Republic SUPREME Manila THIRD DIVISION G.R. No.

130974 August 16, 2006

of

the

Philippines COURT

MA. IMELDA M. MANOTOC, Petitioner, vs. HONORABLE COURT OF APPEALS and AGAPITA TRAJANO on behalf of the Estate of ARCHIMEDES TRAJANO, Respondents. DECISION VELASCO, JR., J.: The courts jurisdiction over a defendant is founded on a valid service of summons. Without a valid service, the court cannot acquire jurisdiction over the defendant, unless the defendant voluntarily submits to it. The defendant must be properly apprised of a pending action against him and assured of the opportunity to present his defenses to the suit. Proper service of summons is used to protect ones right to due process. The Case This Petition for Review on Certiorari 1 under Rule 45 presents the core issue whether there was a valid substituted service of summons on petitioner for the trial court to acquire jurisdiction. Petitioner Manotoc claims the court a quo should have annulled the proceedings in the trial court for want of jurisdiction due to irregular and ineffective service of summons. The Facts Petitioner is the defendant in Civil Case No. 63337 entitled Agapita Trajano, pro se, and on behalf of the Estate of Archimedes Trajano v. Imelda Imee R. Marcos-Manotoc 2 for Filing, Recognition and/or Enforcement of Foreign

Judgment. Respondent Trajano seeks the enforcement of a foreign courts judgment rendered on May 1, 1991 by the United States District Court of Honolulu, Hawaii, United States of America, in a case entitled Agapita Trajano, et al. v. Imee Marcos-Manotoc a.k.a. Imee Marcos, Civil Case No. 86-0207 for wrongful death of deceased Archimedes Trajano committed by military intelligence officials of the Philippines allegedly under the command, direction, authority, supervision, tolerance, sufferance and/or influence of defendant Manotoc, pursuant to the provisions of Rule 39 of the then Revised Rules of Court. Based on paragraph two of the Complaint, the trial court issued a Summons 3 on July 6, 1993 addressed to petitioner at Alexandra Condominium Corporation or Alexandra Homes, E2 Room 104, at No. 29 Meralco Avenue, Pasig City. On July 15, 1993, the Summons and a copy of the Complaint were allegedly served upon (Mr.) Macky de la Cruz, an alleged caretaker of petitioner at the condominium unit mentioned earlier. 4 When petitioner failed to file her Answer, the trial court declared her in default through an Order 5 dated October 13, 1993. On October 19, 1993, petitioner, by special appearance of counsel, filed a Motion to Dismiss 6 on the ground of lack of jurisdiction of the trial court over her person due to an invalid substituted service of summons. The grounds to support the motion were: (1) the address of defendant indicated in the Complaint (Alexandra Homes) was not her dwelling, residence, or regular place of business as provided in Section 8, Rule 14 of the Rules of Court; (2) the party (de la Cruz), who was found in the unit, was neither a representative, employee, nor a resident of the place; (3) the procedure prescribed by the Rules on personal and substituted service of summons was ignored; (4) defendant was a resident of Singapore; and (5) whatever judgment rendered in this case would be ineffective and futile. During the hearing on the Motion to Dismiss, petitioner Manotoc presented Carlos Gonzales, who testified that he saw defendant Manotoc as a visitor in Alexandra Homes only two times. He also identified the Certification of Renato A. de Leon, which stated that Unit E-2104 was owned by Queens Park Realty, Inc.; and at the time the Certification was issued, the unit was not being leased by anyone. Petitioner also presented her Philippine passport and the Disembarkation/Embarkation Card 7 issued by the Immigration Service of Singapore to show that she was a resident of Singapore. She claimed that the person referred to in plaintiffs Exhibits "A" to "EEEE" as "Mrs. Manotoc" may not even be her, but the mother of Tommy Manotoc, and granting that she was the one referred to in said exhibits, only 27 out of 109 entries referred to Mrs. Manotoc. Hence, the infrequent number of times she allegedly entered Alexandra Homes did not at all establish plaintiffs position that she was a resident of said place.

On the other hand, Agapita Trajano, for plaintiffs estate, presented Robert Swift, lead counsel for plaintiffs in the Estate of Ferdinand Marcos Human Rights Litigation, who testified that he participated in the deposition taking of Ferdinand R. Marcos, Jr.; and he confirmed that Mr. Marcos, Jr. testified that petitioners residence was at the Alexandra Apartment, Greenhills. 8 In addition, the entries 9 in the logbook of Alexandra Homes from August 4, 1992 to August 2, 1993, listing the name of petitioner Manotoc and the Sheriffs Return, 10 were adduced in evidence. On October 11, 1994, the trial court rejected Manotocs Motion to Dismiss on the strength of its findings that her residence, for purposes of the Complaint, was Alexandra Homes, Unit E-2104, No. 29 Meralco Avenue, Pasig, Metro Manila, based on the documentary evidence of respondent Trajano. The trial court relied on the presumption that the sheriffs substituted service was made in the regular performance of official duty, and such presumption stood in the absence of proof to the contrary. 11 On December 21, 1994, the trial court discarded Manotocs plea for reconsideration for lack of merit.
12

Undaunted, Manotoc filed a Petition for Certiorari and Prohibition 13 before the Court of Appeals (CA) on January 20, 1995, docketed as CA-G.R. SP No. 36214 seeking the annulment of the October 11, 1994 and December 21, 1994 Orders of Judge Aurelio C. Trampe. Ruling of the Court of Appeals On March 17, 1997, the CA rendered the assailed Decision, 14 dismissing the Petition for Certiorari and Prohibition. The court a quo adopted the findings of the trial court that petitioners residence was at Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig, Metro Manila, which was also the residence of her husband, as shown by the testimony of Atty. Robert Swift and the Returns of the registered mails sent to petitioner. It ruled that the Disembarkation/Embarkation Card and the Certification dated September 17, 1993 issued by Renato A. De Leon, Assistant Property Administrator of Alexandra Homes, were hearsay, and that said Certification did not refer to July 1993the month when the substituted service was effected. In the same Decision, the CA also rejected petitioners Philippine passport as proof of her residency in Singapore as it merely showed the dates of her departure from and arrival in the Philippines without presenting the boilerplates last two (2) inside pages where petitioners residence was indicated. The CA considered the withholding of those pages as suppression of evidence. Thus, according to the CA, the trial court had acquired jurisdiction over petitioner as there was a valid substituted service pursuant to Section 8, Rule 14 of the old Revised Rules of Court.

On April 2, 1997, petitioner filed a Motion for Reconsideration 15 which was denied by the CA in its Resolution 16dated October 8, 1997. Hence, petitioner has come before the Court for review on certiorari. The Issues Petitioner raises the following assignment of errors for the Courts consideration: I. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE IN RULING THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH A SUBSTITUTED SERVICE OF SUMMONS IN ACCORDANCE WITH SECTION 8, RULE 14 OF THE REVISED RULES OF COURT. II. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR WHEN IT RULED THAT THERE WAS A VALID SERVICE OF SUMMONS ON AN ALLEGED CARETAKER OF PETITIONERS RESIDENCE IN COMPLETE DEFIANCE OF THE RULING IN CASTILLO VS. CFI OF BULACAN, BR. IV, G.R. NO. L-55869, FEBRUARY 20, 1984, 127 SCRA 632 WHICH DEFINES THE PROPRIETY OF SUCH SERVICE UPON MERE OVERSEERS OF PREMISES WHERE A PARTY SUPPOSEDLY RESIDES. III. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN CONCLUDING THAT THE RESIDENCE OF THE HUSBAND IS ALSO THE RESIDENCE OF HIS WIFE CONTRARY TO THE RULING IN THE BANK OF THE PHILIPPINE ISLANDS VS. DE COSTER, G.R. NO. 23181, MARCH 16, 1925, 47 PHIL. 594. IV. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN FAILING TO APPLY THE RULE ON EXTRA-TERRITORIAL SERVICE OF SUMMONS UNDER SECTIONS 17 AND 18, RULE 14 OF THE REVISED RULES OF COURT. 17 The assigned errors bring to the fore the crux of the disagreementthe validity of the substituted service of summons for the trial court to acquire jurisdiction over petitioner. The Courts Ruling

We GRANT the petition. Acquisition of Jurisdiction Jurisdiction over the defendant is acquired either upon a valid service of summons or the defendants voluntary appearance in court. When the defendant does not voluntarily submit to the courts jurisdiction or when there is no valid service of summons, "any judgment of the court which has no jurisdiction over the person of the defendant is null and void." 18 In an action strictly in personam, personal service on the defendant is the preferred mode of service, that is, by handing a copy of the summons to the defendant in person. If defendant, for excusable reasons, cannot be served with the summons within a reasonable period, then substituted service can be resorted to. While substituted service of summons is permitted, "it is extraordinary in character and in derogation of the usual method of service." 19 Hence, it must faithfully and strictly comply with the prescribed requirements and circumstances authorized by the rules. Indeed, "compliance with the rules regarding the service of summons is as much important as the issue of due process as of jurisdiction." 20 Requirements for Substituted Service Section 8 of Rule 14 of the old Revised Rules of Court which applies to this case provides: SEC. 8. 21 Substituted service. If the defendant cannot be served within a reasonable time as provided in the preceding section [personal service on defendant], service may be effected (a) by leaving copies of the summons at the defendants residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendants office or regular place of business with some competent person in charge thereof. We can break down this section into the following requirements to effect a valid substituted service: (1) Impossibility of Prompt Personal Service The party relying on substituted service or the sheriff must show that defendant cannot be served promptly or there is impossibility of prompt service. 22 Section 8, Rule 14 provides that the plaintiff or the sheriff is given a "reasonable time" to

"Reasonable time" is defined as "so much time as is necessary under the circumstances for a
serve the summons to the defendant in person, but no specific time frame is mentioned.

reasonably prudent and diligent man to do, conveniently, what the contract or duty requires that should be done, having a regard for the rights and possibility of loss, if any[,] to the other party." 23 Under the Rules, the service of summons has no set period. However,
when the court, clerk of court, or the plaintiff asks the sheriff to make the return of the summons and the latter submits the return of summons, then the validity of the summons lapses. The plaintiff may then ask for an alias summons if the service of summons has failed. 24 What then is a reasonable time for the sheriff to effect a personal service in order to demonstrate impossibility of prompt service? To the plaintiff, "reasonable time" means no more than seven (7) days since an expeditious processing of a complaint is what a plaintiff wants. To the sheriff, "reasonable time" means 15 to 30 days because at the end of the month, it is a practice for the branch clerk of court to require the sheriff to submit a return of the summons assigned to the sheriff for service. The Sheriffs Return provides data to the Clerk of Court, which the clerk uses in the Monthly Report of Cases to be submitted to the Office of the Court Administrator within the first ten (10) days of the succeeding month. Thus, one month from the issuance of summons can be considered "reasonable time" with regard to personal service on the defendant. Sheriffs are asked to discharge their duties on the service of summons with due care, utmost diligence, and reasonable promptness and speed so as not to prejudice the expeditious dispensation of justice. Thus, they are enjoined to try their best efforts to accomplish personal service on defendant. On the other hand, since the defendant is expected to try to avoid and evade service of summons, the sheriff must be resourceful, persevering, canny, and diligent in serving the

For substituted service of summons to be available, there must be several attempts by the sheriff to personally serve the summons within a reasonable period [of one month] which eventually resulted in failure to prove impossibility of prompt service. "Several attempts" means at least three (3) tries, preferably on at least two different dates. In addition, the sheriff must cite why such efforts were unsuccessful. It is only then that impossibility of service can be confirmed or accepted.
process on the defendant.

(2) Specific Details in the Return The sheriff must describe in the Return of Summons the facts and circumstances surrounding the attempted personal service. 25 The efforts made to find the defendant and the reasons behind the failure must be clearly narrated in detail in the Return. The date and time of the attempts on personal service, the inquiries made to locate the defendant, the name/s of the occupants of the alleged residence or house of defendant and all other acts done, though futile, to serve the summons on defendant must be specified in the Return to justify substituted service. The form on Sheriffs Return of Summons on Substituted Service prescribed in the Handbook for Sheriffs published by the Philippine Judicial Academy requires a narration of the efforts made to find the defendant personally and the fact of failure. 26 Supreme Court Administrative Circular No. 5 dated November 9, 1989 requires that "impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the failure of such efforts," which should be made in the proof of service. (3) A Person of Suitable Age and Discretion If the substituted service will be effected at defendants house or residence, it should be left with a person of "suitable age and discretion then residing therein." 27 A person of suitable age and discretion is one who has attained the age of full legal capacity (18 years old) and is considered to have enough discernment to understand the importance of a summons. "Discretion" is defined as "the ability to make decisions which represent a responsible choice and for which an understanding of what is lawful, right or wise may be presupposed". 28 Thus, to be of sufficient discretion, such person must know how to read and understand English to comprehend the import of the summons, and fully realize the need to deliver the summons and complaint to the defendant at the earliest possible time for the person to take appropriate action. Thus, the person must have the "relation of confidence" to the defendant, ensuring that the latter would receive or at least be notified of the receipt of the summons. The sheriff must therefore determine if the person found in the alleged dwelling or residence of defendant is of legal age, what the recipients relationship with the defendant is, and whether said person comprehends the significance of the receipt of the summons and his duty to immediately deliver it to the defendant or at least notify the defendant of said receipt of summons. These matters must be clearly and specifically described in the Return of Summons. (4) A Competent Person in Charge

If the substituted service will be done at defendants office or regular place of business, then it should be served on a competent person in charge of the place. Thus, the person on whom the substituted service will be made must be the one managing the office or business of defendant, such as the president or manager; and such individual must have sufficient knowledge to understand the obligation of the defendant in the summons, its importance, and the prejudicial effects arising from inaction on the summons. Again, these details must be contained in the Return.
Invalid Substituted Service in the Case at Bar Let us examine the full text of the Sheriffs Return, which reads: THIS IS TO CERTIFY that on many occasions several attempts were made to serve the summons with complaint and annexes issued by this Honorable Court in the above entitled case, personally upon the defendant IMELDA IMEE MARCOS-MANOTOC located at Alexandra Condominium Corpration [sic] or Alexandra Homes E-2 Room 104 No. 29 Merlaco [sic] Ave., Pasig, Metro-Manila at reasonable hours of the day but to no avail for the reason that said defendant is usually out of her place and/or residence or premises. That on the 15th day of July, 1993, substituted service of summons was resorted to in accordance with the Rules of Court in the Philippines leaving copy of said summons with complaint and annexes thru [sic] (Mr) Macky de la Cruz, caretaker of the said defendant, according to (Ms) Lyn Jacinto, Receptionist and Telephone Operator of the said building, a person of suitable age and discretion, living with the said defendant at the given address who acknowledged the receipt thereof of said processes but he refused to sign (emphases supplied). WHEREFORE, said summons is hereby returned to this Honorable Court of origin, duly served for its record and information. Pasig, Metro-Manila July 15, 1993. 29

A meticulous scrutiny of the aforementioned Return readily reveals the absence of material data on the serious efforts to serve the Summons on petitioner

Manotoc in person. There is no clear valid reason cited in the Return why those efforts proved inadequate, to reach the conclusion that personal service has become impossible or unattainable outside the generally couched phrases of "on many occasions several attempts were made to serve the summons x x x personally," "at reasonable hours during the day," and "to no avail for the reason that the said defendant is usually out of her place and/or residence or premises."
Wanting in detailed information, the Return deviates from the rulingin Domagas v. Jensen 30 and other related cases 31that the pertinent facts and circumstances on the efforts exerted to serve the summons personally must be narrated in the Return. It cannot be determined how many times, on what specific dates, and at what hours of the day the attempts were made. Given the fact that the substituted service of summons may be assailed, as in the present case, by a Motion to Dismiss, it is imperative that the pertinent facts and circumstances surrounding the service of summons be described with more particularity in the Return or Certificate of Service. Besides, apart from the allegation of petitioners address in the Complaint, it has not been shown that respondent Trajano or Sheriff Caelas, who served such summons, exerted extraordinary efforts to locate petitioner. Certainly, the second paragraph of the Complaint only states that respondents were "informed, and so [they] allege" about the address and

Before resorting to substituted service, a plaintiff must demonstrate an effort in good faith to locate the defendant through more direct means. 32 More so, in the case in hand, when the alleged petitioners residence or house is doubtful or has not been clearly ascertained, it would have been better for personal service to have been pursued persistently.
whereabouts of petitioner. In the case Umandap v. Sabio, Jr., 33 it may be true that the Court held that a Sheriffs Return, which states that "despite efforts exerted to serve said process personally upon the defendant on several occasions the same proved futile," conforms to the requirements of valid substituted service. However, in view of the numerous claims of irregularities in substituted service which have spawned the filing of a great number of unnecessary special civil actions of certiorari and appeals to higher courts, resulting in prolonged litigation and wasteful legal expenses, the Court rules in the case at bar that the narration of the efforts made to find the defendant and the fact of failure written in broad and imprecise words will

not suffice. The facts and circumstances should be stated with more particularity and detail on the number of attempts made at personal service, dates and times of the attempts, inquiries to locate defendant, names of occupants of the alleged residence, and the reasons for failure should be included in the Return to satisfactorily show the efforts undertaken. That such efforts were made to personally serve summons on defendant, and those resulted in failure, would prove impossibility of prompt personal service. Moreover, to allow sheriffs to describe the facts and circumstances in inexact terms would encourage routine performance of their precise duties relating to substituted servicefor it would be quite easy to shroud or conceal carelessness or laxity in such broad terms. Lastly, considering that monies and properties worth millions may be lost by a defendant because of an irregular or void substituted service, it is but only fair that the Sheriffs Return should clearly and convincingly show the impracticability or hopelessness of personal service. Granting that such a general description be considered adequate, there is still a serious nonconformity from the requirement that the summons must be left with a "person of suitable age and discretion" residing in defendants house or residence. Thus, there are two (2) requirements under the Rules: (1) recipient must be a person of suitable age and discretion; and (2) recipient must reside in the house or residence of defendant. Both requirements were not met. In this case, the Sheriffs Return lacks information as to residence, age, and discretion of Mr. Macky de la Cruz, aside from the sheriffs general assertion that de la Cruz is the "resident caretaker" of petitioner as pointed out by a certain Ms. Lyn Jacinto, alleged receptionist and telephone operator of Alexandra Homes .

It is doubtful if Mr. de la Cruz is residing with petitioner Manotoc in the condominium unit considering that a married woman of her stature in society would unlikely hire a male caretaker to reside in her dwelling. With the petitioners allegation that Macky de la Cruz is not her employee, servant, or representative, it is necessary to have additional information in the Return of Summons. Besides, Mr. Macky de la Cruzs refusal to sign the Receipt for the summons is a strong indication that he did not have the necessary "relation of confidence" with petitioner. To protect petitioners right to due process by being accorded proper notice of a case against her, the substituted service of summons must be shown to clearly comply with the rules.

It has been stated and restated that substituted service of summons must faithfully and strictly comply with the prescribed requirements and in the circumstances authorized by the rules. 34 Even American case law likewise stresses the principle of strict compliance with statute or rule on substituted service, thus: The procedure prescribed by a statute or rule for substituted or constructive service must be strictly pursued. be strict compliance with the requirements of statutes authorizing substituted or constructive service. 36
35

There must

Where, by the local law, substituted or constructive service is in certain situations authorized in the place of personal service when the latter is inconvenient or impossible, a strict and literal compliance with the provisions of the law must be shown in order to support the judgment based on such substituted or constructive service. 37Jurisdiction is not to be assumed and exercised on the general ground that the subject matter of the suit is within the power of the court. The inquiry must be as to whether the requisites of the statute have been complied with, and such compliance must appear on the record. 38 The fact that the defendant had actual knowledge of attempted service does not render the service effectual if in fact the process was not served in accordance with the requirements of the statute. 39 Based on the above principles, respondent Trajano failed to demonstrate that there was strict compliance with the requirements of the then Section 8, Rule 14 (now Section 7, Rule 14 of the 1997 Rules of Civil Procedure). Due to non-compliance with the prerequisites for valid substituted service, the proceedings held before the trial court perforce must be annulled. The court a quo heavily relied on the presumption of regularity in the performance of official duty. It reasons out that "[t]he certificate of service by the proper officer is prima facie evidence of the facts set out herein, and to overcome the presumption arising from said certificate, the evidence must be clear and convincing." 40 The Court acknowledges that this ruling is still a valid doctrine. However, for the presumption to apply, the Sheriffs Return must show that serious efforts or attempts were exerted to personally serve the summons and that said efforts failed. These facts must be specifically narrated in the Return. To reiterate, it must clearly show that the substituted service must be made on a person of suitable age and discretion living in the dwelling or residence of defendant. Otherwise, the Return is flawed and the presumption cannot be availed of. As previously explained, the Return of Sheriff Caelas did not comply with the stringent requirements of Rule 14, Section 8 on substituted service.

In the case of Venturanza v. Court of Appeals, 41 it was held that "x x x the presumption of regularity in the performance of official functions by the sheriff is not applicable in this case where it is patent that the sheriffs return is defective (emphasis supplied)." While the Sheriffs Return in the Venturanza case had no statement on the effort or attempt to personally serve the summons, the Return of Sheriff Caelas in the case at bar merely described the efforts or attempts in general terms lacking in details as required by the ruling in the case of Domagas v. Jensen and other cases. It is as if Caelas Return did not mention any effort to accomplish personal service. Thus, the substituted service is void. On the issue whether petitioner Manotoc is a resident of Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig City, our findings that the substituted service is void has rendered the matter moot and academic. Even assuming that Alexandra Homes Room 104 is her actual residence, such fact would not make an irregular and void substituted service valid and effective. IN VIEW OF THE FOREGOING, this Petition for Review is hereby GRANTED and the assailed March 17, 1997 Decision and October 8, 1997 Resolution of the Court of Appeals and the October 11, 1994 and December 21, 1994 Orders of the Regional Trial Court, National Capital Judicial Region, Pasig City, Branch 163 are herebyREVERSED and SET ASIDE.No costs. SO ORDERED. PRESBITERO J. VELASCO, JR.

FIRST DIVISION

[G.R. No. 132007. August 5, 1998]

SOLAR TEAM ENTERTAINMENT, INC., petitioner, vs. HON. HELEN BAUTISTA RICAFORT,in her capacity as Presiding Judge of the Regional Trial Court of Paraaque, Metro Manila (Branch 260), TEAM IMAGE ENTERTAINMENT, INC., FELIX S. CO, JEFFREY C. CAL, and KING CUISIA, respondents. DECISION DAVIDE, JR., J.: At issue is whether respondent judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying petitioners motion to expunge private respondents answer with counterclaims on the ground that said pleading was not served personally; moreover, there was no written explanation as to why personal service was not accomplished, as required by Section 11 of Rule 13 of the 1997 Rules of Civil Procedure. The antecedents are not disputed. On 10 July 1997, petitioner, as plaintiff, filed before the Regional Trial Court (RTC) in Paraaque, Metro Manila, a complaint for recovery of possession and damages with prayer for a writ of replevin [1] against herein private respondents. The case was docketed as Civil Case No. 97-0304 and was assigned to Branch 260 of said court, presided over by public respondent Judge Helen Bautista-Ricafort. Summonses and copies of the complaint were forthwith served on private respondents. On 25 July 1997, their counsel filed a notice of appearance with urgent ex-parte motion for extension of time to plead,[2] which the court granted in its order of 4 August 1997.[3] On 8 August 1997, private respondents, as defendants, filed their Answer (with Counterclaims). [4] A copy thereof was furnished counsel for petitioner by registered mail; however, the pleading did not contain any written explanation as to why service was not made personally upon petitioner-plaintiff, as required by Section 11 of Rule 13 of the 1997 Rules of Civil Procedure. On 11 August 1997, petitioner filed a motion to expunge the Answer (with Counterclaims) and to declare herein private respondents in default,[5] alleging therein that the latter did not observe the mandate of the aforementioned Section 11, and that there was: [A]bsolutely no valid reason why defendant[s] should not have personally served plaintiffs ... counsel with [a] copy of their answer [as] (t)he office of defendants (sic) counsel, Atty. Froilan Cabaltera, is just a stone [sic] throw away from the office of [petitioners] counsel, with an estimate (sic) distance of about 200 meters more or less.

Petitioner further alleged that the post office was about ten (10) times farther from the office of Atty. Cabaltera. On 15 August 1997, private respondents filed their opposition[6] to the above mentioned motion, alleging that petitioners rigid and inflexible reliance on the provisions of Section 11, Rule 13 ... is an adventitious resort to technicality and is contrary to Section 6 of Rule 3 ... which admonishes that said Rules shall be liberally construed in order to promote their objective in securing a just, speedy and inexpensive disposition of [e]very action and proceeding; and that Section 11, Rule 13 notwithstanding, private respondents religiously complied with [Section 5 of Rule 13] by personally present[ing] to the clerk of court their said Answer ... furnishing a copy thereof to the counsel for [petitioner] by way of registered mail. On 8 September 1997, public respondent Judge Bautista-Ricafort issued an order[7]stating that under Section 11 of Rule 13 it is within the discretion of the [trial court] whether to consider the pleading as filed

or not, and denying, for lack of merit, petitioners motion to expunge the Answer (with Counterclaims) and to declare
private respondents in default. Petitioner immediately moved for reconsideration[8] of the order, but public respondent Judge Bautista-Ricafort denied this motion in her order[9] of 17 November 1997. The order justified the denial in this wise: Section 6 [of] Rule 1 of the 1997 Rules of Civil Procedure ordains that the Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. Liberal construction of the rules and the pleading is the controlling principle to effect substantial justice. As pointed out by the Supreme Court in Alonso vs. Villamor, 16 Phil. 315, "the error in this case is purely technical. To take advantage of it for other purposes than to cure it, does not appeal a fair sense of justice. Its presentation as fatal to plaintiff a [sic] case smacks of skill rather than right. A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is rather, a contest in which each contending party fully and fairly lays before the Court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections or form of technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust." While it is desirable that the above Rules be faithfully and even meticulously observed, courts should not strict about procedural lapses that do not really impair the proper administration of justice. Furthermore, it is well settled that litigations should, as much as possible be decided on their merits and not on technicalities.

Petitioner thus filed the instant special civil action of certiorari, contending that public respondent Judge BautistaRicafort committed grave abuse of discretion amounting to lack or excess of jurisdiction when she admitted private respondents' "Answer (with Counterclaims)" notwithstanding private respondents' clear, admitted and inexcusable violation of Section 11, Rule 13 of the 1997 Rules of Civil Procedure, in that: (a) the "Answer (with Counterclaims)" was not served personally upon petitioners counsel despite the undisputed fact that the offices of private respondents counsel and that of petitioners counsel are only about 200 meters away from each other; and (b) the Answer did not contain any explanation as to why the answer was not served personally. In their Comment, filed in compliance with the resolution of 2 February 1998, and to which petitioner filed a Reply, private respondents aver that public respondent Judge Bautista-Ricafort correctly admitted private respondents Answer (with Counterclaims) in light of Section 6, Rule 1 of the 1997 Rules of Civil Procedure; that Section 11 of Rule 13 begins with the phrase whenever practicable, thereby suggesting that service by mail may still be effected depending on the relative priority of the pleading sought to be filed; and when service is not done personally, it is more prudent and judicious for the courts to require a written explanation rather than to expunge the pleading outright or consider the same as not being filed. In view of the importance of the issue raised, which is, undoubtedly, one of the first impression, the Court resolved to give due course to the petition and consider it submitted for decision on the basis of the pleadings filed by the parties. Section 5, Rule 13 of the 1997 Rules of Civil Procedure prescribes two modes of service of pleadings, motions, notices, orders, judgments and other papers, namely: (1) personal service; and (2) service by mail. The first is governed by Section 6, while the second, by Section 7 of said Rule. If service cannot be done either personally or by mail, substituted service may be resorted to under Section 8 thereof. Pursuant, however, to Section 11 of Rule 13, service and filing of pleadings and other papers must, whenever practicable, be done personally; and if made through other modes, the party concerned must provide a written explanation as to why the service or filing was not done personally. The section reads:

SEC. 11. Priorities in modes of service and filing. -- Whenever practicable, the service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed.(n)

Note that Section 11 refers to both service of pleadings and other papers on the adverse party or his counsel as provided for in Sections 6, 7 and 8; and to the filing of pleadings and other papers in court. Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action or resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely to be incurred if service or filing is done by mail, considering the inefficiency of the postal service. Likewise, personal service will do away with the practice of some lawyers who, wanting to appear clever, resort to the following less than ethical practices: (1) serving or filing pleadings by mail to catch opposing counsel off-guard, thus leaving the latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or (2) upon receiving notice from the post office that the registered parcel containing the pleading of or other paper from the adverse party may be claimed, unduly procrastinating before claiming the parcel, or, worse, not claiming it at all, thereby causing undue delay in the disposition of such pleading or other papers. If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to consider a pleading or paper as not filed if the other modes of service or filing were resorted to and no written explanation was made as to why personal service was not done in the first place. The exercise of discretion must, necessarily, consider the practicability of personal service, for Section 11 itself begins with the clause whenever practicable.

We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil Procedure, personal service and filing is the general rule, and resort to other modes of service and filing, the exception. Henceforth, whenever personal
service or filing is practicable, in light of the circumstances of time, place and person, personal service or filing is mandatory. Only when personal service or filing is not practicable may resort to other modes be had, which must then be accompanied by a written explanation as to why personal service or filing was not practicable to begin with. In adjudging the plausibility of an explanation, a court shall likewise consider the importance of the subject matter of the case or the issues involved therein, and the prima facie merit of the pleading sought to be expunged for violation of Section 11. This Court cannot rule otherwise, lest we allow circumvention of the innovation introduced by the 1997 Rules in order to obviate delay in the administration of justice. Here, the proximity between the offices of opposing counsel was established; moreover, that the office of private respondents counsel was ten times farther from the post office than the distance separating the offices of opposing counsel. Of course, proximity would seem to make personal service most practicable, but exceptions may nonetheless apply. For instance, where the adverse party or opposing counsel to be served with a pleading seldom reports to office

and no employee is regularly present to receive pleadings, or where service is done on the last day of the reglementary period and the office of the adverse party or opposing counsel to be served is closed, for whatever reason. Returning, however, to the merits of this case, in view of the proximity between the offices of opposing counsel and the absence of any attendant explanation as to why personal service of the answer was not effected, indubitably, private respondents counsel violated Section 11 of Rule 13 and the motion to expunge was prima facie meritorious. However, the grant or denial of said motion nevertheless remained within the sound exercise of the trial courts discretion. Thus, as guided by Section 6, Rule 1 of the 1997 Rules of Civil Procedure, which ordains that the Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action or proceeding, as well as by the dictum laid down in Alonso v. Villamor, 16 Phil. 315 [1910], the trial court opted to exercise its discretion in favor of admitting the Answer (with Counterclaims), instead of expunging it from the record. To our mind, if motions to expunge or strike out pleadings for violation of Section 11 of Rule 13 were to be indiscriminately resolved under Section 6 of Rule 1 or Alonzo v. Villamor and other analogous cases, then Section 11 would become meaningless and its sound purpose negated. Nevertheless, we sustain the challenged ruling of the trial court, but for reasons other than those provided for in the challenged order.

The 1997 Rules of Civil Procedure took effect only on 1 July 1997, while the questioned Answer (with Counterclaims) was filed only on 8 August 1997, or on the 39th day following the effectivity of the 1997 Rules. Hence, private respondents counsel may not have been fully aware of the requirements and ramifications of Section 11, Rule 13. In fact, as pointed out by petitioners counsel, in another case where private respondents counsel was likewise opposing counsel, the latter similarly failed to comply with Section 11.
It has been several months since the 1997 Rules of Civil Procedure took effect. In the interim, this Court has generally accommodated parties and counsel who failed to comply with the requirement of a written explanation whenever personal service or filing was not practicable, guided, in the exercise of our discretion, by the primary objective of Section 11, the importance of the subject matter of the case, the issues involved and the prima facie merit of the challenged pleading. However, as we have in the past, for the guidance of the Bench and Bar, strictest compliance with Section 11 of Rule 13 is mandated one month from promulgation of this Decision.

WHEREFORE, the instant petition is DISMISSED considering that while the justification for the denial of the motion to expunge the Answer (with Counterclaims) may not necessarily be correct, yet, for the reasons above stated, the violation of Section 11 of Rule 13 may be condoned. No pronouncement as to costs. SO ORDERED. Vitug, Panganiban and Quisumbing, JJ., concur. Bellosillo, J., separate opinion.

SECOND DIVISION

GENTLE SUPREME PHILIPPINES, INC., Petitioner,

G.R. No. 183182 Present: CARPIO, J., Chairperson, NACHURA, BERSAMIN,* ABAD, and MENDOZA, JJ. Promulgated:

- versus -

RICARDO F. CONSULTA, Respondent.

September 1, 2010 x --------------------------------------------------------------------------------------- x DECISION ABAD, J.:

This case is about the service of summons on a corporation and its officers, allegedly done improperly, resulting in the failure of the trial court to acquire jurisdiction over the persons of the defendants and in the nullity of its proceedings.

The Facts and the Case

On September 29, 2005 petitioner Gentle Supreme Philippines, Inc. (GSP) filed a collection case with application for a writ of preliminary attachment[1] against Consar Trading Corporation (CTC), its president, respondent Ricardo Consulta (Consulta), and its vice-president, Norberto Sarayba (Sarayba) before the Regional Trial Court (RTC) of Pasig City, Branch 68, in Civil Case 70544. GSP alleged that CTC, through Consulta and Sarayba, bought certain merchandise from it but refused to pay for them. Before summons could be served, the RTC issued a writ of preliminary attachment [2] against the defendants after GSP filed the required bond.[3] Afterwards, the RTC issued summons against the defendants.

sheriff failed to serve the summons and copies of the complaint on any of CTCs authorized officers as well as on Consulta and Sarayba, he left copies of such documents with Agnes Canave (Canave) who, according to the sheriffs return,[4] was Saraybas secretary and an authorized representative of both Sarayba and Consulta.
On October 11, 2005 as the

None of the defendants filed an answer to the complaint. Thus, upon motion,[5] on November 18, 2005 the RTC declared them in default[6] and proceeded to hear GSPs

evidence ex parte.

Meanwhile, the sheriff attached a registered land [7] belonging to Consulta.[8] After trial, the RTC

ruled that having defrauded GSP, defendants CTC, Consulta, and Sarayba were solidarily liable for the value of the supplied goods plus attorneys fees and costs of the suit.[9] And upon motion, on January 25, 2006 the RTC issued a writ of execution against the defendants.[10]

On June 9, 2006 respondent Consulta filed a petition for annulment of the RTC decision before the Court of Appeals (CA) in CA-G.R. SP 94817.[11] He alleged 1) that he found out about the case against him only on May 19, 2006 when he received a notice of sale on execution of his house and lot in Marikina City; and 2) that he was not properly served with summons because, although his address stated in the complaint was his regular place of business, Canave, who received the summons, was not in charge of the matter. Consulta invoked the Courts ruling in Keister v. Judge Navarro,[12] that the rule (on substituted service) presupposes that such relation of confidence exists between the person with whom the copy is left and the defendant and, therefore, assumes that such person will deliver the process to defendant or in some way give him notice thereof. Consulta claimed that Canave was only Saraybas secretary. Thus, neither the sheriff nor the RTC had basis for assuming that Canave would find a way to let Consulta know of the pending case against him. Consulta concluded that the RTC did not acquire jurisdiction over his person. In its answer to the petition,[13] GSP insisted on the validity of the service of summons on Consulta. Also, assuming that summons was not properly served, Consultas ignorance was contrived. His knowledge of the case against him may be proved by the following circumstances:

1.

On February 25, 2006 CTC faxed GSP a letter proposing a schedule of payment for the adjudged amounts

in the RTC decision. Admittedly, it was only Sarayba who signed the letter. By the rules of evidence, however, the act and declaration of a joint debtor is binding upon a party. [14] This means that Saraybas knowledge and admission of the case and the defendants corresponding liability to GSP was binding on Consulta. Besides, Consulta, together with Sarayba, signed the postdated checks as partial payment of CTCs obligation to GSP; The RTCs sheriff garnished CTCs bank accounts on the day the summons was served. As company

2.

president, it was incredulous that Consulta was unaware of the garnishment and the reason for it;

3.

Consulta admitted that CTC was properly served with summons through Canave. By that statement, it can

be deduced that Canave was in charge of the office, Consultas regular place of business, signifying proper service of the summons on him.

On March 18, 2008 the CA rendered a decision, holding that the RTC sheriff did not properly serve summons on all the defendants. It ordered the remand of the case to the trial court, enjoining it to take steps to insure the valid service of summons on them.[15]

Respondent Consulta filed a motion for partial reconsideration of the decision but the CA denied it for being late. Petitioner GSP also filed a motion for reconsideration[16] which the CA denied on May 29, 2008 for lack of merit,[17] hence, this petition.

The Issue Presented

The sole issue presented in this case is whether the CA correctly ruled that summons had not been properly served on respondent Consulta with the result that the RTC did not acquire jurisdiction over his person and that the judgment against him was void.

The Ruling of the Court

First of all, only Consulta brought an action for the annulment of the RTC decision. CTC and Sarayba did not. Consequently, the CA had no business deciding whether or not the latter two were properly served with summons. The right to due process must be personally invoked and its circumstances specifically alleged by the party claiming to have been denied such. [18]

Second, there is valid substituted service of summons on Consulta at his place of business with some competent person in charge thereof. According to the sheriffs return, which is prima facie evidence of the facts it states,[19] he served a copy of the complaint on Canave, an authorized representative of both Consulta and Sarayba.[20] Besides Consultas bare allegations, he did not present evidence to rebut the presumption of regularity on the manner that the sheriff performed his official duty.[21] Nor did Consulta present clear and convincing evidence that Canave was not competent to receive the summons and the attached documents for him.

In fact, in his petition for annulment of judgment, Consulta said that CTC had been apprised of the civil action through Canave.[22] In other words, Canave was a person charged with authority to receive court documents for the company as well as its officers who held office in that company. Absent contrary evidence, the veracity of the returns content and its effectiveness stand.

it is not necessary that the person in charge of the defendants regular place of business be specifically authorized to receive the summons. It is enough that he appears to be in charge.[23] In this case, Canave, a
Further, this Court has ruled that secretary whose job description necessarily includes receiving documents and other correspondence, would have the semblance of authority to accept the court documents.

It is true that this Court emphasized the importance of strict and faithful compliance in effecting substituted service.[24] It must, however, be reiterated that when the rigid application of rules becomes a conduit for escaping ones responsibility, the Court will intervene to set things right according to the rules. [25]

Further, Consulta does not deny a) that summons had been properly served on Sarayba, his vice-president, through Canave at the companys office; b) that the summons on him was served on the same occasion also through Canave; c) that the sheriff had succeeded in garnishing his companys bank deposits; and d) that his company subsequently made an offer to settle the judgment against it. The Court is not dumb as to believe that Consulta became aware of the suit only when the sheriff served a notice of execution sale covering his house and lot.

WHEREFORE, premises considered, the Court REVERSES the Court of Appeals Decision in CA-G.R. SP 94817 dated March 17, 2008 and REINSTATES the Regional Trial Courts Decision in Civil Case 70544 dated December 14, 2005. SO ORDERED. THIRD [G.R. No. 163749, September 26, DIVISION 2008]

SPOUSES JULIAN SANTIAGO, SR. AND LEONILA SANTIAGO AND SPOUSES LIM JOSE ONG AND MIMI ONG LIM, PETITIONERS, VS. BANK OF THE PHILIPPINE ISLANDS AS SUCCESSOR IN INTEREST OF FAR EAST BANK & TRUST CO., SUBSTITUTED BY INVESTMENTS 2234 PHILIPPINES FUND I (SPV-AMC), INC.,[1] RESPONDENT. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari filed by Spouses Julian Santiago, Sr. and Leonila Santiago (Spouses Santiago) and Spouses Lim Jose Ong and Mimi Ong Lim (Spouses Lim), seeking to reverse and set aside the Decision[2] dated November 14, 2003 and the Resolution[3] dated June 2, 2004 issued by the Court of Appeals (CA) in CAG.R. SP No. 73110. Petitioners Spouses Santiago were the original owners of three parcels of land covered by TCT Nos. 3943, 9797 and 15131, all situated in Barrio Piapi, Dumaguete City. They mortgaged the said properties to spouses Bienvenido and Theresa Deloria (spouses Deloria) as security for their loan in the amount of P2,370,000.00. On August 24, 1994, Far East Bank and Trust Company (FEBTC) wrote a letter[4] addressed to spouses Deloria stating that the bank had approved a term loan facility in favor of petitioner Lim Jose Ong, and among the conditions for the approval of the facility was that the entire proceeds shall be exclusively used to purchase the three parcels of land, with its improvement mortgaged to them; and that the amount of P2,370,000.00 shall be delivered to spouses Deloria in consideration of their release of the mortgage.

Subsequently, a deed of sale over the three parcels of land was executed by Spouses Santiago in favor of Spouses Lim; and new TCT Nos. 23276, 23277 and 23278 were issued to Spouses Lim. On September 29, 1994, Spouses Lim executed in favor of FEBTC a real estate mortgage over the three parcels of land to secure the amount of P2,500,000.00 loaned from the bank; the mortgage was made to stand as a security for the payment of the loan, as well as those loans that the mortgagee may extend to the mortgagor, including interest and expenses or any other obligation owed to the mortgagee whether direct or indirect, principal or secondary, as appearing in the accounts, books and records of the mortgagee. Petitioner Lim Jose Ong was also an officer of Marichris Development Corporation (MDC), one of FEBTC's valued clients, which has a credit line with the bank. However due to the business slow-down brought about by the economic crisis, MDC through petitioner Lim Jose Ong requested a restructuring of its loan term, which was granted by the FEBTC. Meanwhile, FEBTC merged with the Bank of the Philippine Islands (private respondent), with the latter as the surviving corporation. Thus, private respondent assumed all the rights, privileges and obligations of FEBTC. As Spouses Lim failed to pay their indebtedness with the bank in the total amount of P18,630,011.96, private respondent filed on August 2, 2002 an application for extra-judicial foreclosure of real estate mortgage[5] with the Office of the Clerk of Court, Dumaguete City, and the case was raffled to sheriff Ramoneto Hedriana. The public auction was scheduled on September 13, 2002 at 9 o'clock in the morning.[6] Petitioners filed with the Regional Trial Court (RTC) of Negros Oriental, Dumaguete City, a complaint [7] for injunction, damages and accounting with prayer for preliminary injunction and/or temporary restraining order against private respondent as successor-in-interest of FEBTC. They also filed together with the complaint a motion for special raffle in view of the urgency of the relief sought and for the issuance of an ex-parte temporary restraining order (TRO). In their complaint, petitioners alleged that since petitioners Spouses Santiago, as the original owners of the three parcels of land, could not pay their mortgage loan with the spouses Deloria, they tried to apply for a loan with FEBTC but was told that they should be accommodated by a person with a good credit standing with the bank; that the titles to their land should be transferred to the accommodating party; that Spouses Santiago sought the help of petitioner Lim, who had a good reputation and credit facility with the bank, and who accommodated them; that titles to the three parcels of land were transferred to Spouses Lim who subsequently executed a real estate mortgage over the three parcels of land in favor of FEBTC to secure the P2.5 million loan of petitioners Spouses Lim; that the fact of accommodation was with prior approval of FEBTC officials, since they had been directly transacting with the original mortgagees for the release of the mortgage;

that petitioners Spouses Santiago, being the real borrowers, have been paying the loan after the execution of the mortgage, as appearing on various FEBTC official receipts, in which it was stated: "Julian Santiago for the account (FAO) of Lim Jose Ong"; that they had asked for, apart from the mortgage, a detailed statement of account, which was unheeded; thus, the obligation being claimed by private respondent is unliquidated. On September 12, 2002, Executive Judge Eleuterio E. Chiu issued a TRO [8] valid for 72 hours ordering the bank or any person acting on its behalf from conducting the scheduled auction sale of the subject three parcels of land. Summons, together with a copy of the complaint, was served on private respondent through the managers of its branches located in San Jose Street and Percedes Street, Dumaguete City. The case was raffled to Branch 33,[9] and a hearing for the issuance of the TRO was scheduled on September 13, 2002.

During the hearing, counsel for private respondent raised the issue of the RTC's lack of jurisdiction over private respondent, as the summons was served on its branch manager in Dumaguete City, and not on any one of those persons enumerated under Section 11, Rule 14 of the 1997 Rules of Civil Procedure. Petitioners' counsel had argued that service of summons even to a
substation of the corporation was valid, as it was in effect served on a principal of the corporation. The RTC judge continued with the reception of petitioners' evidence and ruled that he would include in his resolution for the issuance of a TRO whether the court had jurisdiction when the summons was served only on the manager of BPI, Dumaguete Branch.[10] The continuation of the hearing was set on September 16, 2002. On September 16, 2002, private respondent filed a memorandum [11] in support of the opposition to the petition for preliminary injunction or TRO. It moved for the dismissal of the complaint on the following grounds: 1. that the court has no jurisdiction over the person of the defending party; 2. the court has no jurisdiction over the subject matter of the claim because the proper docketing fees have not been paid; 3. that Julian Santiago, Sr. and Leonila Santiago are not the real party [sic] in interest to file this claim; 4. that this court has no jurisdiction or authority to issue injunction against extrajudicial foreclosure under Art. 3135. [12] In the hearing of even date, petitioners argued that the memorandum was in reality a motion to dismiss; thus, it should comply with the three-day notice rule. The RTC, however, stated that petitioners' counsel was aware that during the last

hearing, private respondent had insisted that the RTC had no jurisdiction over the case because of improper service of summons; that the motion was only a follow up, as counsel for private respondent could not cite authorities; that with or without authority, Rule 14 enumerated the persons on whom service of summons may be served. [13] The RTC also stated that even without the motion, it would resolve whether a TRO should be issued, and whether the court had jurisdiction over the case.[14] On the same day, the RTC issued its Order,[15] the dispositive portion of which reads: WHEREFORE, on the ground that this Court did not acquire jurisdiction over the defendant because of improper service of summons, the prayer for the issuance of the restraining order is hereby dismissed and this case is likewise dismissed on the same ground.[16] Petitioners filed with the CA a petition for certiorari with prayer for the issuance of a TRO and injunction. In a Resolution[17] dated October 17, 2002, the CA issued a TRO effective for 60 days, restraining private respondent from conducting the foreclosure sale of the subject properties. On January 8, 2003, the CA issued another Resolution[18] for the issuance of a writ of preliminary injunction upon petitioners' filing of a bond in the amount of one million pesos. On November 14, 2003, the CA issued its assailed Decision, the dispositive portion of which reads: WHEREFORE, the instant petition is hereby DISMISSED and consequently the order decreeing the issuance of a writ of preliminary injunction dated 08 January 2003 [is] set aside. Petitioners' motion for reconsideration was denied in a Resolution dated June 2, 2004. The CA found that the RTC did not commit any grave abuse of discretion in finding that summons served on the branch managers of BPI Dumaguete City was not valid and therefore the RTC did not acquire jurisdiction over the person of private respondent. The CA upheld the RTC's application of this Court's ruling in E.B. Villarosa & Partner Co., Ltd v. Benito,[19] in which it was held that the designation of persons or officers who were authorized to accept summons for a domestic corporation or partnership was now limited and more clearly specified in Section 11, Rule 14 of the 1997 Rules of Civil Procedure. The CA found no merit in private respondent's contention that the CA failed to acquire jurisdiction over it, since no copy of the petition for certiorari and motion for reconsideration were furnished to the bank through any of the persons enumerated under Section 11, Rule 14; that counsel was not one of the in-house counsels of private respondent, but was

the counsel on record of the Dumaguete branch only. The CA ruled that there was no requirement of service of summons in the manner provided for under Section 11, Rule 14, relative to a special civil action of certiorariunder Rule 65. Hence herein petition raising the following issues: I. II. III. WHETHER OR NOT SERVICE OF SUMMONS UPON TWO (2) BRANCH MANAGERS OF BPI IN DUMAGUETE IS A SUBSTANTIAL COMPLIANCE OF THE RULES. WHETHER OR NOT BPI'S MOTION TO DISMISS VIOLATES THE THREE-DAY NOTICE RULE. WHETHER OR NOT THERE IS SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE FOR THE PETITIONERS WHEN CA G.R. SP NO. 73110 WAS FILED. [20]

Petitioners filed a Motion for Leave of Court to admit the urgent motion for issuance of TRO since the notice of extrajudicial sale set the auction sale of the subject properties on September 7, 2003. On September 6, 2004, the Court issued a TRO[21] and ordered petitioners to post a bond in the amount of two million five hundred thousand pesos which petitioners did. The main issue for resolution is whether or not the service of summons on the branch managers of private respondent's two separate branches in Dumaguete City constitutes substantial compliance with Section 11, Rule 14 of the 1997 Rules of Civil Procedure. The complaint was filed by petitioners in 2002 when the 1997 Rules of Civil Procedure was already in force. Section 11, Rule 14 of the 1997 Rules of Civil Procedure provides: SECTION 11. Service upon domestic private juridical entity - When the defendant is a corporation, partnership or association organized under the laws of the Philippines with a juridical personality, service may be made on the president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel. This provision revised the former Section 13, Rule 14 of the Rules of Court, which provided that: SECTION 13. Service upon private domestic corporation or partnership. - If the defendant is a corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager, secretary, cashier, agent, or any of its directors.

The designation of persons or officers who are authorized to accept summons for a domestic corporation or partnership is now limited and more clearly specified in Section 11, Rule 14 of the 1997 Rules of Civil Procedure.[22] The rule now states "general
manager" instead of only "manager"; "corporate secretary" instead of "secretary"; and "treasurer" instead of "cashier." The phrase "agent, or any of its directors" is conspicuously deleted from the new rule. [23]

Basic is the rule that a strict compliance with the mode of service is necessary to confer jurisdiction of the court over a corporation.[24] The officer upon whom service is made must be one who is named in the statute; otherwise, the service is insufficient.[25] The purpose is to render it reasonably certain that the corporation will receive prompt and proper notice in an action against it or to insure that the summons be served on a representative so integrated with the corporation that such person will know what to do with the legal papers served on him.[26]
Petitioners contend that the summons were received by two branch managers of BPI's San Jose Street and Perdeces Street, Dumaguete City on September 12, 2002; that the branch manager is the chief executive officer of the branch and the alter ego of the management within his/her jurisdiction and oversees the overall operations of the branch; that for certain, the two branch managers, upon receipt of summons, have sufficient responsibility and discretion to realize the importance of the legal papers served on them and are expected to relay to the president, or other responsible officer of the company, the complaint filed against it; that in Millenium Industrial Commercial Corporation v. Tan,[27] it was held that service of summons upon a defendant corporation must be made on a representative so integrated with the corporation sued as to make it a priori presumable that he would realize his responsibilities and know what he should do with any legal papers received by him; that clearly then, there is in this case substantial compliance with the rule on service of summons; and that the need for speedy justice must prevail over technicality. We are not persuaded.

The matter of whether petitioners can invoke substantial compliance with Section 11, Rule 14 of the 1997 Rules of Civil Procedure, has been settled in Mason v. Court of Appeals,[28] thus: The question of whether the substantial compliance rule is still applicable under Section 11, Rule 14 of the 1997 Rules of Civil Procedure has been settled in Villarosa which applies squarely to the instant case. In the said case, petitioner E.B. Villarosa & Partner Co. Ltd. (hereafter Villarosa) with principal office address at 102 Juan Luna St., Davao City and with branches at 2492 Bay View Drive, Tambo, Paraaque, Metro Manila and Kolambog, Lapasan, Cagayan de Oro City, entered into a sale with development agreement with private respondent Imperial Development Corporation. As Villarosa failed to comply with its contractual obligation, private respondent initiated a suit for breach of contract and damages at the Regional Trial Court of Makati. Summons, together with the complaint, was served upon Villarosa through its branch manager at Kolambog, Lapasan, Cagayan de Oro City. Villarosa filed a Special Appearance with Motion to Dismiss on the ground of improper service of summons and lack of jurisdiction. The trial court denied the motion and ruled that there was substantial compliance with the rule, thus, it acquired jurisdiction over Villarosa. The latter questioned the denial before us in its petition for certiorari. We decided in Villarosa's favor and declared the trial court without jurisdiction to take cognizance of the case. We held that there was no valid service of summons on Villarosa as service was made through a person not included in the enumeration in Section 11, Rule 14 of the 1997 Rules of Civil Procedure, which revised the Section 13, Rule 14 of the 1964 Rules of Court. We discarded the trial court's basis for denying the motion to dismiss, namely, private respondent's substantial compliance with the rule on service of summons, and fully agreed with petitioner's assertions that the enumeration under the new rule is restricted, limited and exclusive, following the rule in statutory construction that expressio unios est exclusio alterius. Had the Rules of Court Revision Committee intended to liberalize the rule on service of summons, we said, it could have easily done so by clear and concise language. Absent a manifest intent to liberalize the rule, we stressed strict compliance with Section 11, Rule 14 of the 1997 Rules of Civil Procedure. Neither can herein petitioners invoke our ruling in Millennium to support their position for said case is not on all fours with the instant case. We must stress that Millennium was decided when the 1964 Rules of Court were still in force and effect, unlike the instant case which falls under the new rule. Hence, the cases cited by petitioners where we upheld the doctrine of substantial compliance must be deemed overturned by Villarosa, which is the later case. At this juncture, it is worth emphasizing that notice to enable the other party to be heard and to present evidence is not a mere technicality or a trivial matter in any administrative or judicial proceedings. The service of summons is a vital and indispensable ingredient of due process.[29] Moreover, in the recent case of Bank of Philippine Islands v. Santiago,[30] it was ruled that service of the original summons upon the branch manager of BPI's Sta. Cruz, Laguna branch did not bind the corporation, for the branch manager was not

included in the enumeration in the statute of the persons upon whom service can be validly made in behalf of the corporation; thus, such service was therefore void and ineffectual. It was only upon the issuance and proper service of new summons validly served on BPI's corporate secretary that the RTC acquired jurisdiction to issue the Order granting the application for the issuance of a writ of preliminary injunction filed by the plaintiffs therein. Petitioners further contend that the motion to dismiss filed by private respondent came as a surprise, as they were not notified three days prior to the hearing thereon, and petitioners were made to oppose the motion on the same day it was filed; that a motion that does not comply with requirements of Sections 4 [31] and 5,[32] Rule 15 of the Rules of Court, is a worthless piece of paper which the clerk has no right to receive, and which the court has no authority to act upon. This time, the Court does not agree.

Private respondent filed a memorandum in support of its opposition to the petition for preliminary injunction or TRO and moved for the dismissal of the complaint claiming, among others, that the court had no jurisdiction over the person of BPI. Even if it would appear that the memorandum was a motion to dismiss, which was filed on the same day where the court's hearing for the issuance of TRO was set, the non-observance of the three-day notice rule would not affect the RTC's Order dismissing the case for lack of jurisdiction over the person of private respondent. The purpose of the law in requiring the filing of motions at least three days before the hearing thereof is to avoid surprises upon the opposite party and to give the latter time to study and meet the arguments of the movant. [33] In this case, during the initial hearing for the issuance of the TRO on September 13, 2002, counsel of private respondent had already raised the issue of the court's lack of jurisdiction over the private respondent, since the summons was not served on any of the persons enumerated under Section 11, Rule 14. Notably, in that same hearing, petitioners' counsel presented arguments and even cited jurisprudence to prove the validity of the service of summons on private respondent's branch managers in Dumaguete City. Thus, when BPI filed its memorandum/motion to dismiss on September 16, 2002, there was no element of surprise to speak of, as petitioners knew that private respondent was already questioning the jurisdiction of the court over it, but this time it had jurisprudence cited in its memorandum to support its argument. Procedural due process is not based solely on a mechanistic and literal application of a rule, such that any deviation is inexorably fatal.[34] Rules of procedure, and these include the three-day notice requirement, are liberally construed to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding.[35] Lapses in the literal observance of a rule of procedure may be overlooked when they have not prejudiced the adverse party and have not deprived the court of its authority. [36]

Moreover, as the RTC correctly observed, it would still resolve the issue of jurisdiction over the person of private respondent even without taking into consideration the memorandum as the issue of jurisdiction was already raised during the initial hearing for the issuance of the TRO on September 13, 2002, which must be ruled upon before the RTC could issue the TRO. WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated November 14, 2003 and the Resolution dated June 2, 2004 issued by the Court of Appeals in CA-G.R. SP No. 73110 are AFFIRMED. Costs SO ORDERED. SECOND DIVISION against petitioners.

REMELITA M. ROBINSON, Petitioner,

G.R. No. 163584 Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ. Promulgated:

- versus -

CELITA B. MIRALLES, Respondent. December 12, 2006 x -------------------------------------------------------------------------------------- x

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is the instant petition for review on certiorari assailing the Resolutions dated February 11[1] and May 11, 2004[2] of the Regional Trial Court (RTC), Branch 274, Paraaque City, in Civil Case No. 00-0372. On August 25, 2000, Celita Miralles, respondent, filed with the said court a complaint for sum of money against Remelita Robinson, petitioner, docketed as Civil Case No. 00-0372. Respondent alleged that petitioner borrowed from her US$20,054.00 as shown by a Memorandum of Agreement they both executed on January 12, 2000. Summons was served on petitioner at her given address. However, per return of service of Sheriff Maximo Potente dated March 5, 2001, petitioner no longer resides at such address. On July 20, 2001, the trial court issued an alias summons to be served at No. 19 Baguio St., Alabang Hills, Muntinlupa City, petitioners new address. Again, the summons could not be served on petitioner. Sheriff Potente explained that: The Security Guard assigned at the gate of Alabang Hills refused to let me go inside the subdivision so that I could effect the service of the summons to the defendant in this case. The security guard alleged that the defendant had given them instructions not to let anybody proceed to her house if she is not around. I explained to the Security Guard that I am a sheriff serving the summons to the defendant, and if the defendant is not around, summons can be received by any person of suitable age and discretion living in the same house. Despite of all the explanation, the security guard by the name of A.H. Geroche still refused

to let me go inside the subdivision and served (sic) the summons to the defendant. The same thing happened when I attempted to serve the summons previously. Therefore, the summons was served by leaving a copy thereof together with the copy of the complaint to the security guard by the name of A.H. Geroche, who refused to affix his signature on the original copy thereof, so he will be the one to give the same to the defendant.

Eventually, respondent filed a motion to declare petitioner in default for her failure to file an answer seasonably despite service of summons. On February 28, 2003, the trial court granted respondents motion declaring petitioner in default and allowing respondent to present her evidence ex parte. On June 20, 2003, the trial court issued an Order, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendant ordering the defendant to pay the plaintiff as follows: 1. The sum of US$20,054.00 as the unpaid obligation, plus the stipulated interest of 3% a month from May 2000 (date of default) until fully paid; 2. Php100,000.00 for moral damages; 3. Php50,000.00 plus Php1,500.00 per appearance as attorneys fees; 4. Costs of suit. SO ORDERED. A copy of the Order was sent to petitioner by registered mail at her new address. Upon respondents motion, the trial court, on September 8, 2003, issued a writ of execution.

On September 26, 2003, petitioner filed with the trial court a petition for relief from the judgment by default. She claimed that summons was improperly served upon her, thus, the trial court never acquired jurisdiction over her and that all its proceedings are void. On February 11, 2004, the trial court issued a Resolution denying the petition for relief. Petitioner filed a motion for reconsideration, but it was denied by the trial court in a Resolution dated May 11, 2004. Hence, the instant recourse. The sole issue for our resolution is whether the trial court correctly ruled that a substituted service of summons upon petitioner has been validly effected.

Summons is a writ by which the defendant is notified of the action brought against him or her.[3] In a civil action, service of summons is the means by which the court acquires jurisdiction
over the person of the defendant.[4] Any judgment without such service, in the absence of a valid waiver, is null and void.[5] Where the action is in personam and the defendant is in the Philippines, the service of summons may be made through personal or substituted service in the manner provided for in Sections 6 and 7, Rule 14 of the 1997 Rules of Procedure, as amended,[6] thus: SEC. 6. Service in person on defendant. Whenever practicable, the summons shall be served by handing a copy thereof to the defendant in person, or if he refuses to receive and sign for it, by tendering it to him. SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendants residence with some person of suitable age and discretion then residing therein; or (b) by leaving the copies at the defendants office or regular place of business with some competent person in charge thereof.

Under our procedural rules, personal service is generally preferred over substituted service, the latter mode of service being a method extraordinary in character.[7] For substituted service to be justified, the following circumstances must be clearly established: (a) personal service of summons within a reasonable time was impossible; (b) efforts were exerted to locate the party; and (c) the summons was served upon a person of sufficient age and discretion residing at the partys residence or upon a competent person in charge of the partys office or place of business.[8] Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds.[9] Petitioner contends that the service of summons upon the subdivision security guard is not in compliance with Section 7, Rule 14 since he is not related to her or staying at her residence. Moreover, he is not duly authorized to receive summons for the residents of the village. Hence, the substituted service of summons is not valid and that the trial court never acquired jurisdiction over her person. We have ruled that the statutory requirements of substituted service must be followed strictly, faithfully, and fully and any substituted service other than that authorized by the Rules is considered ineffective. [10] However, we frown upon an overly strict application of the Rules. It is the spirit, rather than the letter of the procedural rules, that governs. In his Return, Sheriff Potente declared that he was refused entry by the security guard in Alabang Hills twice. The latter informed him that petitioner prohibits him from allowing anybody to proceed to her residence whenever she is out. Obviously, it was impossible for the sheriff to effect personal or substituted service of summons upon petitioner. We note that she failed to controvert the sheriffs declaration. Nor did she deny having received the summons through the security guard. Considering her strict instruction to the security guard, she must bear its consequences. Thus, we agree with the trial court that summons has been properly served upon petitioner and that it has acquired jurisdiction over her.

WHEREFORE, we DENY the petition and we AFFIRM the 274, Paraaque City, in Civil Case No. 00-0372. Costs against petitioner. SO ORDERED.

assailed

Orders

of

the

RTC,

Branch

THIRD DIVISION

UNITED BANK,

COCONUT

PLANTERS

G.R. No. 159912 Present:

Petitioner, YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and - versus REYES, JJ.

Promulgated:

SPOUSES SAMUEL and ODETTE BELUSO,

August 17, 2007

Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, which seeks to annul the Court of Appeals Decision[1] dated 21 January 2003and its Resolution[2] dated 9 September 2003 in CA-G.R. CV No. 67318. The assailed Court of Appeals Decision and Resolution affirmed in turn the Decision [3]dated 23 March 2000 and Order[4] dated 8 May 2000 of the Regional Trial Court (RTC), Branch 65 of Makati City, in Civil Case No. 99-314, declaring void the interest rate provided in the promissory notes executed by the respondents Spouses Samuel and Odette Beluso (spouses Beluso) in favor of petitioner United Coconut Planters Bank (UCPB).

The procedural and factual antecedents of this case are as follows:

On 16 April 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the latter could avail from the former credit of up to a maximum amount of P1.2 Million pesos for a term ending on 30 April 1997. The spouses Beluso constituted, other than their promissory notes, a real estate mortgage over parcels of land in Roxas City, covered by Transfer Certificates of Title No. T-31539 and T-27828, as additional security for the obligation. The Credit Agreement was subsequently amended to increase the amount of the Promissory Notes Line to a maximum of P2.35 Million pesos and to extend the term thereof to 28 February 1998.

The spouses Beluso availed themselves of the credit line under the following Promissory Notes:

PN #

Date of PN

Maturity Date 27 1996 30 1996

Amount Secured

8314-96-00083-3 29 April 1996 8314-96-00085-0 2 May 1996 8314-96-000292- 20 2 1996

August P 700,000 August P 500,000 March P 800,000

November 20 1997

The three promissory notes were renewed several times. On 30 April 1997, the payment of the principal and interest of the latter two promissory notes were debited from the spouses Belusos account with UCPB; yet, a consolidated loan for P1.3 Million was again released to the spouses Beluso under one promissory note with a due date of 28 February 1998.

To completely avail themselves of the P2.35 Million credit line extended to them by UCPB, the spouses Beluso executed two more promissory notes for a total of P350,000.00:

PN # 97-00363-1 98-00002-4

Date of PN 11 December 1997 2 January 1998

Maturity Date 28 1998 28 1998

Amount Secured

February P 200,000 February P 150,000

However, the spouses Beluso alleged that the amounts covered by these last two promissory notes were never released or credited to their account and, thus, claimed that the principal indebtedness was only P2 Million.

In any case, UCPB applied interest rates on the different promissory notes ranging from 18% to 34%. From 1996 to February 1998 the spouses Beluso were able to pay the total sum of P763,692.03.

From 28 February 1998 to 10 June 1998, UCPB continued to charge interest and penalty on the obligations of the spouses Beluso, as follows:

PN #

Amount Secured

Interest

Penalty

Total

97-00363-1 97-00366-6

P P

200,000 700,000

31% 30.17% (7 days)

36% 32.786% (102 days) 30.41% (102 days) 36%

P P

225,313.24 795,294.72

97-00368-2

P 1,300,000

28% (2 days)

P 1,462,124.54

98-00002-4

150,000

33% (102 days)

170,034.71

The spouses Beluso, however, failed to make any payment of the foregoing amounts.

On 2 September 1998, UCPB demanded that the spouses Beluso pay their total obligation of P2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to comply therewith. On 28 December 1998, UCPB foreclosed the properties mortgaged by the spouses Beluso to secure their credit line, which, by that time, already ballooned to P3,784,603.00.

On 9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting and Damages against UCPB with the RTC of Makati City.

On 23 March 2000, the RTC ruled in favor of the spouses Beluso, disposing of the case as follows:

PREMISES CONSIDERED, judgment is hereby rendered declaring the interest rate used by [UCPB] void and the foreclosure and Sheriffs Certificate of Sale void. [UCPB] is hereby ordered to return to [the spouses Beluso] the properties subject of the foreclosure; to pay [the spouses Beluso] the amount of P50,000.00 by way of attorneys fees; and to pay the costs of suit. [The spouses Beluso] are hereby ordered to pay [UCPB] the sum of P1,560,308.00.[5]

On 8 May 2000, the RTC denied UCPBs Motion for Reconsideration,[6] prompting UCPB to appeal the RTC Decision with the Court of Appeals. The Court of Appeals affirmed the RTC Decision, to wit:

WHEREFORE, premises considered, the decision dated March 23, 2000 of the Regional Trial Court, Branch 65, Makati City in Civil Case No. 99-314 is hereby AFFIRMED subject to the modification that defendant-appellant UCPB is not liable for attorneys fees or the costs of suit.[7]

On 9 September 2003, the Court of Appeals denied UCPBs Motion for Reconsideration for lack of merit. UCPB thus filed the present petition, submitting the following issues for our resolution:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH DECLARED VOID THE PROVISION ON INTEREST RATE AGREED UPON BETWEEN PETITIONER AND RESPONDENTS

II

WHETHER OR NOT THE HONORABLE COURT REVERSIBLE ERROR WHEN IT AFFIRMED THE RESPONDENTS INDEBTEDNESS AND ORDERED AMOUNT OF ONLY ONE MILLION FIVE HUNDRED PESOS (P1,560,308.00)

OF APPEALS COMMITTED SERIOUS AND COMPUTATION BY THE TRIAL COURT OF RESPONDENTS TO PAY PETITIONER THE SIXTY THOUSAND THREE HUNDRED EIGHT

III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH ANNULLED THE FORECLOSURE BY PETITIONER OF THE SUBJECT PROPERTIES DUE TO AN ALLEGED INCORRECT COMPUTATION OF RESPONDENTS INDEBTEDNESS

IV

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH FOUND PETITIONER LIABLE FOR VIOLATION OF THE TRUTH IN LENDING ACT

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF THE CASE BECAUSE THE RESPONDENTS ARE GUILTY OF FORUM SHOPPING[8]

Validity of the Interest Rates

The Court of Appeals held that the imposition of interest in the following provision found in the promissory notes of the spouses Beluso is void, as the interest rates and the bases therefor were determined solely by petitioner UCPB:

FOR VALUE RECEIVED, I, and/or We, on or before due date, SPS. SAMUEL AND ODETTE BELUSO (BORROWER), jointly and severally promise to pay to UNITED COCONUT PLANTERS BANK (LENDER) or order at UCPB Bldg., Makati Avenue, Makati City, Philippines, the sum of ______________ PESOS, (P_____), Philippine Currency, with interest thereon at the rate indicative of DBD retail rate or as determined by the Branch Head.[9]

UCPB asserts that this is a reversible error, and claims that while the interest rate was not numerically quantified in the face of the promissory notes, it was nonetheless categorically fixed, at the time of execution thereof, at the rate indicative of the DBD retail rate. UCPB contends that said provision must be read with another stipulation in the promissory notes subjecting to review the interest rate as fixed:

The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.[10]

In this regard, UCPB avers that these are valid reference rates akin to a prevailing rate or prime rate allowed by this Court in Polotan v. Court of Appeals.[11] Furthermore, UCPB argues that even if the proviso as determined by the branch head is considered void, such a declaration would not ipso factorender the connecting clause indicative of DBD retail rate void in view of the separability clause of the Credit Agreement, which reads:

Section 9.08 Separability Clause. If any one or more of the provisions contained in this AGREEMENT, or documents executed in connection herewith shall be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.[12]

According to UCPB, the imposition of the questioned interest rates did not infringe on the principle of mutuality of contracts, because the spouses Beluso had the liberty to choose whether or not to renew their credit line at the new interest rates pegged by petitioner.[13] UCPB also claims that assuming there was any defect in the mutuality of the contract at the time of its inception, such defect was cured by the subsequent conduct of the spouses Beluso in availing themselves of the credit line from April 1996 to February 1998 without airing any protest with respect to the interest rates imposed by UCPB. According to UCPB, therefore, the spouses Beluso are in estoppel.[14]

We agree with the Court of Appeals, and find no merit in the contentions of UCPB.

Article 1308 of the Civil Code provides:

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

We applied this provision in Philippine National Bank v. Court of Appeals,[15] where we held:

In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing,

the weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it" (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.

The provision stating that the interest shall be at the rate indicative of DBD retail rate or as determined by the Branch Head is indeed dependent solely on the will of petitioner UCPB. Under such provision, petitioner UCPB has two choices on what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head. As UCPB is given this choice, the rate should be categorically determinable in both choices. If either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank can easily choose such an option, thus making the entire interest rate provision violative of the principle of mutuality of contracts.

Not just one, but rather both, of these choices are dependent solely on the will of UCPB. Clearly, a rate as determined by the Branch Head gives the latter unfettered discretion on what the rate may be. The Branch Head may choose any rate he or she desires. As regards the rate indicative of the DBD retail rate, the same cannot be considered as valid for being akin to a prevailing rate or prime rate allowed by this Court in Polotan. The interest rate in Polotan reads:

The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank and Trust Company. x x x.[16]

In this provision in Polotan, there is a fixed margin over the reference rate: 3%. Thus, the parties can easily determine the interest rate by applying simple arithmetic. On the other hand, the provision in the case at bar does not specify any margin above or below the DBD retail rate. UCPB can peg the interest at any percentage above or below the DBD retail rate, again giving it unfettered discretion in determining the interest rate.

The stipulation in the promissory notes subjecting the interest rate to review does not render the imposition by UCPB of interest rates on the obligations of the spouses Beluso valid. According to said stipulation:

The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.[17]

It should be pointed out that the authority to review the interest rate was given UCPB alone as the lender. Moreover, UCPB may apply the considerations enumerated in this provision as it wishes. As worded in the above provision, UCPB may give as much weight as it desires to each of the following considerations: (1) the prevailing financial and monetary condition; (2) the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or (3) the resulting profitability to the LENDER (UCPB) after due consideration of all dealings with the BORROWER (the spouses Beluso). Again, as in the case of the interest rate provision, there is no fixed margin above or below these considerations.

In view of the foregoing, the Separability Clause cannot save either of the two options of UCPB as to the interest to be imposed, as both options violate the principle of mutuality of contracts.

UCPB likewise failed to convince us that the spouses Beluso were in estoppel.

Estoppel cannot be predicated on an illegal act. As between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.[18]

The interest rate provisions in the case at bar are illegal not only because of the provisions of the Civil Code on mutuality of contracts, but also, as shall be discussed later, because they violate the Truth in Lending Act. Not disclosing the true finance charges in connection with the extensions of credit is, furthermore, a form of deception which we cannot countenance. It is against the policy of the State as stated in the Truth in Lending Act:

Sec. 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. [19]

Moreover, while the spouses Beluso indeed agreed to renew the credit line, the offending provisions are found in the promissory notes themselves, not in the credit line. In fixing the interest rates in the promissory notes to cover the renewed credit line, UCPB still reserved to itself the same two options (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head.

Error in Computation

UCPB asserts that while both the RTC and the Court of Appeals voided the interest rates imposed by UCPB, both failed to include in their computation of the outstanding obligation of the spouses Beluso the legal rate of interest of 12% per annum. Furthermore, the penalty charges were also deleted in the decisions of the RTC and the Court of Appeals. Section 2.04, Article II on Interest and other Bank Charges of the subject Credit Agreement, provides:

Section 2.04 Penalty Charges. In addition to the interest provided for in Section 2.01 of this ARTICLE, any principal obligation of the CLIENT hereunder which is not paid when due shall be subject to a penalty charge of one percent (1%) of the amount of such obligation per month computed from due date until the obligation is paid in full. If the bank accelerates teh (sic) payment of availments hereunder pursuant to ARTICLE VIII hereof, the penalty charge shall be used on the total principal amount outstanding and unpaid computed from the date of acceleration until the obligation is paid in full. [20]

Paragraph 4 of the promissory notes also states:

In case of non-payment of this Promissory Note (Note) at maturity, I/We, jointly and severally, agree to pay an additional sum equivalent to twenty-five percent (25%) of the total due on the Note as attorneys fee, aside from the expenses and costs of collection whether actually incurred or not, and a penalty charge of one percent (1%) per month on the total amount due and unpaid from date of default until fully paid. [21]

Petitioner further claims that it is likewise entitled to attorneys fees, pursuant to Section 9.06 of the Credit Agreement, thus:

If the BANK shall require the services of counsel for the enforcement of its rights under this AGREEMENT, the Note(s), the collaterals and other related documents, the BANK shall be entitled to

recover attorneys fees equivalent to not less than twenty-five percent (25%) of the total amounts due and outstanding exclusive of costs and other expenses.[22]

Another alleged computational error pointed out by UCPB is the negation of the Compounding Interest agreed upon by the parties under Section 2.02 of the Credit Agreement:

Section 2.02 Compounding Interest. Interest not paid when due shall form part of the principal and shall be subject to the same interest rate as herein stipulated.[23]

and paragraph 3 of the subject promissory notes:

Interest not paid when due shall be added to, and become part of the principal and shall likewise bear interest at the same rate.[24]

UCPB lastly avers that the application of the spouses Belusos payments in the disputed computation does not reflect the parties agreement. The RTC deducted the payment made by the spouses Beluso amounting to P763,693.00 from the principal of P2,350,000.00. This was allegedly inconsistent with the Credit Agreement, as well as with the agreement of the parties as to the facts of the case. In paragraph 7 of the spouses Belusos Manifestation and Motion on Proposed Stipulation of Facts and Issues vis--vis UCPBs Manifestation, the parties agreed that the amount of P763,693.00 was applied to the interest and not to the principal, in accord with Section 3.03, Article II of the Credit Agreement on Order of the Application of Payments, which provides:

Section 3.03 Application of Payment. Payments made by the CLIENT shall be applied in accordance with the following order of preference:

1. 2. 3. 4. 5. 6. 7. 8.

Accounts receivable and other out-of-pocket expenses Front-end Fee, Origination Fee, Attorneys Fee and other expenses of collection; Penalty charges; Past due interest; Principal amortization/Payment in arrears; Advance interest; Outstanding balance; and All other obligations of CLIENT to the BANK, if any.[25]

Thus, according to UCPB, the interest charges, penalty charges, and attorneys fees had been erroneously excluded by the RTC and the Court of Appeals from the computation of the total amount due and demandable from spouses Beluso.

The spouses Belusos defense as to all these issues is that the demand made by UCPB is for a considerably bigger amount and, therefore, the demand should be considered void. There being no valid demand, according to the

spouses Beluso, there would be no default, and therefore the interests and penalties would not commence to run. As it was likewise improper to foreclose the mortgaged properties or file a case against the spouses Beluso, attorneys fees were not warranted.

We agree with UCPB on this score. Default commences upon judicial or extrajudicial demand. [26] The excess amount in such a demand does not nullify the demand itself, which is valid with respect to the proper amount. A contrary ruling would put commercial transactions in disarray, as validity of demands would be dependent on the exactness of the computations thereof, which are too often contested.

There being a valid demand on the part of UCPB, albeit excessive, the spouses Beluso are considered in default with respect to the proper amount and, therefore, the interests and the penalties began to run at that point.

As regards the award of 12% legal interest in favor of petitioner, the RTC actually recognized that said legal interest should be imposed, thus: There being no valid stipulation as to interest, the legal rate of interest shall be charged.[27] It seems that the RTC inadvertently overlooked its non-inclusion in its computation.

The spouses Beluso had even originally asked for the RTC to impose this legal rate of interest in both the body and the prayer of its petition with the RTC:

12. Since the provision on the fixing of the rate of interest by the sole will of the respondent Bank is null and void, only the legal rate of interest which is 12% per annum can be legally charged and imposed by the bank, which would amount to only about P599,000.00 since 1996 up to August 31, 1998.

xxxx

WHEREFORE, in view of the foregoing, petiitoners pray for judgment or order:

xxxx

2. By way of example for the public good against the Banks taking unfair advantage of the weaker party to their contract, declaring the legal rate of 12% per annum, as the imposable rate of interest up to February 28, 1999 on the loan of 2.350 million.[28]

All these show that the spouses Beluso had acknowledged before the RTC their obligation to pay a 12% legal interest on their loans. When the RTC failed to include the 12% legal interest in its computation, however, the spouses Beluso merely defended in the appellate courts this non-inclusion, as the same was beneficial to them. We see, however, sufficient basis to impose a 12% legal interest in favor of petitioner in the case at bar, as what we have voided is merely the stipulated rate of interest and not the stipulation that the loan shall earn interest.

We must likewise uphold the contract stipulation providing the compounding of interest. The provisions in the Credit Agreement and in the promissory notes providing for the compounding of interest were neither nullified by the RTC or the Court of Appeals, nor assailed by the spouses Beluso in their petition with the RTC. The compounding of interests has furthermore been declared by this Court to be legal. We have held in Tan v. Court of Appeals,[29] that:

Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.

As regards the imposition of penalties, however, although we are likewise upholding the imposition thereof in the contract, we find the rate iniquitous. Like in the case of grossly excessive interests, the penalty stipulated in the contract may also be reduced by the courts if it is iniquitous or unconscionable. [30]

We find the penalty imposed by UCPB, ranging from 30.41% to 36%, to be iniquitous considering the fact that this penalty is already over and above the compounded interest likewise imposed in the contract. If a 36% interest in itself has been declared unconscionable by this Court,[31] what more a 30.41% to 36% penalty, over and above the payment of compounded interest? UCPB itself must have realized this, as it gave us a sample computation of the spouses Belusos obligation if both the interest and the penalty charge are reduced to 12%.

As regards the attorneys fees, the spouses Beluso can actually be liable therefor even if there had been no demand. Filing a case in court is the judicial demand referred to in Article 1169[32] of the Civil Code, which would put the obligor in delay.

The RTC, however, also held UCPB liable for attorneys fees in this case, as the spouses Beluso were forced to litigate the issue on the illegality of the interest rate provision of the promissory notes. The award of attorneys fees, it must be recalled, falls under the sound discretion of the court.[33] Since both parties were forced to litigate to protect their respective rights, and both are entitled to the award of attorneys fees from the other, practical reasons dictate that we set off or compensate both parties liabilities for attorneys fees. Therefore, instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the award of attorneys fees to the spouses Beluso.

In sum, we hold that spouses Beluso should still be held liable for a compounded legal interest of 12% per annum and a penalty charge of 12% per annum. We also hold that, instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the award of attorneys fees to the spouses Beluso.

Annulment of the Foreclosure Sale

Properties of spouses Beluso had been foreclosed, titles to which had already been consolidated on 19 February 2001 and 20 March 2001 in the name of UCPB, as the spouses Beluso failed to exercise their right of redemption which expired on 25 March 2000. The RTC, however, annulled the foreclosure of mortgage based on an alleged incorrect computation of the spouses Belusos indebtedness.

UCPB alleges that none of the grounds for the annulment of a foreclosure sale are present in the case at bar. Furthermore, the annulment of the foreclosure proceedings and the certificates of sale were mooted by the subsequent issuance of new certificates of title in the name of said bank. UCPB claims that the spouses Belusos action for annulment of foreclosure constitutes a collateral attack on its certificates of title, an act proscribed by Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, which provides:

Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.

The spouses Beluso retort that since they had the right to refuse payment of an excessive demand on their account, they cannot be said to be in default for refusing to pay the same. Consequently, according to the spouses Beluso, the enforcement of such illegal and overcharged demand through foreclosure of mortgage should be voided.

We agree with UCPB and affirm the validity of the foreclosure proceedings. Since we already found that a valid demand was made by UCPB upon the spouses Beluso, despite being excessive, the spouses Beluso are considered in default with respect to the proper amount of their obligation to UCPB and, thus, the property they mortgaged to secure such amounts may be foreclosed. Consequently, proceeds of the foreclosure sale should be applied to the extent of the amounts to which UCPB is rightfully entitled.

As argued by UCPB, none of the grounds for the annulment of a foreclosure sale are present in this case. The grounds for the proper annulment of the foreclosure sale are the following: (1) that there was fraud, collusion, accident, mutual mistake, breach of trust or misconduct by the purchaser; (2) that the sale had not been fairly and regularly conducted; or (3) that the price was inadequate and the inadequacy was so great as to shock the conscience of the court.[34]

Liability for Violation of Truth in Lending Act

The RTC, affirmed by the Court of Appeals, imposed a fine of P26,000.00 for UCPBs alleged violation of Republic Act No. 3765, otherwise known as the Truth in Lending Act.

UCPB challenges this imposition, on the argument that Section 6(a) of the Truth in Lending Act which mandates the filing of an action to recover such penalty must be made under the following circumstances:

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. x x x (Emphasis ours.)

According to UCPB, the Court of Appeals even stated that [a]dmittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no action to formally admit the amended petition [which expressly alleges violation of the Truth in Lending Act] was made either by [respondents] spouses Beluso and the lower court. x x x.[35]

UCPB further claims that the action to recover the penalty for the violation of the Truth in Lending Act had been barred by the one-year prescriptive period provided for in the Act. UCPB asserts that per the records of the case, the latest of the subject promissory notes had been executed on 2 January 1998, but the original petition of the spouses Beluso was filed before the RTC on 9 February 1999, which was after the expiration of the period to file the same on 2 January 1999.

On the matter of allegation of the violation of the Truth in Lending Act, the Court of Appeals ruled:

Admittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no action to formally admit the amended petition was made either by [respondents] spouses Beluso and the lower court. In such transactions, the debtor and the lending institutions do not deal on an equal footing and this law was intended to protect the public from hidden or undisclosed charges on their loan obligations, requiring a full disclosure thereof by the lender. We find that its infringement may be inferred or implied from allegations that when [respondents] spouses Beluso executed the promissory notes, the interest rate chargeable thereon were left blank. Thus, [petitioner] UCPB failed to discharge its duty to disclose in full to [respondents] Spouses Beluso the charges applicable on their loans. [36]

We agree with the Court of Appeals. The allegations in the complaint, much more than the title thereof, are controlling. Other than that stated by the Court of Appeals, we find that the allegation of violation of the Truth in Lending Act can also be inferred from the same allegation in the complaint we discussed earlier:

b.) In unilaterally imposing an increased interest rates (sic) respondent bank has relied on the provision of their promissory note granting respondent bank the power to unilaterally fix the interest rates, which rate was not determined in the promissory note but was left solely to the will of the Branch Head of the respondent Bank, x x x.[37]

The allegation that the promissory notes grant UCPB the power to unilaterally fix the interest rates certainly also means that the promissory notes do not contain a clear statement in writing of (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. [38] Furthermore, the spouses

Belusos prayer for such other reliefs just and equitable in the premises should be deemed to include the civil penalty provided for in Section 6(a) of the Truth in Lending Act.

UCPBs contention that this action to recover the penalty for the violation of the Truth in Lending Act has already prescribed is likewise without merit. The penalty for the violation of the act is P100 or an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is greater, except that such liability shall not exceed P2,000.00 on any credit transaction.[39] As this penalty depends on the finance charge required of the borrower, the borrowers cause of action would only accrue when such finance charge is required. In the case at bar, the date of the demand for payment of the finance charge is 2 September 1998, while the foreclosure was made on 28 December 1998. The filing of the case on 9 February 1999 is therefore within the one-year prescriptive period.

UCPB argues that a violation of the Truth in Lending Act, being a criminal offense, cannot be inferred nor implied from the allegations made in the complaint.[40] Pertinent provisions of the Act read:

Sec. 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorneys fees and court costs as determined by the court.

xxxx

(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,000 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both.

As can be gleaned from Section 6(a) and (c) of the Truth in Lending Act, the violation of the said Act gives rise to both criminal and civil liabilities. Section 6(c) considers a criminal offense the willful violation of the Act, imposing the penalty therefor of fine, imprisonment or both. Section 6(a), on the other hand, clearly provides for a civil cause of action for failure to disclose any information of the required information to any person in violation of the Act. The penalty therefor is an amount of P100 or in an amount equal to twice the finance charge required by the creditor in connection with such transaction, whichever is greater, except that the liability shall not exceed P2,000.00 on any credit transaction. The action to recover such penalty may be instituted by the aggrieved private person separately and independently from the criminal case for the same offense.

In the case at bar, therefore, the civil action to recover the penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void. This joinder is allowed under Rule 2, Section 5 of the Rules of Court, which provides:

SEC. 5. Joinder of causes of action.A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions: (a) (b) The party joining the causes of action shall comply with the rules on joinder of parties; The joinder shall not include special civil actions or actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein; and (d) Where the claims in all the causes of action are principally for recovery of money, the aggregate amount claimed shall be the test of jurisdiction.

In attacking the RTCs disposition on the violation of the Truth in Lending Act since the same was not alleged in the complaint, UCPB is actually asserting a violation of due process. Indeed, due process mandates that a defendant should be sufficiently apprised of the matters he or she would be defending himself or herself against. However, in the 1 July 1999 pre-trial brief filed by the spouses Beluso before the RTC, the claim for civil sanctions for violation of the Truth in Lending Act was expressly alleged, thus:

Moreover, since from the start, respondent bank violated the Truth in Lending Act in not informing the borrower in writing before the execution of the Promissory Notes of the interest rate expressed as a percentage of the total loan, the respondent bank instead is liable to pay petitioners double the amount the bank is charging petitioners by way of sanction for its violation.[41]

In the same pre-trial brief, the spouses Beluso also expressly raised the following issue:

b.) Does the expression indicative rate of DBD retail (sic) comply with the Truth in Lending Act provision to express the interest rate as a simple annual percentage of the loan?[42]

These assertions are so clear and unequivocal that any attempt of UCPB to feign ignorance of the assertion of this issue in this case as to prevent it from putting up a defense thereto is plainly hogwash.

Petitioner further posits that it is the Metropolitan Trial Court which has jurisdiction to try and adjudicate the alleged violation of the Truth in Lending Act, considering that the present action allegedly involved a single credit transaction as there was only one Promissory Note Line.

We disagree. We have already ruled that the action to recover the penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void. There had been no question that the above actions belong to the jurisdiction of the RTC. Subsection (c) of the above-quoted Section 5 of the Rules of Court on Joinder of Causes of Action provides:

(c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein.

Furthermore, opening a credit line does not create a credit transaction of loan or mutuum, since the former is merely a preparatory contract to the contract of loan or mutuum. Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to the other party amounts not exceeding the limit provided. The credit transaction thus occurred not when the credit line was opened, but rather when the credit line was availed of. In the case at bar, the violation of the Truth in Lending Act allegedly occurred not when the parties executed the Credit Agreement,

where no interest rate was mentioned, but when the parties executed the promissory notes, where the allegedly offending interest rate was stipulated.

UCPB further argues that since the spouses Beluso were duly given copies of the subject promissory notes after their execution, then they were duly notified of the terms thereof, in substantial compliance with the Truth in Lending Act.

Once more, we disagree. Section 4 of the Truth in Lending Act clearly provides that the disclosure statement must be furnished prior to the consummation of the transaction:

SEC. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information:

(1)

the cash price or delivered price of the property or service to be acquired;

(2)

the amounts, if any, to be credited as down payment and/or trade-in;

(3)

the difference between the amounts set forth under clauses (1) and (2)

(4)

the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;

(5)

the total amount to be financed;

(6)

the finance charge expressed in terms of pesos and centavos; and

(7)

the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

The rationale of this provision is to protect users of credit from a lack of awareness of the true cost thereof, proceeding from the experience that banks are able to conceal such true cost by hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount, and the like. The law thereby seeks to protect debtors by permitting them to fully appreciate the true cost of their loan, to enable them to give full consent to the contract, and to properly evaluate their options in arriving at business decisions. Upholding UCPBs claim of substantial compliance would defeat these purposes of the Truth in Lending Act. The belated discovery of the true cost of credit will too often not be able to reverse the ill effects of an already consummated business decision.

In addition, the promissory notes, the copies of which were presented to the spouses Beluso after execution, are not sufficient notification from UCPB. As earlier discussed, the interest rate provision therein does not sufficiently indicate with particularity the interest rate to be applied to the loan covered by said promissory notes.

Forum Shopping

UCPB had earlier moved to dismiss the petition (originally Case No. 99-314 in RTC, Makati City) on the ground that the spouses Beluso instituted another case (Civil Case No. V-7227) before the RTC of Roxas City, involving the same parties and issues. UCPB claims that while Civil Case No. V-7227 initially appears to be a different action, as it prayed for the issuance of a temporary restraining order and/or injunction to stop foreclosure of spouses Belusos properties, it poses issues which are similar to those of the present case. [43] To prove its point, UCPB cited the spouses Belusos Amended Petition in Civil Case No. V-7227, which contains similar allegations as those in the present case. The RTC of Makati denied UCPBs Motion to Dismiss Case No. 99-314 for lack of merit. Petitioner UCPB raised the same issue with the Court of Appeals, and is raising the same issue with us now.

The spouses Beluso claim that the issue in Civil Case No. V-7227 before the RTC of Roxas City, a Petition for Injunction Against Foreclosure, is the propriety of the foreclosure before the true account of spouses Beluso is determined. On the other hand, the issue in Case No. 99-314 before the RTC of Makati City is the validity of the interest rate provision. The spouses Beluso claim that Civil Case No. V-7227 has become moot because, before the RTC of Roxas City could act on the restraining order, UCPB proceeded with the foreclosure and auction sale. As the act sought to be restrained by Civil Case No. V-7227 has already been accomplished, the spouses Beluso had to file a different action, that of Annulment of the Foreclosure Sale, Case No. 99-314 with the RTC, Makati City.

Even if we assume for the sake of argument, however, that only one cause of action is involved in the two civil actions, namely, the violation of the right of the spouses Beluso not to have their property foreclosed for an amount they do not owe, the Rules of Court nevertheless allows the filing of the second action. Civil Case No. V-7227 was dismissed by the RTC of Roxas City before the filing of Case No. 99-314 with the RTC of Makati City, since the venue of litigation as provided for in the Credit Agreement is in Makati City.

Rule 16, Section 5 bars the refiling of an action previously dismissed only in the following instances:

SEC. 5. Effect of dismissal.Subject to the right of appeal, an order granting a motion to dismiss based on paragraphs (f), (h) and (i) of section 1 hereof shall bar the refiling of the same action or claim. (n)

Improper venue as a ground for the dismissal of an action is found in paragraph (c) of Section 1, not in paragraphs (f), (h) and (i):

SECTION 1. Grounds.Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:

(a) That the court has no jurisdiction over the person of the defending party;

(b) That the court has no jurisdiction over the subject matter of the claim;

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same cause;

(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

(g) That the pleading asserting the claim states no cause of action;

(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions of the statute of frauds; and

(j) That a condition precedent for filing the claim has not been complied with.[44] (Emphases supplied.)

When an action is dismissed on the motion of the other party, it is only when the ground for the dismissal of an action is found in paragraphs (f), (h) and (i) that the action cannot be refiled. As regards all the other grounds, the complainant is allowed to file same action, but should take care that, this time, it is filed with the proper court or after the accomplishment of the erstwhile absent condition precedent, as the case may be.
UCPB, however, brings to the attention of this Court a Motion for Reconsideration filed by the spouses Beluso on 15 January 1999 with the RTC of Roxas City, which Motion had not yet been ruled upon when the spouses Beluso

filed Civil Case No. 99-314 with the RTC of Makati. Hence, there were allegedly two pending actions between the same parties on the same issue at the time of the filing of Civil Case No. 99-314 on 9 February 1999 with the RTC of Makati. This will still not change our findings. It is indeed the general rule that in cases where there are two pending actions between the same parties on the same issue, it should be the later case that should be dismissed. However, this rule is not absolute. According to this Court in Allied Banking Corporation v. Court of Appeals[45]:

In these cases, it is evident that the first action was filed in anticipation of the filing of the later action and the purpose is to preempt the later suit or provide a basis for seeking the dismissal of the second action.

Even if this is not the purpose for the filing of the first action, it may nevertheless be dismissed if the later action is the more appropriate vehicle for the ventilation of the issues between the parties. Thus, in Ramos v. Peralta, it was held:

[T]he rule on litis pendentia does not require that the later case should yield to the earlier case. What is required merely is that there be another pending action, not a prior pending action. Considering the broader scope of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was committed by the lower court in deferring to the Bataan court's jurisdiction.

Given, therefore, the pendency of two actions, the following are the relevant considerations in

(1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later
determining which action should be dismissed:

action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties.

In the case at bar, Civil Case No. V-7227 before the RTC of Roxas City was an action for injunction against a foreclosure sale that has already been held, while Civil Case No. 99-314 before the RTC of Makati City includes an action for the annulment of said foreclosure, an action certainly more proper in view of the execution of the foreclosure sale. The former case was improperly filed in Roxas City, while the latter was filed in Makati City, the proper venue of the action as mandated by the Credit Agreement. It is evident, therefore, that Civil Case No. 99-314 is the more appropriate vehicle for litigating the issues between the parties, as compared to Civil Case No. V-7227. Thus, we rule that the RTC of Makati City was not in error in not dismissing Civil Case No. 99-314.

WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED with the following MODIFICATIONS:

1.

In addition to the sum of P2,350,000.00 as determined by the courts a quo, respondent spouses Samuel and Odette Beluso are also liable for the following amounts: a. Penalty of 12% per annum on the amount due[46] from the date of demand; and b. Compounded legal interest of 12% per annum on the amount due [47] from date of demand;

2. a.

The following amounts shall be deducted from the liability of the spouses Samuel and Odette Beluso: Payments made by the spouses in the amount of P763,692.00. These payments shall be applied to the date of actual payment of the following in the order that they are listed, to wit:

i. ii. iii. iv. b.

penalty charges due and demandable as of the time of payment; interest due and demandable as of the time of payment; principal amortization/payment in arrears as of the time of payment; outstanding balance.

Penalty under Republic Act No. 3765 in the amount of P26,000.00. This amount shall be deducted from the liability of the spouses Samuel and Odette Beluso on 9 February 1999 to the following in the order that they are listed, to wit: i. ii. iii. iv. penalty charges due and demandable as of time of payment; interest due and demandable as of the time of payment; principal amortization/payment in arrears as of the time of payment; outstanding balance.

3.

The foreclosure of mortgage is hereby declared VALID. Consequently, the amounts which the Regional Trial Court and the Court of Appeals ordered respondents to pay, as modified in this Decision, shall be deducted from the proceeds of the foreclosure sale.

SO ORDERED.

Republic SUPREME Manila

of

the

Philippines COURT

SECOND DIVISION G.R. No. 173379 December 1, 2010 AFDAL and FATIMA A. AFDAL, Petitioners,

ABUBAKAR A. vs. ROMEO CARLOS, Respondent. DECISION CARPIO, J.: The Case

This is a petition for review1 of the 3 January 20052 and 16 June 20063 Orders of the Regional Trial Court, Branch 25, Bian, Laguna (RTC) in Civil Case No. B-6721. In its 3 January 2005 Order, the RTC ordered the dismissal of petitioners Abubakar A. Afdal and Fatima A. Afdals (petitioners) petition for relief from judgment. In its 16 June 2006 Order, the RTC denied petitioners motion for reconsideration. The Facts On 18 December 2003, respondent Romeo Carlos (respondent) filed a complaint for unlawful detainer and damages against petitioners, Zenaida Guijabar (Guijabar), John Doe, Peter Doe, Juana Doe, and all persons claiming rights under them docketed as Civil Case No. 3719 before the Municipal Trial Court, Bian, Laguna (MTC). Respondent alleged that petitioners, Guijabar, and all other persons claiming rights under them were occupying, by mere tolerance, a parcel of land in respondents name covered by Transfer Certificate of Title No. T-5301394 in the Registry of Deeds Calamba, Laguna. Respondent claimed that petitioner Abubakar Afdal (petitioner Abubakar) sold the property to him but that he allowed petitioners to stay in the property. On 25 August 2003, respondent demanded that petitioners, Guijabar, and all persons claiming rights under them turn over the property to him because he needed the property for his personal use.5 Respondent further alleged that petitioners refused to heed his demand and he was constrained to file a complaint before the Lupon ng Tagapamayapa (Lupon). According to respondent, petitioners ignored the notices and the Lupon issued a "certificate to file action."6 Then, respondent filed the complaint before the MTC.

According to the records, there were three attempts to serve the summons and complaint on petitioners 14 January, 3 and 18 February 2004.7 However, petitioners failed to file an answer. On 2 June 2004, respondent filed an ex-parte motion and compliance with position paper submitting the case for decision based on the pleadings on record.8 In its 23 August 2004 Decision,9 the MTC ruled in favor of respondent. The dispositive portion of the 23 August 2004 Decision reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants as follows: 1. Ordering defendants Abubakar Afdal, Zenaida Guijabar and all persons claiming rights under them to vacate the subject property and peacefully turn-over possession of the same to plaintiff; 2. Ordering defendants to pay plaintiff the amount of TEN THOUSAND PESOS (P10,000.00) as rental arrears from August 25, 2003 up to the date of decision; 3. Ordering defendants to pay plaintiff the amount of TEN THOUSAND PESOS (P10,000.00) a month thereafter, as reasonable compensation for the use of the subject premises until they finally vacate the same; 4. Ordering defendants to pay plaintiff the amount of FIFTY THOUSAND PESOS (P50,000.00) as and for attorneys fees plus ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00) appearance fee; 5. Ordering defendants to pay the costs of suit. SO ORDERED.10 On 1 October 2004, the MTC issued a writ of execution.11 On 30 October 2004, petitioners filed a petition for relief from judgment with the MTC. 12 Respondent filed a motion to dismiss or strike out the petition for relief.13 Subsequently, petitioners manifested their intention to withdraw the petition for relief after realizing that it was a prohibited pleading under the Revised Rule on Summary Procedure. On 10 November 2004, the MTC granted petitioners request to withdraw the petition for relief. 14

On 6 December 2004, petitioners filed the petition for relief before the RTC. 15 Petitioners alleged that they are the lawful owners of the property which they purchased from spouses Martha D.G. Ubaldo and Francisco D. Ubaldo. Petitioners denied that they sold the property to respondent. Petitioners added that on 15 December 2003, petitioner Abubakar filed with the Commission on Elections his certificate of candidacy as mayor in the municipality of Labangan, Zamboanga del Sur, for the 10 May 2004 elections. Petitioners said they only learned of the MTCs 23 August 2004 Decision on 27 October 2004. Petitioners also pointed out that they never received respondents demand letter nor were they informed of, much less participated in, the proceedings before the Lupon. Moreover, petitioners said they were not served a copy of the summons and the complaint. On 3 January 2005, the RTC issued the assailed Order dismissing the petition for relief. The RTC said it had no jurisdiction over the petition because the petition should have been filed before the MTC in accordance with Section 1 of Rule 38 of the Rules of Court which provides that a petition for relief should be filed "in such court and in the same case praying that the judgment, order or proceeding be set aside." Petitioners filed a motion for reconsideration. In its 16 June 2006 Order, the RTC denied petitioners motion. Hence, this petition. The Issue

Petitioners raise the sole issue of whether the RTC erred in dismissing their petition for relief from judgment.
The Ruling of the Court Petitioners maintain that the RTC erred in dismissing their petition for relief. Petitioners argue that they have no other recourse but to file the petition for relief with the RTC. Petitioners allege the need to reconcile the apparent inconsistencies with respect to the filing of a petition for relief from judgment under Rule 38 of the Rules of Court and the prohibition under the Revised Rule on Summary Procedure. Petitioners suggest that petitions for relief from judgment in forcible entry and unlawful detainer cases can be filed with the RTC provided that petitioners have complied with all the legal requirements to entitle him to avail of such legal remedy.

Section 13(4) of Rule 70 of the Rules of Court provides: SEC. 13. Prohibited pleadings and motions. - The following petitions, motions, or pleadings shall not be allowed: x x x 4. Petition for relief from judgment; x x x Section 19(d) of the Revised Rule on Summary Procedure also provides: SEC. 19. Prohibited pleadings and motions. - The following pleadings, motions, or petitions shall not be allowed in the cases covered by this Rule: x x x (d) Petition for relief from judgment; x x x Clearly, a petition for relief from judgment in forcible entry and unlawful detainer cases, as in the present case, is a prohibited pleading. The reason for this is to achieve an expeditious and inexpensive determination of the cases subject of summary procedure.16 Moreover, Section 1, Rule 38 of the Rules of Court provides: SEC. 1. Petition for relief from judgment, order or other proceedings. - When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake or excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside. (Emphasis supplied) A petition for relief from judgment, if allowed by the Rules and not a prohibited pleading, should be filed with and resolved by the court in the same case from which the petition arose.171avvphi1 In the present case, petitioners cannot file the petition for relief with the MTC because it is a prohibited pleading in an unlawful detainer case. Petitioners cannot also file the petition for relief with the RTC because the RTC has no jurisdiction to entertain petitions for relief from judgments of the MTC. Therefore, the RTC did not err in dismissing the petition for relief from judgment of the MTC.

The remedy of petitioners in such a situation is to file a petition for certiorari with the RTC under Rule 65 18 of the Rules of Court on the ground of lack of jurisdiction of the MTC over the person of petitioners in view of the absence of summons to petitioners. Here, we shall treat petitioners petition for relief from judgment as a petition for certiorari before the RTC. An action for unlawful detainer or forcible entry is a real action and in personam because the plaintiff seeks to enforce a personal obligation on the defendant for the latter to vacate the property subject of the action, restore physical possession thereof to the plaintiff, and pay actual damages by way of reasonable compensation for his use or occupation of the property.19 In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case.20 Jurisdiction over the defendant is acquired either upon a valid service of summons or the defendants voluntary appearance in court.21 If the defendant does not voluntarily appear in court, jurisdiction can be acquired by personal or substituted service of summons as laid out under Sections 6 and 7 of Rule 14 of the Rules of Court, which state: Sec. 6. Service in person on defendant. - Whenever practicable, the summons shall be served by handing a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering it to him. Sec. 7. Substituted Service. - If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendants residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendants office or regular place of business with some competent person in charge thereof. Any judgment of the court which has no jurisdiction over the person of the defendant is null and void. 22 The 23 August 2004 Decision of the MTC states: Record shows that there were three attempts to serve the summons to the defendants. The first was on January 14, 2004 where the same was unserved. The second was on February 3, 2004 where the same was served to one Gary Akob and the last was on February 18, 2004 where the return was duly served but refused to sign.23 A closer look at the records of the case also reveals that the first indorsement dated 14 January 2004 carried the annotation that it was "unsatisfied/given address cannot be located." 24 The second indorsement dated 3 February 2004 stated that the summons was "duly served as evidenced by his signature of one Gary Acob25 (relative)."26While the last

indorsement dated 18 February 2004 carried the annotation that it was "duly served but refused to sign" without specifying to whom it was served.27 Service of summons upon the defendant shall be by personal service first and only when the defendant cannot be promptly served in person will substituted service be availed of.28 In Samartino v. Raon,29 we said: We have long held that the impossibility of personal service justifying availment of substituted service should be explained in the proof of service; why efforts exerted towards personal service failed. The pertinent facts and circumstances attendant to the service of summons must be stated in the proof of service or Officers Return; otherwise, the substituted service cannot be upheld.30

In this case, the indorsements failed to state that prompt and personal service on petitioners was rendered impossible. It failed to show the reason why personal service could not be made. It was also not shown that efforts were made to find petitioners personally and that said efforts failed. These requirements are indispensable because substituted service is in derogation of the usual method of service. It is an extraordinary method since it seeks to bind the defendant to the consequences of a suit even though
notice of such action is served not upon him but upon another whom the law could only presume would notify him of the pending proceedings. Failure to faithfully, strictly, and fully comply with the statutory requirements of substituted service renders such service ineffective.31 Likewise, nowhere in the return of summons or in the records of the case was it shown that Gary Acob, the person on whom substituted service of summons was effected, was a person of suitable age and discretion residing in petitioners residence. In Manotoc v. Court of Appeals,32 we said: If the substituted service will be effected at defendants house or residence, it should be left with a person of "suitable age and discretion then residing therein." A person of suitable age and discretion is one who has attained the age of full legal capacity (18 years old) and is considered to have enough discernment to understand the importance of a summons. "Discretion" is defined as "the ability to make decisions which represent a responsible choice and for which an understanding of what is lawful, right or wise may be presupposed." Thus, to be of sufficient discretion, such person must

know how to read and understand English to comprehend the import of the summons, and fully realize the need to deliver the summons and complaint to the defendant at the earliest possible time for the person to take appropriate action. Thus, the person must have the "relation of confidence" to the defendant, ensuring that the latter would receive or at least be notified of the receipt of the summons. The sheriff must therefore determine if the person found in the alleged dwelling or residence of defendant is of legal age, what the recipients relationship with the defendant is, and whether said person comprehends the significance of the receipt of the summons and his duty to immediately deliver it to the defendant or at least notify the defendant of said receipt of summons. These matters must be clearly and specifically described in the Return of Summons.33 (Emphasis supplied)

In this case, the process server failed to specify Gary Acobs age, his relationship to petitioners and to ascertain whether he comprehends the significance of the receipt of the summons and his duty to deliver it to petitioners or at least notify them of said receipt of summons.
In sum, petitioners were not validly served with summons and the complaint in Civil Case No. 3719 by substituted service. Hence, the MTC failed to acquire jurisdiction over the person of the petitioners and, thus, the MTCs 23 August 2004 Decision is void.34 Since the MTCs 23 August 2004 Decision is void, it also never became final.35 WHEREFORE, we GRANT the petition. We SET ASIDE the 3 January 2005 and 16 June 2006 Orders of the Regional Trial Court, Branch 25, Bian, Laguna. The 23 August 2004 Decision and the 1 October 2004 Writ of Execution, as well as all acts and deeds incidental to the judgment in Civil Case No. 3719, are declared VOID. WeREMAND the case to the Municipal Trial Court, Bian, Laguna, for consolidation with the unlawful detainer case in Civil Case No. 3719 and for the said Municipal Trial Court to continue proceedings thereon by affording petitioners Abubakar A. Afdal and Fatima A. Afdal a chance to file their answer and present evidence in their defense, and thereafter to hear and decide the case. SO ORDERED. Republic SUPREME Manila of the Philippines COURT

THIRD DIVISION G.R. No. 169116 March 28, 2007

BANK OF THE PHILIPPINE ISLANDS, Petitioner, vs. SPS. IRENEO M. SANTIAGO and LIWANAG P. SANTIAGO, CENTROGEN, INC., REPRSENTED BY EDWIN SANTIAGO, Respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari filed by petitioner Bank of the Philippine Islands (BPI) seeking to reverse and set aside the Decision1 of the Court of Appeals dated 3 March 2005 and its Resolution2dated 28 July 2005 affirming the Order3 of the Regional Trial Court (RTC) of Santa Cruz, Laguna, Branch 91, dated 20 March 2003 enjoining the extrajudicial foreclosure sale of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-131382 registered under the name of Spouses Ireneo and Liwanag Santiago. The dispositive portion of the Court of Appeals Decision reads: WHEREFORE, premises considered, the petition is DISMISSED. The assailed orders dated March 20, 2003 and August 25, 2003 of the respondent court in Civil Case No. SC-4259 are hereby AFFIRMED. Petitioner BPI is a banking institution duly organized and existing as such under the Philippine laws. Private respondent Centrogen, Inc. (Centrogen) is a domestic corporation engaged in pharmaceutical business, duly organized and existing as such under the Philippine laws and represented in this act by its President, Edwin Santiago, son of private respondents Spouses Ireneo M. Santiago and Liwanag P. Santiago. On several occasions, private respondent Centrogen obtained loans from Far East Bank and Trust Company (FEBTC) in different amounts, the total of which reached the sum P4,650,000.00, as evidenced by promissory notes executed by Edwin Santiago.

As a security for a fraction of the loan obligation, Ireneo M. Santiago executed a Real Estate Mortgage over a parcel of land covered by TCT No. T-131382 registered under his name and located at Sta Cruz, Laguna, with an area of 2,166 square meters (subject property).4 The mortgage secured the principal loan in the amount ofP490,000.00. Later on, the same property secured another loan obligation in the amount of P1,504,280.00.5 Subsequently, however, Centrogen incurred default and therefore the loan obligation became due and demandable. Meanwhile, FEBTC merged with the BPI with the latter as the surviving corporation. As a result, BPI assumed all the rights, privileges and obligations of FEBTC. On 13 December 2002, BPI filed an Extra-Judicial Foreclosure of Real Estate Mortgage6 over the subject property before the RTC of Sta. Cruz, Laguna. In order to validly effect the foreclosure, a Notice of Sale was issued by the Provincial Sheriff on 21 January 2003. On the same day, the Spouses Santiago were served with the copy of the Notice of Sale. Upon receipt of the Notice of Sale, the Spouses Santiago and Centrogen filed a Complaint seeking the issuance of a Temporary Restraining Order and Preliminary and Final Injunction and in the alternative, for the annulment of the Real Estate Mortgage with BPI. The complaint alleged that the initial loan obligation in the amount of P490,000.00, including interest thereon was fully paid as evidenced by Union Bank Check No. 0363020895 dated 20 December 2001 in the amount ofP648,521.51 with BPI as payee. Such payment notwithstanding, the amount was still included in the amount of computation of the arrears as shown by the document of Extra-Judicial Foreclosure of Real Estate Mortgage filed by the latter. In addition, the Spouses Santiago and Centrogen asseverated that the original loan agreement was for the amount of Five Million Pesos. Such amount will be supposedly utilized to finance the squalene project of the company. However, after the amount of Two Million Pesos was released and was accordingly used in funding the erection of the structural details of the project, FEBTC, in gross violation of the agreement, did not release the balance of Three Million Pesos that will supposedly finance the purchase of machineries and equipment necessary for the operation. As a result, the squalene project failed and the company groped for funds to pay its loan obligations. On 27 February 2003, BPI was summoned to file and serve its Answer to the Complaint filed by Spouses Santiago and Centrogen. On the same day, the Sheriff served a copy of the summons to the Branch Manager of BPI Sta. Cruz, Laguna Branch, as evidenced by the Sheriffs Return,7 which reads:

SHERIFFS RETURN Respectfully returned the original summons and order dated February 2003 with the information that on February 27, 2003 the undersigned served the copy of summons together with the corresponding copy of complaint and its Annexes and order dated February 27, 2003, to defendants (sic) Bank of the Philippine Islands (BPI) thru the manager Ms. Glona Ramos at Sta. Cruz Laguna Branch, at Sta. Cruz, Laguna, to defendant Sheriff Marcial Opinion at the Office of the Provincial Sheriff of Laguna, R.T.C. (sic) Sta. Cruz, Laguna as shown by their signatures on the original summons and order. Instead of filing an Answer, BPI filed a Motion to Dismiss8 the complaint on the ground of lack of jurisdiction over the person of the defendant and other procedural infirmities attendant to the filing of the complaint. In its Motion to Dismiss, BPI claimed that the Branch Manager of its Sta. Cruz, Laguna Branch, was not one of those authorized by Section 11, Rule 14 of the Revised Rules of Court9 to receive summons on behalf of the corporation. The summons served upon its Branch Manager, therefore, did not bind the corporation. In addition, it was alleged that the complaint filed by the Spouses Santiago and Centrogen lacked a Certificate of Non-Forum Shopping10 and was therefore dismissible. Finally, BPI underscored that the person who verified the complaint was not duly authorized by Centrogens Board of Directors to institute the present action as required by Section 23 of the Corporation Code. 11 In an Order12 dated 28 February 2003, the RTC denied the Motion to Dismiss and emphasized that the nature of the case merited its removal from the purview of Section 11, Rule 14 of the Revised Rules of Court. Based on the provisions of Section 5, Rule 58 of the Revised Rules of Court,13 the RTC declared that the instant Order is still valid and binding despite non-compliance with the provisions of Section 11, Rule 14 of the same Rules. The dispositive portion of the Order reads: WHEREFORE, premises considered, the motion to dismiss is hereby denied because of the presence of extreme urgency wherein the Court has jurisdiction to act on the TRO despite lack of proper service of summons. Let the instant case be called for summary hearing on plaintiffs application for temporary restraining order. After summary hearing on the Spouses Santiago and Centrogens application for Temporary Restraining Order, the RTC, on 28 February 2003, issued an Order14 enjoining the Provincial Sheriff from proceeding with the extra-judicial foreclosure sale of the subject property until the propriety of granting a preliminary injunction is ascertained. The decretal portion of the said Order reads:

Wherefore, premises considered, the Court orders that pending the resolution of the plaintiffs prayer for preliminary injunction: 1. The Defendant Provincial Sheriff, his deputies, employees, and agents are enjoined from proceeding with the threatened extra-judicial foreclosure sale (to be conducted today) of the parcel of land owned by plaintiffs Spouses Ireneo M. Santiago and Liwanag P. Santiago located in (sic) Brgy. Sto. Angel Norte, Sta. Cruz, Laguna. 2. The application for a preliminary injunction is hereby set for hearing on March 10, 2003 at 1:30 pm. Further, the plaintiffs are hereby ordered to immediately file a bond amounting to One Hundred Thousand Pesos (P100,000.00) to answer for damages that Defendant Bank may sustain if the court should finally decide that the plaintiffs are not entitled thereto. On 6 March 2003, the RTC ordered the service of new summons to BPI in accordance with the provisions of the Revised Rules of Court. The aforesaid Order reads: To avoid further argument as regards the proper service of summons to Defendant Bank, the Branch Clerk of Court is hereby directed to issue another summons and serve copy of the same together with the complaint and its annexes to any of the officers of the Defendant Bank as provided by the rules of civil procedure. 15 In compliance with the aforesaid Order, the Branch Clerk of Court caused the issuance of a new summons on 7 March 2003, a copy of which was served upon the Office of the Corporate Secretary of the BPI on 11 March 2003, as evidenced by the Sheriffs Return,16 which reads: Sheriffs Return This is to Certify that on March 11, 2003 the undersigned caused the service of summons together with the copy of complaint and its annexes to defendant Bank of the Philippine Islands (BPI) and receive (sic) by the Office of the Corporate Secretary dated March 11, 2003 at the BPI Building Ayala Avenue, Makati City. On 20 March 2003, the RTC issued an Order granting the application for the issuance of a Writ of Preliminary Injunction filed by the Spouses Santiago and Centrogen. It enjoined the extra-judicial foreclosure sale of the subject property pending resolution of the main action for Annulment of Real Estate Mortgage or until further orders of the trial court. In issuing the Writ of Preliminary Injunction, it rationalized that to allow the foreclosure without hearing the main case would

work injustice to the complainant and since Spouses Santiago and Centrogen claimed that the first loan in the amount of P490,000.00 secured by the property subject of the extra-judicial sale had long been paid by Centrogen through a Union Bank Check No. 0363020895 presented as evidence. The dispositive part of the Order reads: Wherefore, premises considered, the Court orders that pending the resolution of the main action for the annulment of the real estate mortgage, etc., and /or order from this Court: 1. The Defendant Provincial Sheriff, his deputies, employees, and agents are enjoined from proceeding with the threatened extra-judicial foreclosure sale of the parcel of land covered by TCT No. T-131382 owned by Plaintiffs Spouses Ireneo M. Santiago and Liwanag P. Santiago located in Brgy. Sto. Angel, Sta. Cruz, Laguna. 2. The bond in the amount of One Hundred Thousand (P100,000.00) Pesos ordered by the Court to be posted by the plaintiffs to answer for damages that defendant bank may sustain if the court should finally decide that the plaintiffs are entitled thereto still stands. The Motion for Reconsideration filed by BPI was denied by the RTC in its Order 17 dated 25 August 2003. Aggrieved, BPI filed a Petition for Certiorari before the Court of Appeals seeking the reversal of the adverse Orders of the RTC. On 3 March 2005, the Court of Appeals rendered a Decision 18 affirming the assailed Orders of the RTC and dismissing the Petition for Certiorari filed by BPI. The Court of Appeals declared that jurisdiction was acquired upon the service of new summons. Before the assailed Orders were therefore issued, the RTC properly acquired jurisdiction over the person of BPI. Undaunted, BPI filed this instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. For our resolution are the following issues: I. WHETHER OR NOT THE RTC ACQUIRED JURISDICTION OVER THE PERSON OF BPI WHEN THE ORIGINAL SUMMONS WAS SERVED UPON THE BRANCH MANAGER OF ITS STA. CRUZ, LAGUNA BRANCH.

II. WHETHER OR NOT THE RTC COMMITTED A GRAVE ABUSE OF DISCRETION IN ISSUING THE WRIT OF PRELIMINARY INJUNCTION. BPI vehemently insists that the court a quo did not acquire jurisdiction over its person and consequently, the Order issued by the RTC, permanently enjoining the foreclosure sale, was therefore void and does not bind BPI. We are not persuaded. The pertinent provision of the Revised Rules of Court provides: Sec. 11, Rule 14. Service upon domestic private juridical entity When the defendant is a corporation, partnership or association organized under the laws of the Philippines with a juridical personality service may be made on the president, managing partner, general manager, corporate secretary, treasurer or in-house counsel. Basic is the rule that a strict compliance with the mode of service is necessary to confer jurisdiction of the court over a corporation. The officer upon whom service is made must be one who is named in the statute; otherwise, the service is insufficient.19 The purpose is to render it reasonably certain that the corporation will receive prompt and proper notice in an action against it or to insure that the summons be served on a representative so integrated with the corporation that such person will know what to do with the legal papers served on him. Applying the aforestated principle in the case at bar, we rule that the service of summons on BPIs Branch Manager did not bind the corporation for the branch manager is not included in the enumeration of the statute of the persons upon whom service of summons can be validly made in behalf of the corporation. Such service is therefore void and ineffectual.

However, upon the issuance and the proper service of new summons on 11 March 2003, before the Writ of Preliminary Injunction was issued on 20 March 2003, whatever defect attended the service of the original summons, was promptly and accordingly cured.

It bears stressing, that on 7 March 2003, the Branch Clerk of Court issued a new summons which was properly served upon BPIs Corporate Secretary on 11 March 2003, as evidenced by the Sheriffs Return. The subsequent service of summons was neither disputed nor was it mentioned by BPI except in a fleeting narration of facts and therefore enjoys the presumption that official duty has been regularly performed.20 The Process Servers Certificate of Service of Summons is a prima facie evidence of facts set out in that certificate.21 Inarguably, before the Order granting the application for Writ of Preliminary Injunction was issued, the RTC already acquired jurisdiction over the person of BPI by virtue of the new summons validly served on the Corporate Secretary. The fact that the original summons was invalidly served is of no moment since jurisdiction over BPI was subsequently acquired by the service of a new summons. In the case of The Philippine American Life and General Insurance Company v. Brevea,[22] we ruled: A case should not be dismissed simply because an original summons was wrongfully served. It should be difficult to conceive, for example, that when a defendant personally appears before a Court complaining that he had not been validly summoned, that the case against him should be dismissed. An alias summons can be actually served on said defendant. xxxx x x x It is not pertinent whether the summons is designated as an "original" or an "alias" summons as long as it has adequately served its purpose. What is essential is that the summons complies with the requirements under the Rules of Court and it has been duly served on the defendant together with the prevailing complaint. x x x Moreover, the second summons was technically not an alias summons but more of a new summons on the amended complaint. It was not a continuation of the first summons considering that it particularly referred to the amended complaint and not to the original complaint. (Emphases supplied.) BPIs lamentation, at every turn, on the invalidity of the service of summons made on the Branch Manager and its deliberate neglect to acknowledge the fact that a new summons was accordingly served on its Corporate Secretary, is an attempt in futility to mislead this Court into believing that the court a quo never acquired jurisdiction over the case and thus the issuance of the Writ of Preliminary Injunction was invalid.

We are not drawn into petitioners sophistry. In the case of G&G Trading Corporation v. Court of Appeals,23 this Court made the following pronouncements: Although it may be true that the service of summons was made on a person not authorized to receive the same in behalf of the petitioner, nevertheless since it appears that the summons and complaint were in fact received by the corporation through its said clerk, the Court finds that there was substantial compliance with the rule on service of summons. x x x The need for speedy justice must prevail over a technicality. In explaining the test on the validity of service of summons, Justice Florenz Regalado24 stressed that substantial justice must take precedence over technicality and thus stated:

The ultimate test on the validity and sufficiency on service of summons is whether the same and the attachments thereto where ultimately received by the corporation under such circumstances that no undue prejudice is sustained by it from the procedural lapse and it was afforded full opportunity to present its responsive pleadings. This is but in accord with the entrenched rule that the ends of substantial justice should
not be subordinated to technicalities and, for which purpose, each case should be examined within the factual milieu peculiar to it. Prescinding from the above, we deem it best to underscore that there is no hard and fast rule pertaining to the manner of service of summons. Rather, substantial justice demands that every case should be viewed in light of the peculiar circumstances attendant to each. In any event, as it is glaringly evident from the records of the case that jurisdiction over the person of the defendant was validly acquired by the court by the valid service of a new summons before the writ of preliminary injunction was issued and guided by jurisprudential pronouncements heretofore adverted to, we hold that the proceedings attendant to the issuance of the writ of preliminary injunction were regular. Having settled this issue necessitates us to look into the propriety of the issuance of the Writ of Preliminary Injunction.

BPI asserts that the RTC gravely abused its discretion in granting the Spouses Santiago and Centrogens application for the Writ of Preliminary Injunction in the absence of showing that the latter have a clear legal right sought to be protected. Again, we do not agree. An injunction is a preservative remedy for the protection of ones substantive right or interest; it is not a cause of action by itself but merely a provisional remedy, an adjunct to the main suit. 25 The purpose of injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and educated. Its sole aim is to preserve the status quo until the merits of the case is heard fully.26 The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that the discretion should be exercised based upon the grounds and in a manner provided by law. Before a writ of preliminary injunction may be issued, the following requisites must be complied with: (1) a right inesse or a clear or unmistakable right to be protected; (2) violation of that right; and (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.27 Verily, the aforestated requisites for the issuance of the Writ of Preliminary Injunction have been fully complied with. The right of Spouses Santiago over the property clearly exists since they are the registered owners thereof, and the existence of a Real Estate Mortgage does not undermine the right of the absolute owner over the property. The violation of such right is manifest in the threatened foreclosure proceedings commenced by BPI amidst the claim that the principal obligation has been fully paid. Finally, to allow the foreclosure of the subject property without first calibrating the evidence of opposing parties pertaining to the action for the annulment of mortgage would cause irreparable damage to the registered owner. The right of BPI to foreclose the subject property is under dispute upon the claim interposed by the Spouses Santiago and Centrogen that payments for the loan secured by the property subject to the threatened foreclosure proceedings were already made. To support their assertions, Spouses Santiago and Centrogen presented as evidence Union Bank Check No. 0363020895 dated 20 December 2001 in the amount of P648,521.51, with BPI as payee. From this, we can deduce that the right of BPI to foreclose the subject property is questionable. We cannot therefore allow the foreclosure of the Real Estate Mortgage to proceed without first setting the main case for hearing so that based on the evidence presented by the parties, the trial court can determine who between them has the better right over the subject property. To rule otherwise would cause a grave irreparable damage to the Spouses Santiago and Centrogen.

Parenthetically, this petition affords us the opportunity to once again reiterate the rule that the issuance of the writ of preliminary injunction rests entirely within the discretion of the court and generally not interfered with except in case of manifest abuse. The assessment and evaluation of evidence in the issuance of the writ of preliminary injunction involve finding of facts ordinarily left to the trial court for its conclusive determination. 28 In Toyota Motor Phils. Corp. Workers Association v. Court of Appeals, 29 citing Ubanes, Jr. v. Court of Appeals,30we made the following declaration: [T]he matter of the issuance of writ of a preliminary injunction is addressed to the sound discretion of the trial court, unless the court commits a grave abuse of discretion. Grave abuse of discretion in the issuance of writs of preliminary injunction implies a capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction or whether the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal aversion amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law. x x x. In the case at bar, after summary hearing and evaluation of evidence presented by both contending parties, the RTC ruled that justice would be better served if status quo is preserved until the final determination of the merits of the case, to wit: For purposes of preliminary injunction, between the evidence presented by [the spouses Santiago and Centrogen] and [BPI], the evidence of the former carries more weight. The evidence of [the spouses Santiago and Centrogen] established that to allow extra-judicial foreclosure without hearing the main action for the annulment of mortgage would probably work injustice to the plaintiffs and would probably violate their rights over the subject lot. Furthermore, this case involves complicated issues that must be resolved first before altering the status quo. The issue of payment and non-payment of the loan and the issue of breach of the second loan directly affect the rights of the plaintiffs over the subject lot. Hence, the last actual, peaceable, uncontested status of the parties before the controversy must be preserved. The unyielding posture of BPI that its right to foreclose the subject property was violated since it is permanently barred from proceeding with the auction sale is patently erroneous. The RTC, in the exercise of its discretion merely intended to preserve the status quo while the principal action for the annulment of mortgage is heard with the end view that no irreversible damage may be caused to the opposing parties. We find nothing whimsical, arbitrary or capricious in the exercise of the RTC of its discretion.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is DENIED. The Decision dated 3 March 2005, and the Resolution dated 28 July 2005, rendered by the Court of Appeals in CA-G.R. SP No. 80643, are herebyAFFIRMED. Costs against petitioner. SO ORDERED. FIRST DIVISION

[G.R. No. 150656. April 29, 2003]

MARGARITA ROMUALDEZ-LICAROS, petitioner, vs. ABELARDO B. LICAROS, respondent. DECISION CARPIO, J.:

The Case This is a petition for review on certiorari[1] to annul the Decision[2] dated 9 August 2001 of the Court of Appeals in CAG.R. SP No. 58487, as well as the Resolution dated 23 October 2001 denying the motion for reconsideration. The Court of Appeals dismissed the petition to annul the following decisions [3] rendered by Branch 143 of the Regional Trial Court of Makati: (1) The Decision dated 27 December 1990[4] granting the dissolution of the conjugal partnership of gains of the spouses Abelardo B. Licaros and Margarita Romualdez-Licaros; (2) The Decision dated 8 November 1991[5] declaring the marriage between the same spouses null and void.

The Facts The antecedent facts as found by the Court of Appeals are as follows: x x x Abelardo Licaros (Abelardo, for short) and Margarita Romualdez-Licaros (Margarita, hereafter) were lawfully married on December 15, 1968. Out of this marital union were born Maria Concepcion and Abelardo, Jr. Ironically, marital differences, squabbles and irreconcilable conflicts transpired between the spouses, such that sometime in 1979, they agreed to separate from bed and board. In 1982, Margarita left for the United States and there, to settle down with her two (2) children. In the United States, on April 26, 1989, Margarita applied for divorce before the Superior Court of California, County of San Mateo (Annex 1, Rejoinder, pp. 164-165) where she manifested that she does not desire counseling at that time (Quotation, p. 166, Rollo). On August 6, 1990, Margarita was granted the decree of divorce (Annex 2, Answer, p. 108, Rollo) together with a distribution of properties between her and Abelardo (pp. 167-168, Rollo). Not long after, on August 17, 1990, Abelardo and Margarita executed an Agreement of Separation of Properties (pp. 6064, Rollo). This was followed-up by a petition filed on August 21, 1990 before the Regional Trial Court of Makati for the dissolution of the conjugal partnership of gains of the spouses and for the approval of the agreement of separation of their properties. This was docketed as Special Proceeding No. 2551. On December 27, 1990, a decision was issued granting the petition and approving the separation of property agreement. For his part, on June 24, 1991, Abelardo commenced Civil Case No. 91-1757, for the declaration of nullity of his marriage with Margarita, based on psychological incapacity under the New Family Code. As Margarita was then residing at 96 Mulberry Lane, Atherton, California, U.S.A., Abelardo initially moved that summons be served through the International Express Courier Service. The court a quo denied the motion. Instead, it ordered that summons be served by publication in a newspaper of general circulation once a week for three (3) consecutive weeks, at the same time furnishing respondent a copy of the order, as well as the corresponding summons and a copy of the petition at the given address in the United States through the Department of Foreign Affairs, all at the expense of Abelardo. Respondent was given sixty (60) days after publication to file a responsive pleading. On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted his Officers Return quoted hereunder: OFFICERS RETURN

THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of summons and complaint with annexes together with order dated June 28, 1991 issued by the Court in the above-entitled case upon defendant Margarita Romualdez-Licaros c/o DFA. (sent by Mail) thru Pat G. Martines receiving Clerk of Department of Foreign Affairs a person authorized to receive this kind of process who acknowledged the receipt thereof at ADB Bldg., Roxas Blvd., Pasay City, Metro Manila. (p. 40, Rollo) As required by law, the case was referred to Trial Prosecutor Bruselas, Jr. to find out any possible collusion between the parties in the case. Thereafter, with the negative report of collusion, Abelardo was allowed to present his evidence exparte. On November 8, 1991, the Decision (Annex A, Petition) was handed down in Civil Case No. 91-1757 declaring the marriage between Abelardo and Margarita null and void. Almost nine (9) years later, on April 28, 2000, the petition at bench was commenced when Margarita received a letter dated November 18, 1991 from a certain Atty. Angelo Q. Valencia informing her that she no longer has the right to use the family name Licaros inasmuch as her marriage to Abelardo had already been judicially dissolved by the Regional Trial Court of Makati on November 8, 1991. Asseverating to have immediately made some verifications and finding the information given to be true, petitioner commenced the instant petition on the following grounds: (A) THERE WAS EXTRINSIC FRAUD IN THE PREPARATION AND FILING BY ABELARDO OF THE PETITION FOR DISSOLUTION OF THE CONJUGAL PARTNERSHIP OF GAINS AND ITS ANNEX, THE AGREEMENT OF SEPARATION OF PROPERTIES. (B) THE TRIAL COURT LACKED JURISDICTION TO HEAR AND DECIDE THE PETITION FOR DECLARATION OF NULLITY OF MARRIAGE.[6]

The Ruling of the Court of Appeals The Court of Appeals debunked the claim of Margarita that there was extrinsic fraud in the preparation and filing by Abelardo of the Petition for Dissolution of Conjugal Partnership of Gains and its annex, the Agreement of Separation of Properties. The Court of Appeals stated: x x x, the extrinsic fraud alluded to consists of Abelardo coercing Margarita into signing the petition to dissolve their conjugal partnership of gains together with the agreement of separation of properties, by threatening to cut-off all financial

and material support of their children then still studying in the United States; that petitioner had no hand directly or indirectly in the preparation of the petition and agreement of separation of properties; that petitioner never met the counsel for the petitioner, nor the notary public who notarized the deed; and, petitioner never received any notice of the pendency of the petition nor a copy of the decision. Antithetically, a meticulous perusal of the controversial petition (Annex B-1) and the agreement of separation of properties (pp. 60-64, Rollo) readily shows that the same were signed by the petitioner on the proper space after the prayer and on the portion for the verification of the petition. The same is true with the agreement of separation of properties. What is striking to note is that on August 6, 1990, Margarita appeared before Amado P. Cortez, Consul of the Republic of the Philippines at the San Francisco, California, United States Consulate Office, to affirm and acknowledge before said official that she executed the agreement of separation of properties of her own free will and deed, after being informed of the contents thereof. And yet, there is no showing that Abelardo was with her at the Philippine Consulate Office in confirming the separation of property agreement. Moreover, on page 2 of the same agreement, it is specifically stated that such property separation document shall be subject to approval later on by the proper court of competent jurisdiction. The clear import of this is that the agreement must have to be submitted before the proper court for approval, which explains and confirms petitioners signature on the petition filed in court. In main, We see no indication nor showing of coercion or fraud from these facts, which could very well be considered as extrinsic or collateral fraud to justify a petition under Rule 47. From all indications, the pretended coerced documents were rather freely and voluntarily executed by the parties therein knowing fully well the imports thereof. This conclusion finds more weight if We consider the fact that the separation of property was fully implemented and enforced, when apparently both parties correspondingly received the properties respectively assigned to each of them under the said document.[7] The Court of Appeals also rejected Margaritas claim that the trial court lacked jurisdiction to hear and decide the Petition for Declaration of Nullity of Marriage for improper service of summons on her. The case involves the marital status of the parties, which is an action in rem or quasi in rem. The Court of Appeals ruled that in such an action the purpose of service of summons is not to vest the trial court with jurisdiction over the person of the defendant, but only to comply with due process. The Court of Appeals concluded that any irregularity in the service of summons involves due process which does not destroy the trial courts jurisdiction over the res which is the parties marital status. Neither does such irregularity invalidate the judgment rendered in the case. Thus, the Court of Appeals dismissed the petition for annulment of judgment, stating that:

At bar, the case involves the personal (marital) status of the plaintiff and the defendant. This status is the res over which the Philippine court has acquired jurisdiction. This is also the kind of action which the Supreme Court had ruled that service of summons may be served extraterritorially under Section 15 (formerly Section 17) of Rule 14 and where such service of summons is not for the purpose of vesting the trial court with jurisdiction over the person of the defendant but only for the purpose of complying with the requirements of fair play and due process. A fortiori, the court a quo had properly acquired jurisdiction over the person of herein petitioner-defendant when summons was served by publication and a copy of the summons, the complaint with annexes, together with the Order of June 28, 1991, was served to the defendant through the Department of Foreign Affairs by registered mail and duly received by said office to top it all. Such mode was upon instruction and lawful order of the court and could even be treated as any other manner the court may deem sufficient.[8] Hence, the instant petition.

The Issues The issues raised by Margarita are restated as follows: I. Whether Margarita was validly served with summons in the case for declaration of nullity of her marriage with Abelardo; II. Whether there was extrinsic fraud in the preparation and filing by Abelardo of the Petition for Dissolution of the Conjugal Partnership of Gains and its annex, the Agreement of Separation of Properties. The Courts Ruling The petition is bereft of merit. First Issue: Validity of the Service of Summons on Margarita Margarita insists that the trial court never acquired jurisdiction over her person in the petition for declaration of nullity of marriage since she was never validly served with summons. Neither did she appear in court to submit voluntarily to its jurisdiction.

On the other hand, Abelardo argues that jurisdiction over the person of a non-resident defendant in an action in rem or quasi in rem is not necessary. The trial and appellate courts made a clear factual finding that there was proper summons by publication effected through the Department of Foreign Affairs as directed by the trial court. Thus, the trial court acquired jurisdiction to render the decision declaring the marriage a nullity.

Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the court acquires jurisdiction over his person.[9]
As a rule, when the defendant does not reside and is not found in the Philippines, Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court. But when the case is one of actions in rem or quasi in rem enumerated in Section 15,[10] Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case. In such instances, Philippine courts have jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not essential.[11] Actions in personam[12] and actions in rem or quasi in rem differ in that actions in personam are directed against specific persons and seek personal judgments. On the other hand, actions in rem or quasi in rem are directed against the thing or property or status of a person and seek judgments with respect thereto as against the whole world.[13] At the time Abelardo filed the petition for nullity of the marriage in 1991, Margarita was residing in the United States. She left the Philippines in 1982 together with her two children. The trial court considered Margarita a nonresident defendant who is not found in the Philippines. Since the petition affects the personal status of the plaintiff, the trial court authorized extraterritorial service of summons under Section 15, Rule 14 of the Rules of Court. The term personal status includes family relations, particularly the relations between husband and wife. [14] Under Section 15 of Rule 14, a defendant who is a non-resident and is not found in the country may be served with summons by extraterritorial service in four instances:

(1) when the action affects the personal

status of the plaintiff; (2) when the action relates to, or the subject of which is property within the Philippines,
in which the defendant has or claims a lien or interest, actual or contingent; (3) when the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; or (4) when the property of the defendant has been attached within the Philippines. In these instances, extraterritorial service of summons may be effected under any of three modes: (1) by personal service out of the country, with leave of court; (2) by publication and sending a copy of the summons and order of the

court by registered mail to the defendants last known address, also with leave of court; or

(3) by any other

means the judge may consider sufficient.

Applying the foregoing rule, the trial court required extraterritorial service of summons to be effected on Margarita in the following manner: x x x, service of Summons by way of publication in a newspaper of general circulation once a week for three (3) consecutive weeks, at the same time, furnishing respondent copy of this Order as well as the corresponding Summons and copy of the petition at her given address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru the Department of Foreign Affairs, all at the expense of petitioner.[15] (Emphasis ours) The trial courts prescribed mode of extraterritorial service does not fall under the first or second mode specified in Section 15 of Rule 14, but under the third mode. This refers to any other means that the judge may consider sufficient. The Process Servers Return of 15 July 1991 shows that the summons addressed to Margarita together with the complaint and its annexes were sent by mail to the Department of Foreign Affairs with acknowledgment of receipt. The Process Servers certificate of service of summons is prima facie evidence of the facts as set out in the certificate.[16] Before proceeding to declare the marriage between Margarita and Abelardo null and void, the trial court stated in its Decision dated 8 November 1991 that compliance with the jurisdictional requirements hav(e) (sic) been duly established. We

hold that delivery to the Department of Foreign Affairs was sufficient compliance with the rule. After all, this is exactly what the trial court required and considered as sufficient to effect service of summons under the third mode of extraterritorial service pursuant to Section 15 of Rule 14.
Second Issue: Validity of the Judgment Dissolving the Conjugal Partnership of Gains Margarita claims that Abelardo coerced her into signing the Petition for Dissolution of the Conjugal Partnership of Gains (Petition) and its annex, the Agreement of Separation of Properties (Agreement). Abelardo allegedly threatened to cut off all financial and material support to their children if Margarita did not sign the documents. The trial court did not find anything amiss in the Petition and Agreement that Abelardo filed, and thus the trial court approved the same. The Court of Appeals noted that a meticulous perusal of the Petition and Agreement readily shows

that Margarita signed the same on the proper space after the prayer and on the portion for the verification of the petition. The Court of Appeals observed further that on 6 August 1990, Margarita appeared before Consul Amado Cortez in the Philippine Consulate Office in San Francisco, California, to affirm that she executed the Agreement of her own free will. There was no showing that Abelardo was at that time with her at the Philippine Consulate Office. Abelardo secured judicial approval of the Agreement as specifically required in the Agreement. The Court is bound by the factual findings of the trial and appellate courts that the parties freely and voluntarily executed the documents and that there is no showing of coercion or fraud. As a rule, in an appeal by certiorari under Rule 45, the Court does not pass upon questions of fact as the factual findings of the trial and appellate courts are binding on the Court. The Court is not a trier of facts. The Court will not examine the evidence introduced by the parties below to determine if the trial and appellate courts correctly assessed and evaluated the evidence on record.[17] The due and regular execution of an instrument acknowledged before an officer authorized to administer oaths cannot be overthrown by bare allegations of coercion but only by clear and convincing proof.[18] A person acknowledging an instrument before an officer authorized to administer oaths acknowledges that he freely and voluntarily executed the instrument, giving rise to a prima facie presumption of such fact. In the instant case, Margarita acknowledged the Agreement before Consul Cortez. The certificate of acknowledgment signed by Consul Cortez states that Margarita personally appeared before him and acknowledged before me that SHE executed the same of her own free will and deed.[19] Thus, there is a prima facie presumption that Margarita freely and voluntarily executed the Agreement. Margarita has failed to rebut this prima facie presumption with clear and convincing proof of coercion on the part of Abelardo. A document acknowledged before a notary public is prima facie evidence of the due and regular execution of the document.[20] A notarized document has in its favor the presumption of regularity in its execution, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant. [21] WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 58487 dismissing the petition to annul judgment is AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

SECOND DIVISION

[G.R. No. 129242. January 16, 2001]

PILAR

S. VDA. DE MANALO, ANTONIO S. MANALO, ORLANDO S. MANALO, and ISABELITA MANALO, petitioners, vs. HON. COURT OF APPEALS, HON. REGIONAL TRIAL COURT OF MANILA (BRANCH 35), PURITA S. JAYME, MILAGROS M. TERRE, BELEN M. ORILLANO, ROSALINA M. ACUIN, ROMEO S. MANALO, ROBERTO S. MANALO, AMALIA MANALO and IMELDA MANALO,respondents.

DECISION DE LEON, JR., J.: This is a petition for review on certiorari filed by petitioners Pilar S. Vda. De Manalo, et. al., seeking to annul the Resolution[1] of the Court of Appeals[2] affirming the Orders[3] of the Regional Trial Court and the Resolution[4]which denied petitioners motion for reconsideration. The antecedent facts[5] are as follows: Troadio Manalo, a resident of 1966 Maria Clara Street, Sampaloc, Manila died intestate on February 14, 1992. He was survived by his wife, Pilar S. Manalo, and his eleven (11) children, namely: Purita M. Jayme, Antonio Manalo, Milagros M. Terre, Belen M. Orillano, Isabelita Manalo, Rosalina M. Acuin, Romeo Manalo, Roberto Manalo, Amalia Manalo, Orlando Manalo, and Imelda Manalo, who are all of legal age. At the time of his death on February 14, 1992, Troadio Manalo left several real properties located in Manila and in the province of Tarlac including a business under the name and style Manalos Machine Shop with offices at No. 19 Calavite Street, La Loma, Quezon City and at No. 45 Gen. Tinio Street, Arty Subdivision, Valenzuela, Metro Manila. On November 26, 1992, herein respondents, who are eight (8) of the surviving children of the late Troadio Manalo, namely: Purita, Milagros, Belen, Rosalina, Romeo, Roberto, Amalia, and Imelda filed a petition [6] with the respondent Regional Trial Court of Manila[7] for the judicial settlement of the estate of their late father, Troadio Manalo, and for the appointment of their brother, Romeo Manalo, as administrator thereof.

On December 15, 1992, the trial court issued an order setting the said petition for hearing on February 11, 1993 and directing the publication of the order for three (3) consecutive weeks in a newspaper of general circulation in Metro Manila, and further directing service by registered mail of the said order upon the heirs named in the petition at their respective addresses mentioned therein. On February 11, 1993, the date set for hearing of the petition, the trial court issued an order declaring the whole world in default, except the government, and set the reception of evidence of the petitioners therein on March 16, 1993. However, this order of general default was set aside by the trial court upon motion of herein petitioners (oppositors therein) namely: Pilar S. Vda. De Manalo, Antonio, Isabelita and Orlando who were granted ten (10) days within which to file their opposition to the petition. Several pleadings were subsequently filed by herein petitioners, through counsel, culminating in the filing of an Omnibus Motion[8] on July 23, 1993 seeking: (1) to set aside and reconsider the Order of the trial court dated July 9, 1993 which denied the motion for additional extension of time to file opposition; (2) to set for preliminary hearing their affirmative defenses as grounds for dismissal of the case; (3) to declare that the trial court did not acquire jurisdiction over the persons of the oppositors; and (4) for the immediate inhibition of the presiding judge. On July 30, 1993, the trial court issued an order[9] which resolved, thus: A. To admit the so-called Opposition filed by counsel for the oppositors on July 20, 1993, only for the purpose of considering the merits thereof; B. To deny the prayer of the oppositors for a preliminary hearing of their affirmative defenses as ground for the dismissal of this proceeding, said affirmative defenses being irrelevant and immaterial to the purpose and issue of the present proceeding; C. To declare that this court has acquired jurisdiction over the persons of the oppositors; D. To deny the motion of the oppositors for the inhibition of this Presiding Judge; E. To set the application of Romeo Manalo for appointment as regular administrator in the intestate estate of the deceased Troadio Manalo for hearing on September 9, 1993 at 2:00 oclock in the afternoon. Herein petitioners filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals, docketed as CA-G.R. SP. No. 39851, after their motion for reconsideration of the Order dated July 30, 1993 was denied by the trial court in its Order[10] dated September 15, 1993. In their petition for certiorari with the appellate court, they contend that: (1) the venue was improperly laid in SP. PROC. No. 92-63626; (2) the trial court did not acquire jurisdiction over their persons; (3) the share of the surviving spouse was included in the intestate proceedings; (4) there was absence of

earnest efforts toward compromise among members of the same family; and (5) no certification of non-forum shopping was attached to the petition. Finding the contentions untenable, the Court of Appeals dismissed the petition for certiorari in its Resolution[11] promulgated on September 30, 1996. On May 6, 1997 the motion for reconsideration of the said resolution was likewise dismissed.[12] The only issue raised by herein petitioners in the instant petition for review is whether or not the respondent Court of Appeals erred in upholding the questioned orders of the respondent trial court which denied their motion for the outright dismissal of the petition for judicial settlement of estate despite the failure of the petitioners therein to aver that earnest efforts toward a compromise involving members of the same family have been made prior to the filing of the petition but that the same have failed. Herein petitioners claim that the petition in SP. PROC No. 92-63626 is actually an ordinary civil action involving members of the same family. They point out that it contains certain averments which, according to them, are indicative of its adversarial nature, to wit: x x x

Par. 7. One of the surviving sons, ANTONIO MANALO, since the death of his father, TROADIO MANALO, had not made any settlement, judicial or extra-judicial of the properties of the deceased father, TROADIO MANALO. Par. 8. xxx the said surviving son continued to manage and control the properties aforementioned, without proper accounting, to his own benefit and advantage xxx. x x x

Par. 12. That said ANTONIO MANALO is managing and controlling the estate of the deceased TROADIO MANALO to his own advantage and to the damage and prejudice of the herein petitioners and their co-heirs xxx. x x x

Par. 14. For the protection of their rights and interests, petitioners were compelled to bring this suit and were forced to litigate and incur expenses and will continue to incur expenses of not less than, P250,000.00 and engaged the services of herein counsel committing to pay P200,000.00 as and for attorneys fees plus honorarium of P2,500.00 per appearance in court xxx.[13]

Consequently, according to herein petitioners, the same should be dismissed under Rule 16, Section 1(j) of the Revised Rules of Court which provides that a motion to dismiss a complaint may be filed on the ground that a condition precedent for filing the claim has not been complied with, that is, that the petitioners therein failed to aver in the petition in SP. PROC. No. 92-63626, that earnest efforts toward a compromise have been made involving members of the same family prior to the filing of the petition pursuant to Article 222[14] of the Civil Code of the Philippines. The instant petition is not impressed with merit. It is a fundamental rule that, in the determination of the nature of an action or proceeding, the averments[15] and the

A careful scrutiny of the Petition for Issuance of Letters of Administration, Settlement and Distribution of Estate in SP. PROC. No. 92-63626 belies herein petitioners claim that the same is in the nature of an ordinary civil action. The said petition contains sufficient
character of the relief sought[16] in the complaint, or petition, as in the case at bar, shall be controlling. jurisdictional facts required in a petition for the settlement of estate of a deceased person such as the fact of death of the late Troadio Manalo on February 14, 1992, as well as his residence in the City of Manila at the time of his said death. The fact of death of the decedent and of his residence within the country are foundation facts upon which all the subsequent proceedings in the administration of the estate rest.[17] The petition in SP. PROC. No. 92-63626 also contains an enumeration of the names of his legal heirs including a tentative list of the properties left by the deceased which are sought to be settled in the probate proceedings. In addition, the reliefs prayed for in the said petition leave no room for doubt as regard the intention of the petitioners therein (private respondents herein) to seek judicial settlement of the estate of their deceased father, Troadio Manalo, to wit: PRAYER WHEREFORE, premises considered, it is respectfully prayed for of this Honorable Court: (a) That after due hearing, letters of administration be issued to petitioner ROMEO MANALO for the administration of the estate of the deceased TORADIO MANALO upon the giving of a bond in such reasonable sum that this Honorable Court may fix. (b) That after all the properties of the deceased TROADIO MANALO have been inventoried and expenses and just debts, if any, have been paid and the legal heirs of the deceased fully determined, that the said estate of TROADIO MANALO be settled and distributed among the legal heirs all in accordance with law.

c) That the litigation expenses o these proceedings in the amount of P250,000.00 and attorneys fees in the amount of P300,000.00 plus honorarium of P2,500.00 per appearance in court in the hearing and trial of this case and costs of suit be taxed solely against ANTONIO MANALO.[18] Concededly, the petition in SP. PROC. No. 92-63626 contains certain averments which may be typical of an ordinary civil action. Herein petitioners, as oppositors therein, took advantage of the said defect in the petition and filed their socalled Opposition thereto which, as observed by the trial court, is actually an Answer containing admissions and denials, special and affirmative defenses and compulsory counterclaims for actual, moral and exemplary damages, plus attorney's fees and costs[19] in an apparent effort to make out a case of an ordinary civil action an ultimately seek its dismissal under Rule 16, Section 1(j) of the Rules of Court vis--vis, Article 222 of the Civil Code. It is our view that herein petitioners may not be allowed to defeat the purpose of the essentially valid petition for the settlement of the estate of the late Troadio Manalo by raising matters that are irrelevant and immaterial to the said petition. It must be emphasized that the trial court, sitting, as a probate court, has limited and special jurisdiction [20] and cannot hear and dispose of collateral matters and issues which may be properly threshed out only in an ordinary civil action. In addition, the rule has always been to the effect that the jurisdiction of a court, as well as the concomitant nature of an action, is determined by the averments in the complaint and not by the defenses contained in the answer. If it were otherwise, it would not be too difficult to have a case either thrown out of court or its proceedings unduly delayed by simple strategem.[21] So it should be in the instant petition for settlement of estate. Herein petitioners argue that even if the petition in SP. PROC. No. 92-63626 were to be considered as a special proceeding for the settlement of estate of a deceased person, Rule 16, Section 1(j) of the Rules of Court vis-a-vis Article 222 of the Civil Code of the Philippines would nevertheless apply as a ground for the dismissal of the same by virtue of Rule 1, Section 2 of the Rules of Court which provides that the rules shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding. Petitioners contend that the term proceeding is so broad that it must necessarily include special proceedings. The argument is misplaced. Herein petitioners may not validly take refuge under the provisions of Rule 1, Section 2, of the Rules of Court to justify the invocation of Article 222 of the Civil Code of the Philippines for the dismissal of the petition for settlement of the estate of the deceased Troadio Manalo inasmuch as the latter provision is clear enough, to wit:

Art. 222. No suit shall be filed or maintained between members of the same family unless it should appear that earnest efforts toward a compromise have been made, but that the same have failed, subject to the limitations in Article 2035 (underscoring supplied).[22]

The above-quoted provision of the law is applicable only to ordinary civil actions. This is clear from the term suit that it refers to an action by one person or persons against another or others
in a court of justice in which the plaintiff pursues the remedy which the law affords him for the redress of an injury or the enforcement of a right, whether at law or in equity.[23] A civil action is thus an action filed in a court of justice, whereby a party sues another for the enforcement of a right, or the prevention or redress of a wrong. [24] Besides, an excerpt from the Report of the Code Commission unmistakably reveals the intention of the Code Commission to make that legal provision applicable only to civil actions which are essentially adversarial and involve members of the same family, thus: It is difficult to imagine a sadder and more tragic spectacle than a litigation between members of the same family. It is necessary that every effort should be made toward a compromise before a litigation is allowed to breed hate and passion in the family. It is known that lawsuit between close relatives generates deeper bitterness than strangers.[25]

It must be emphasized that the oppositors (herein petitioners) are not being sued in SP. PROC. No. 92-63626 for any cause of action as in fact no defendant was impleaded therein. The Petition for Issuance of Letters of Administration, Settlement and Distribution of
Estate in SP. PROC. No. 92-63626 is a special proceeding and, as such, it is a remedy whereby the petitioners therein seek to establish a status, a right, or a particular fact.[26] The petitioners therein (private respondents herein) merely seek to establish the fact of death of their father and subsequently to be duly recognized as among the heirs of the said deceased so that they can validly exercise their right to participate in the settlement and liquidation of the estate of the decedent consistent with the limited and special jurisdiction of the probate court. WHEREFORE, the petition in the above-entitled case, is DENIED for lack of merit. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.