FACTS:

The parties entered into a lease agreement over a Quezon City property owned by petitioner Victoria Legarda. Legarda refused to sign the contract despite the deposit and down payment made by respondent New Cathay House, Inc. (Cathay). Cathay filed a complaint for specific performance with preliminary injunction and damages against Legarda in the Regional Trial Court.

Legarda's counsel, Atty. Antonio Coronel, requested an extension of time to file an answer, but failed to do so within the extended period. Legarda was declared in default, and Cathay presented evidence ex-parte. A judgment by default was issued ordering Legarda to execute the lease contract and pay damages to Cathay. A copy of the decision was served on Atty. Coronel, but he took no action until the judgment became final and executory.

A month later, a writ of execution was issued and the property was sold in a public auction to Cathay's manager, Roberto Cabrera. A Final Deed of Sale was subsequently issued, cancelling Legarda's ownership and transferring it to Cabrera. Legarda, upon learning of the adverse decision, filed a petition for annulment of judgment with the Court of Appeals. The appellate court affirmed the trial court's decision, holding Legarda bound by her counsel's negligence.

Legarda's new counsel filed a petition for certiorari with the Supreme Court, alleging that her previous lawyer's negligence violated her right to due process. The Supreme Court ruled in favor of Legarda, nullifying the lower court decisions and ordering Cathay to reconvey the property.

Cathay filed a motion for reconsideration, arguing that it was no longer in possession of the property and ownership had already been transferred to third parties.

Cathay, as the judgment creditor, had a duly recorded mortgage over a property owned by Legarda. Due to Legarda's failure to pay, the property was foreclosed and Cathay emerged as the highest bidder at the public auction. The manager of Cathay, Roberto Cabrera, was the one who made the winning bid. Cabrera subsequently obtained a certificate of sale and final deed of sale for the property, consolidating his ownership over it. He then sold the property to Nancy Saw, who later sold it to Lily Tanlo Sy Chua. Finally, the property was transferred to Janet Chong Luminlun.

It is important to note that all the subsequent owners of the property obtained indefeasible titles and were considered transferees for value and in good faith. There was no notice of lis pendens annotated on any of the titles, and even if there was, it would not have created a lien over the property. Thus, the property is now in the hands of Luminlun, an innocent purchaser for value.

It is also worth mentioning that Cabrera was impleaded as a party-respondent only after the promulgation of the decision ordering Cathay to reconvey the property to Legarda. Cabrera was never a party to the case, and the court did not obtain jurisdiction over him until he was impleaded. Ordering his principal, Cathay, to reconvey the property to Legarda would be inappropriate and a deprivation of property without due process of law.

ISSUES:

1. Whether the Court obtained jurisdiction over Cabrera, who was impleaded as a party-respondent only after the promulgation of the Gancayco decision.

2. Whether reconveyance is possible and would address the issues raised in the case.

3. Whether the application of the sale price to Legarda's judgment debt constituted payment that extinguished her liability to Cathay.

4. Whether Legarda was deprived of her property without due process of law.

5. Whether Cabrera, as an officer of Cathay, acted in bad faith as the winning bidder in the auction sale.

6. Whether or not Cathay and Cabrera should be made to suffer for the gross negligence of Legarda's counsel.

7. Whether or not the final judgments of the trial and appellate courts were illegally obtained.

8. Whether or not the issue of lack of jurisdiction over the parties and subject matter can be raised for the first time in a motion for reconsideration.

9. Whether or not the alleged negligence of the counsel can be a ground to annul a final and executory decision.

RULING:

1. The Court did not obtain jurisdiction over Cabrera until he was impleaded as a party-respondent. Commanding his principal to reconvey the property to Legarda, which used to be his property, would be inappropriate and would constitute a deprivation of property without due process of law.

2. Reconveyance, assuming it is possible, would still not address the issues raised in the case.

3. The application of the sale price to Legarda's judgment debt constituted payment and extinguished her liability to Cathay. With the fulfillment of the judgment debtor's obligation, no further action is required.

4. Legarda was not deprived of her property without due process of law. Although her counsel was negligent, she was given the opportunity to defend her interests in due course, which is the essence of due process. The proceedings leading to the case were regular and free from irregularities.

5. Cabrera, as an officer of Cathay, did not act in bad faith as the winning bidder in the auction sale. His act of representing the company was never disputed, and the bidding was conducted in accordance with the rules. The fact that Cabrera emerged as the winning bidder does not raise any alarm, as sometimes the judgment creditor personally participates in the bidding.

6. Cathay and Cabrera should not be made to suffer for the negligence of Legarda's counsel. The party responsible for the negligence should bear the consequences. This is in accordance with the basic common law maxim that between two innocent parties, the one who made it possible for the wrong to be done should bear the resulting loss.

7. The final judgments of the trial and appellate courts were not illegally obtained. The judgments became final when Legarda failed to avail of remedies such as filing a motion for reconsideration or appealing the case. Once a judgment becomes final, it may no longer be reviewed or modified by a higher court, except for clerical errors.

8. The issue of lack of jurisdiction over the parties and subject matter was not raised by Legarda during the trial, therefore, the trial court's decision cannot be nullified on this ground. Errors of judgment can only be reviewed on appeal, and if no appeal is made, the decision becomes final and executory.

9. Legarda initially claimed that the trial court's decision was fraudulently obtained, but later grounded her petition before the Supreme Court on her counsel's alleged negligence. However, this cannot be accepted because Legarda only protested the negligence of her attorney after the appellate court's decision had become final and executory, and after the property had already been auctioned off and sold to innocent purchasers for value. Such a claim is dilatory and desperate on the part of a vanquished litigant.

PRINCIPLES:

• Jurisdiction over a party is acquired through voluntary appearance or submission to the court or through coercive process issued by the court, generally by service of summons.

• Reconveyance requires the return of property to its rightful owner.

• Payment of a judgment debt extinguishes the debtor's liability.

• Due process requires that a party be given the opportunity to be heard and defend their interests.

• Negligence of counsel does not necessarily constitute a deprivation of due process if the proceedings leading to the case were regular and free from irregularities.

• The winning bidder in an auction sale is not automatically deemed to have acted in bad faith, even if they are an officer or representative of the judgment creditor.

• Between two innocent parties, the one who made it possible for the wrong to be done should bear the resulting loss.

• Courts render decisions based on sound judgment and the relevant law, not on emotions.

• Courts are not authorized to intervene and restore a losing litigant unless there is a violation of law or an actionable wrong.

• Judgments must reach a stage of finality in order to give certainty and stability to legal proceedings.

• Void judgments may fall under two groups: those rendered by a court without jurisdiction and those obtained by fraud or collusion.

• An action to annul a judgment on the ground of fraud will not lie if the fraud is extrinsic or collateral and has been controverted or resolved in the case where the judgment was rendered.

• Lack of jurisdiction must be raised as an issue during the trial, otherwise, the decision cannot be nullified on this ground.

• Errors of judgment can only be reviewed on appeal, and if no appeal is made, the decision becomes final and executory.

• Negligence of counsel cannot be a ground to annul a final and executory decision, especially when raised only after the decision has become final and executory and after other parties have relied on it.