the Franciscos, ordering the Estrellados to vacate the properties, the Estrellados continued to challenge the ownership, leading to multiple appeals and legal actions. The question before the Supreme Court was whether the final judgments in the forcible entry cases definitively settled the ownership issue, and whether a later claim of ownership could override the established possessory rights.

The petitioners in G.R. No. 164482, some of the Estrellados, sought to annul the MTCC’s judgments, arguing extrinsic fraud and lack of jurisdiction. They claimed they were not properly impleaded in the original cases and were thus not bound by the decisions. However, the Supreme Court emphasized that a judgment directing the delivery of property possession is binding on parties in privity with the original defendants, such as heirs and successors-in-interest. According to the Supreme Court in Stilgrove v. Sabas:

A judgment directing a party to deliver possession of a property to another is in personam. x x x Any judgment therein is binding only upon the parties properly impleaded and duly heard or given an opportunity to be heard. However, this rule admits of the exception, such that even a non-party may be bound by the judgment in an ejectment suit where he is any of the following: (a) trespasser, squatter; or agent of the defendant fraudulently occupying the property to frustrate the judgment; (b) guest or occupant of the premises with the permission of the defendant; (c) transferee pendente lite; (d) sublessee; (e) co-lessee; or (f) member of the family, relative or privy of the defendant.

The Court found that the remedy of annulment of judgment under Rule 47 of the Rules of Court was unavailable because the Estrellados had already availed themselves of the remedy of appeal. The grounds for annulment are limited to extrinsic fraud and lack of jurisdiction. The Court also noted that the alleged fraud, consisting of their counsel’s failure to submit important documents, did not qualify as extrinsic fraud, as it was not attributable to the Franciscos.

Building on this principle, the Supreme Court reaffirmed the limited scope of annulment of judgment in Dare Adventure Farm Corporation v. Court of Appeals:

A petition for annulment of judgment is a remedy in equity so exceptional in nature that it may be availed of only when other remedies are wanting, and only if the judgment, final order or final resolution sought to be annulled was rendered by a court lacking jurisdiction or through extrinsic fraud. Yet, the remedy, being exceptional in character, is not allowed to be so easily and readily abused by parties aggrieved by the final judgments, orders or resolutions. The Court has thus instituted safeguards by limiting the grounds for the annulment to lack of jurisdiction and extrinsic fraud, and by prescribing in Section 1 of Rule 47 of the Rules of Court that the petitioner should show that the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner. A petition for annulment that ignores or disregards any of the safeguards cannot prosper.

Turning to G.R. No. 211320, the Court addressed the accion reinvindicatoria (action for recovery of ownership) initiated by the Barredo heirs, who claimed ownership based on a Transfer Certificate of Title (TCT) obtained in 1998. The Court had to reconcile the CA’s decision favoring the Barredo heirs’ title with the evidence presented by the Franciscos showing a prior sale agreement with the Barredo spouses. The Franciscos presented a certification dated June 10, 1970, signed by the late Spouses Alipio and Vivina Barredo, acknowledging the sale of their land to Dr. Jovito S. Francisco, along with a receipt confirming full payment. These documents, despite the absence of a formal deed of sale, served as critical evidence of the transaction.

The Supreme Court emphasized that an action for ejectment relates only to the physical possession of the property, independent of ownership claims. This distinction is crucial, as it allows for a separate action to determine ownership, even after a final judgment on possession. The Court then delved into the requirements for a valid sale under Article 1475 of the Civil Code, noting that a contract of sale is perfected upon meeting of the minds on the object and the price. While the Franciscos lacked a formal deed of sale, the presented certification and receipt sufficiently established the elements of a valid sale. The Court emphasized that the absence of a formal deed did not invalidate the sale, as the agreement was reduced to writing and signed by the Barredo spouses, satisfying the Statute of Frauds.

The applicable provision of the Civil Code is Article 1403(2), which requires that the sale of real property, to be enforceable, should be in writing subscribed by the party charged. The Court found that this requirement was met even without a formal deed, as the late Spouses Alipio and Vivina Barredo signed a certification acknowledging the sale. The Court further clarified that the form prescribed by Article 1358(1) of the Civil Code is merely for convenience and does not affect the validity or enforceability of the sale, citing Estate of Pedro C. Gonzales v. Heirs of Marcos Perez. As the Court stated in that case, even without notarization, such documents are legally binding.

The Court contrasted the significance of possession of a TCT with the actual transfer of ownership. While a TCT is evidence of title, it is not the sole determinant of ownership. Registration under the Torrens System does not create or vest title; it merely confirms existing ownership rights. In this case, the Franciscos’ evidence of a prior sale, supported by written documentation, outweighed the Barredo heirs’ possession of a later-obtained TCT. Therefore, while the Barredo heirs possessed the owner’s duplicate of the TCT, this did not override the established fact of the earlier sale to Dr. Francisco.

In conclusion, the Supreme Court denied the petition in G.R. No. 164482, affirming the dismissal of the annulment of judgment, and granted the petition in G.R. No. 211320, reinstating the RTC decision in the accion reinvindicatoria case. This decision clarifies the interplay between judgments on possession and ownership, emphasizing the importance of clear and documented evidence of property transactions. The Court ultimately prioritized the documented sale agreement over the later-obtained title, reinforcing the principle that valid contracts remain enforceable even in the absence of formal documentation.

FAQs

What was the key issue in this case?	The main issue was whether the final judgments in forcible entry cases settled the ownership of the disputed parcels of land and whether a later ownership claim could override prior possessory rights.
What is an accion reinvindicatoria?	An accion reinvindicatoria is an action for the recovery of ownership of real property. It allows a person with a rightful claim of ownership to recover possession from someone else.
What is extrinsic fraud?	Extrinsic fraud is fraud that prevents a party from having a fair trial or from presenting their case fully to the court. It concerns the manner in which the judgment is procured, not the merits of the case itself.
What is the Statute of Frauds?	The Statute of Frauds requires certain contracts, including the sale of real property, to be in writing and signed by the party to be charged in order to be enforceable. This prevents fraudulent claims based on verbal agreements.
Does a Transfer Certificate of Title (TCT) guarantee ownership?	A TCT is evidence of title, but it does not create or vest ownership. It reflects the current registered owner of the property, but ownership can be challenged based on prior valid transactions.
What happens if a property sale isn’t notarized?	While notarization makes a document a public document and provides stronger evidence, the lack of notarization does not necessarily invalidate a sale. A private written agreement can still be enforceable if it meets the requirements of the Statute of Frauds.
Who is bound by a judgment in an ejectment case?	A judgment in an ejectment case is primarily binding on the parties involved. However, it can also bind non-parties who are successors-in-interest, relatives, or occupants acting on behalf of the defendant.
What is the difference between possession and ownership in property law?	Possession refers to the physical control and enjoyment of property, while ownership refers to the legal right to control and dispose of that property. A person can possess property without owning it, and vice versa.
Can a case for annulment of judgment be filed at any time?	No. A petition for annulment of judgment is available only when other remedies like appeal or petition for relief are no longer possible through no fault of the petitioner.

This case highlights the importance of documenting property transactions thoroughly and understanding the distinction between possessory rights and ownership claims. It also underscores the limitations of actions for annulment of judgment and reinforces the principle that a valid, documented sale can prevail over a later-obtained title.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Lourdes J. Estrellado, et al. vs. The Presiding Judge of the Municipal Trial Court in Cities, et al., G.R. No. 164482 & G.R. No. 211320, November 8, 2017