BPI vs. GABRIELA ANDREA DE COSTER y ROXAS, et al. (G.R. No. L-23181.

March 16, 1925)

Summary:

Factual backdrop of the case:

Gabriela Andrea R. De Coster, with her husband, Jean M. Poizat, as her agent,
allegedly made a joint and several promissory note for P292,000 payable in 1 year in
favor of BPI. To secure its payment, De Coster, thru her husband, allegedly executed a real
estate mortgage on a property in Manila City likewise for BPI a property which was
subject of a prior mortgage in favor of the Dominican Order. In addition, a chattel mortgage
was also executed by Jean Poizat and J.M. Poizat & Co. on two steamships belonging to the
Poizat Vegetable Oil Mills.

The note remained unpaid after a year prompting BPI to file a complaint on March
10, 1924 with the Court of First Instance (CFI) of Manila City, wherein BPI was able to
secure a favourable judgment and was awarded P292,000, plus interest and other costs.
However, De Coster did not pay BPI. As a result, BPI asked the court to order the sheriff to
take immediate possession of the property described in the chattel and real estate
mortgages and sell the same to satisfy the amount due the bank. Meanwhile, on April 24,
1924, the Dominican Fathers intervened in the suit and prayed of the court to consider the
credit owed to them upon the foreclosure of the real estate mortgage.

The CFIs questioned decision:

On May 3, 1924, upon BPIs motion, spouses De Coster and Poizat, as well as J.M.
Poizat & Co., were all declared in default by the court for their failure to appear or file their
answer. Without notifying the defendants, and after introducing evidence, the court on June
24, 1924 granted both prayers by BPI and the Dominican Fathers.

Thereafter, on August 26, 1924, De Coster filed a motion praying that the questioned
judgment be set aside and the case be re-opened and tried on its merits. De Coster
contends that at the time the complaint was filed and summons was served on her
husband, she was absent from the Philippines and was residing in Paris, France from the
year 1908 to April 30, 1924 upon her return to the country, and therefore, the court did not
acquire jurisdiction over her. She further contends that she knows nothing of her
husbands dealings with BPI and that she only learned of the default judgment against her
on July 28, 1924 through the local newspapers.

Moreover, she contends that money owed to BPI was a personal loan of Jean Poizat
and J.M. Poizat & Co. and that she did not authorize her husband to sign her name on the
promissory note, thus, making her liable as a surety. And finally, she claims that the real
estate mortgage on her property executed by her husband for BPI was void as it was given
to secure a void obligation. The court, however, denied said motion. She then moved for
reconsideration, but the court denied this as well.

The Appeal:

She then filed an appeal with the Supreme Court and questioned the lower courts
jurisdiction over her as summons was served invalidly and the judgment of said court
making her and her property liable to BPI based on a void promissory note and void real
estate mortgage.

a.) On the question of jurisdiction:

In resolving the first issue, the Supreme Court ruled that there was indeed invalid
service of summons. First, the Court noted that the Sheriff served the summons on March
13, 1924, a time when De Coster was still out of the country. Also, summons was served on
that date at the house of Jean M. Poizat. Upon the admitted facts, the High Court held that
the husbands residence was not the wifes usual place of residence. Also, there is nothing
in the record showing that her husband accepted service of any process for his wife,
whether acting as her agent or as her representative.

De Costers first appearance in court was made when she filed the August 26, 1924
motion wherein she prayed that the default judgment be set aside and that the case be re-
opened and tried on the merits. When she filed said motion, she thus submitted herself to
the lower courts jurisdiction at that time only.

Now, even if the husband was authorized to institute, prosecute and defend all
actions or proceedings in a court of justice, including accepting notices and summons, the
fact that he failed and neglected to perform his duties as her agent will not bar De Coster, as
the principal, to obtain legal relief in this case. And here, such a relief was duly and
properly made.

b.) On the question of the void note:

Anent her contention that the promissory note was void, the High Court agreed with
her that under the power of attorney given by De Coster to her husband, he had no
authority to execute a joint and several note nor to make her liable as an accommodation
maker or surety, as the case may be. The money owed to BPI was Jean Poizat and his
companys alone, and she was not a party to such loan, and therefore, was not obligated to
pay it. The old, original debts of her husband and his company to the bank were all taken
up and merged in the new note in question.

Furthermore, the bank knew that not a dollar was loaned nor borrowed on the
strength of the note. It was actually given at the banks urgent and pressing demand to
obtain security for the previous indebtedness of Jean Poizat, and the record is bereft of
anything that would even hint at that De Coster was a party to the original notes.
Considering these facts, De Coster had a valid defense against the payment of the
questioned note, and thus, she is not liable to pay it or the original notes.

In addition, the note and mortgage show on their face that De Costers husband as
her attorney-in-fact executed them. The bank knew or should have known the nature and
extent of Jean Poizats authority and the limitations on his power. The fact is, there is no
provision in the husbands power of attorney that empowers or authorizes him to sign
anything or to do anything that will make his wife liable as a surety for a pre-existing debt.

c.) On the question of the void mortgage:

The same is true of the real estate mortgage. The note being void as to De Coster, it
follows that as to her, the real estate mortgage is also void for want of power to execute it.
Hence, the SC reversed the lower courts ruling and remanded the case to said court for
trial on the merits.

In a similar manner, respecting the Dominican Fathers claim, the SC likewise
reversed the lower courts judgment favouring them. The Court held that it cannot be
sustained as they did not serve a copy of their plea upon the defendants De Coster and
Poizat. Firstly, the plea filed on April 24, 1924 does not even ask for a judgment for the
foreclosure of its mortgage. Secondly, they served a copy of their plea on BPI only and no
copy of the plea was ever served upon either of the defendants, who were the real parties
in interest. And unless waived, a defendant has a legal right to service of processes, to his
day in court and to be heard in his defense.