MA.
TERESA CHAVES BIACO, G.R.
No. 161417
Petitioner,
Present:
QUISUMBING,
J.,
Chairperson,
- versus - CARPIO,
CARPIO
MORALES,
TINGA,
and
VELASCO,
JR., JJ.
PHILIPPINE
COUNTRYSIDE RURAL
BANK,
Respondent. Promulgated:
x----------------------------------------------------------------------------x
Tinga,
J.:
Petitioner,
Ma. Teresa Chaves Biaco, seeks a review of the Decision[1] of
the Court of Appeals in CA-G.R. No. 67489 dated
The facts as succinctly stated by the
Court of Appeals are as follows:
Ernesto
Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in
the Philippine Countryside Rural Bank (PCRB) as branch manager, Ernesto
obtained several loans from the respondent bank as evidenced by the following
promissory notes:
P 65,000.00
As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of the bank covering the parcel of land described in Original Certificate of Title (OCT) No. P-14423. The real estate mortgages bore the signatures of the spouses Biaco.
When
Ernesto failed to settle the above-mentioned loans on its due date, respondent
bank through counsel sent him a written demand on P1,080,676.50).
The written demand, however, proved futile.
On
Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the spouses Biaco were declared in default upon motion of the respondent bank. The respondent bank was allowed to present its evidence ex parte before the Branch Clerk of Court who was then appointed by the court as Commissioner.
Arturo
Toring, the branch manager of the respondent bank, testified that the spouses
Biaco had been obtaining loans from the bank since 1996 to 1998. The loans for the years 1996-1997 had already
been paid by the spouses Biaco, leaving behind a balance of P1,260,304.33
representing the 1998 loans. The amount being claimed is inclusive of
interests, penalties and service charges as agreed upon by the parties. The
appraisal value of the land subject of the mortgage is only P150,000.00
as reported by the Assessor’s Office.
Based on the report of the Commissioner, the respondent judge ordered as follows:
WHEREFORE,
judgment is hereby rendered ordering defendants spouses ERNESTO R. BIACO and
MA. THERESA [CHAVES] BIACO to pay plaintiff bank within a period of not less
than ninety (90) days nor more than one hundred (100) days from receipt of this
decision the loan of ONE MILLION TWO HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR
PESOS and THIRTY THREE CENTAVOS (P1,260,304.33) plus litigation expenses
in the amount of SEVEN THOUSAND SIX HUNDRED FORTY PESOS (P7,640.00) and
attorney’s fees in the amount of TWO HUNDRED FIFTY TWO THOUSAND THIRTY PESOS
and FORTY THREE CENTAVOS (P252,030.43) and cost of this suit.
In case of non-payment within the period, the Sheriff of this Court is ordered to sell at public auction the mortgaged Lot, a parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-10-002342-D}), located at Gasi, Laguindingan, Misamis Oriental and covered by TCT No. P-14423 to satisfy the mortgage debt, and the surplus if there be any should be delivered to the defendants spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In the event however[,] that the proceeds of the auction sale of the mortgage[d] property is not enough to pay the outstanding obligation, the defendants are ordered to pay any deficiency of the judgment as their personal liability.
SO ORDERED.
On
On P150,000.00).
The
amount of the property sold at public auction being insufficient to cover the
full amount of the obligation, the respondent bank filed an “ex parte
motion for judgment” praying for the issuance of a writ of execution against
the other properties of the spouses Biaco for the full settlement of the
remaining obligation. Granting the motion, the court ordered that a writ of
execution be issued against the spouses Biaco to enforce and satisfy the
judgment of the court for the balance of ONE MILLION THREE HUNDRED SIXTY NINE
THOUSAND NINE HUNDRED SEVENTY FOUR PESOS AND SEVENTY CENTAVOS (P1,369,974.70).
The
sheriff executed two (2) notices of levy against properties registered under
the name of petitioner Ma. Teresa Chaves Biaco.
However, the notices of levy were denied registration because Ma. Teresa had
already sold the two (2) properties to her daughters on
Petitioner sought the annulment of the Regional
Trial Court decision contending that extrinsic fraud prevented her from
participating in the judicial foreclosure proceedings. According to her, she came to know about the
judgment in the case only after the lapse of more than six (6) months after its
finality. She claimed that extrinsic
fraud was perpetrated against her because the bank failed to verify the
authenticity of her signature on the real estate mortgage and did not inquire
into the reason for the absence of her signature on the promissory notes. She moreover asserted that the trial court
failed to acquire jurisdiction because summons were served on her through her husband
without any explanation as to why personal service could not be made.
The Court of Appeals considered the
two circumstances that kept petitioner in the dark about the judicial
foreclosure proceedings: (1) the failure of the sheriff to personally serve
summons on petitioner; and (2) petitioner’s husband’s concealment of his
knowledge of the foreclosure proceedings. On the validity of the service of summons, the
appellate court ruled that judicial foreclosure proceedings are actions quasi
in rem. As such, jurisdiction over the person of the defendant is not
essential as long as the court acquires jurisdiction over the res. Noting that the spouses Biaco were not
opposing parties in the case, the Court of Appeals further ruled that the fraud
committed by one against the other cannot be considered extrinsic fraud.
Her motion for reconsideration having
been denied, petitioner filed the instant Petition for Review,[4]
asserting that even if the action is quasi in rem, personal service of
summons is essential in order to afford her due process. The substituted service made by the sheriff
at her husband’s office cannot be deemed proper service absent any explanation
that efforts had been made to personally serve summons upon her but that such
efforts failed. Petitioner contends that
extrinsic fraud was perpetrated not so much by her husband, who did not inform
her of the judicial foreclosure proceedings, but by the sheriff who allegedly connived
with her husband to just leave a copy of the summons intended for her at the
latter’s office.
Petitioner further argues that the
deficiency judgment is a personal judgment which should be deemed void for lack
of jurisdiction over her person.
Respondent PCRB filed its Comment,[5] essentially
reiterating the appellate court’s ruling.
Respondent avers that service of summons upon the defendant is not
necessary in actions quasi in rem it being
sufficient that the court acquire jurisdiction over the res. As regards the alleged conspiracy between
petitioner’s husband and the sheriff, respondent counters that this is a new
argument which cannot be raised for the first time in the instant petition.
We required the parties to file their
respective memoranda in the Resolution[6]
dated
Annulment of judgment is a recourse
equitable in character, allowed only in exceptional cases as where there is no
available or other adequate remedy. Jurisprudence
and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules of Court) provide
that judgments may be annulled only on grounds of extrinsic fraud and lack of
jurisdiction or denial of due process.[9]
Petitioner asserts that extrinsic
fraud consisted in her husband’s concealment of the loans which he obtained
from respondent PCRB; the filing of the complaint for judicial foreclosure of
mortgage; service of summons; rendition of judgment by default; and all other
proceedings which took place until the writ of garnishment was served.[10]
Extrinsic fraud exists when there is
a fraudulent act committed by the prevailing party outside of the trial
of the case, whereby the defeated party was prevented from presenting
fully his side of the case by fraud or deception practiced on him by the prevailing
party.[11] Extrinsic fraud is present where the
unsuccessful party had been prevented from exhibiting fully his case, by
fraud or deception practiced on him by his opponent, as by keeping him
away from court, a false promise of a compromise; or where the defendant
never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff;
or where an attorney fraudulently or without authority assumes to represent
a party and connives at his defeat; or where the attorney regularly employed
corruptly sells out his client’s interest to the other side. The overriding consideration is that the
fraudulent scheme of the prevailing litigant prevented a party from
having his day in court.[12]
With these considerations, the appellate court acted well in
ruling that there was no fraud perpetrated by respondent bank upon petitioner,
noting that the spouses Biaco were co-defendants in the case and shared the
same interest. Whatever fact or
circumstance concealed by the husband from the wife cannot be attributed to
respondent bank.
Moreover, petitioner’s allegation
that her signature on the promissory notes was forged does not evince extrinsic
fraud. It is well-settled that the use
of forged instruments during trial is not extrinsic fraud because such evidence
does not preclude the participation of any party in the proceedings.[13]
The question of whether the trial
court has jurisdiction depends on the nature of the action, i.e., whether
the action is in personam, in rem, or quasi in rem. The rules on service of summons under Rule 14
of the Rules of Court likewise apply according to the nature of the
action.
An action in personam is an action against a person on the basis of his
personal liability. An action in rem is an
action against the thing itself instead of against the person. An action quasi in rem is one wherein an individual is named as defendant
and the purpose of the proceeding is to subject his interest therein to the
obligation or lien burdening the property.[14]
In an
action in personam, jurisdiction over the person of
the defendant is necessary for the court to validly try and decide the case. In
a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is
not a prerequisite to confer jurisdiction on the court provided that the court
acquires jurisdiction over the res. Jurisdiction
over the res is acquired either (1) by the
seizure of the property under legal process, whereby it is brought into actual
custody of the law; or (2) as a result of the institution of legal proceedings,
in which the power of the court is recognized and made effective.[15]
Nonetheless,
summons must be served upon the defendant not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements.[16]
A resident
defendant who does not voluntarily appear in court, such as petitioner in this
case, must be personally served with summons as provided under Sec. 6, Rule 14
of the Rules of Court. If she cannot be
personally served with summons within a reasonable time, substituted service
may be effected (1) by leaving copies of the summons at the defendant’s
residence with some person of suitable age and discretion then residing
therein, or (2) by leaving the copies at defendant’s office or regular place of
business with some competent person in charge thereof in accordance with Sec.
7, Rule 14 of the Rules of Court.
In this case, the judicial
foreclosure proceeding instituted by respondent PCRB undoubtedly vested the
trial court with jurisdiction over the res.
A judicial foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the person of
petitioner is not required, it being sufficient that the trial court is vested
with jurisdiction over the subject matter.
There is a dimension to this case
though that needs to be delved into. Petitioner
avers that she was not personally served summons. Instead, summons was served to her through
her husband at his office without any explanation as to why the particular
surrogate service was resorted to. The
Sheriff’s Return of Service dated
x x x x
That
on
Without ruling on petitioner’s
allegation that her husband and the sheriff connived to prevent summons from
being served upon her personally, we can see that petitioner was denied due
process and was not able to participate in the judicial foreclosure proceedings
as a consequence. The violation of
petitioner’s constitutional right to due process arising from want of valid
service of summons on her warrants the annulment of the judgment of the trial court.
There is more, the trial court
granted respondent PCRB’s ex-parte motion for deficiency judgment and
ordered the issuance of a writ of execution against the spouses Biaco to
satisfy the remaining balance of the award.
In short, the trial court went beyond its jurisdiction over the res and
rendered a personal judgment against the spouses Biaco. This cannot be countenanced.
In Sahagun v. Court of Appeals,[18]
suit was brought against a
non-resident defendant, Abelardo Sahagun,
and a writ of attachment was issued and subsequently levied on a house and lot
registered in his name. Claiming
ownership of the house, his wife, Carmelita Sahagun,
filed a motion to intervene. For failure
of plaintiff to serve summons extraterritorially upon Abelardo,
the complaint was dismissed without prejudice.
Subsequently, plaintiff filed a
motion for leave to serve summons by publication upon Abelardo. The trial court granted the motion. Plaintiff later filed an amended complaint
against Abelardo, this time impleading
Carmelita and Rallye as additional defendants. Summons was served on Abelardo
through publication in the Manila Evening
Post. Abelardo
failed to file an answer and was declared in default. Carmelita went on certiorari to the Court of
Appeals assailing as grave abuse of discretion the declaration of default of Abelardo. The Court
of Appeals dismissed the petition and denied reconsideration.
In her petition with this Court,
Carmelita raised the issue of whether the trial court acquired jurisdiction over
her husband, a non-resident defendant, by the publication of summons in a
newspaper of general circulation in the
The Court explained, citing El Banco Español-Filipino v. Palanca,[19]
that foreclosure and attachment proceedings are both actions quasi in rem. As such,
jurisdiction over the person of the (non-resident) defendant is not essential. Service of summons on a non-resident defendant
who is not found in the country is required, not for purposes of physically
acquiring jurisdiction over his person but simply in pursuance of the
requirements of fair play, so that he may be informed of the pendency of the
action against him and the possibility that property belonging to him or in
which he has an interest may be subjected to a judgment in favor of a resident,
and that he may thereby be accorded an opportunity to defend in the action, should
he be so minded.
Significantly, the Court went on to
rule, citing De Midgely v. Ferandos,
et. al.[20]
and Perkins v. Dizon, et al.[21]
that in a proceeding in rem or quasi in rem, the
only relief that may be granted by the court against a defendant over whose
person it has not acquired jurisdiction either by valid service of summons or
by voluntary submission to its jurisdiction, is limited to the res.
Similarly, in this case, while the
trial court acquired jurisdiction over the res, its jurisdiction is
limited to a rendition of judgment on the res. It cannot extend its jurisdiction beyond the res
and issue a judgment enforcing petitioner’s personal liability. In doing so without first having acquired
jurisdiction over the person of petitioner, as it did, the trial court violated
her constitutional right to due process, warranting the annulment of the
judgment rendered in the case.
WHEREFORE, the instant petition is
GRANTED. The Decision dated
SO ORDERED.
DANTE O. TINGA
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice
PRESBITERO J. VELASCO,
JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate
Justice
Chairperson,
Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief
Justice
[1]Rollo, pp. 28-35; Penned by Associate Justice Romeo A. Brawner and concurred in by Associate Justices Josefina Guevara-Salonga and Arturo D. Brion.
[12]Strait Times, Inc. v. Court of Appeals, 356 Phil. 217, 225-226 (1998), 294 SCRA 714, citing Palanca v. The American Food Manufacturing Co., 24 SCRA 819, August 30, 1968, per Zaldivar, J., citing U.S. v. Throckmorton, 98 U.S. 93, 95, 25 L. Ed. 93 (1878); See also Alaban v. Court of Appeals, G.R. No. 156021, September 23, 2005, 470 SCRA 697, 708.