EL BANCO ESPAÑOL-FILIPINO vs.

VICENTE PALANCA
Philippine Reports No. 11390, MARCH 26, 1918
STREET, J.

DOCTRINE:
Constitutional Law – Due Process
As applied to judicial proceedings, due process of law implies that there must be a court or tribunal clothed with power to
hear and determine the matter before it, that jurisdiction shall have been lawfully acquired that the defendant shall have an
opportunity to be heard, and that the judgement shall be rendered upon lawful hearing.

FACTS:

 On March 31, 1906 Engracio Palanca Tanquinyeng y Limquingco owed El Banco Espanyol Filipino (Bank)
P218,294.10, with an interest at 8% per annum, payable at the end of each quarter.
 A mortgage was executed by Engracio on various parcels of real property in Manila as security for a debt owed by
him to El Banco Espanyol Filipino (Bank).
 The parties estimated the value of the property at P292,558 which was about P75,000 in excess of the
indebtedness.
 After the execution of the mortgage instrument, Engracio returned to his native country, China, where he died on
Jan. 29, 1910, without returning to the Philippines.
 El Banco Espanyol Filipino instituted an action to foreclose a mortgage upon various parcels of real property owned
by Engracio Palanca Tanquinyeng y Limquingco in Manila.
 Engracio (defendant) was a non-resident at the time of the foreclosure, hence, it was necessary to give notice to
him by publication. An order for publication was made in due from in a newspaper of the city of Manila. The court
further directed that the clerk of court deposit in the post office in a stamped envelope a copy of the summons and
complaint directed to the defendant at his place of his residence, Amoy, China.
 It does not appear in the record, whether or not the clerk complied with this order or not. However, it was found in
the records that an affidavit signed by Bernardo Chan y Garcia, an employee of the attorneys for the bank, showing
that he had deposited in the Manila post-office a registered letter, addressed to Engracio, at Manila, containing
copies of the complaint, the plaintiff’s affidavit, the summons, and the order of the court directing publication. It also
appears from the postmaster’s receipt that Bernardo probably used an envelope obtained from the clerk’s office, as
the receipt purports to show that the letter emanated from the said office.
 In July 1908, a decision was rendered in favor of the Bank and the defendant was declared in default. The decision
stated that publication had been properly made in a newspaper, but nothing was said about notice having been
given by mail. The court ordered that the defendant should deliver to the clerk of court P249,355, the amount of
indebtedness, to satisfy the judgment. It was also declared that in case of failure of the defendant to satisfy the
judgment within such period, the mortgage property located in Manila should be exposed to public sale.
 The defendant failed to deliver the amount to the clerk of court, hence, the court ordered the sale of the property.
In the public sale, the property was brought by the Bank and the sale was confirmed by the court on August 7, 1908.
 After seven years, Vicente Palanca, as administrator of the estate of Engracio filed a motion to set aside the order
of default and the judgment for being void because the court never acquired jurisdiction over the defendant or over
the subject of the action.
 Palanca also contended that the judgment is void because the court entered a personal judgment against the absent
debtor for the full amount of the indebtedness secured by the mortgage.
 Court of First Instance: Denied
 Appellate Court: Denied

ISSUES:

1. Whether or not the trial court acquired the necessary jurisdiction over the property to enable it to proceed with the
foreclosure proceedings
2. Whether or not due process was observed

HELD/ RATIO:

1. YES, the trial court acquired the necessary jurisdiction over the property to enable it to proceed with the foreclosure
proceedings
 The trial court acquired jurisdiction over the properties in Manila even if it did not acquire jurisdiction over the
defendant. Jurisdiction over the property, even without acquiring jurisdiction over the defendant, is enough to
proceed with the foreclosure proceedings, which is an action quasi in rem.
 Where the defendant in a mortgage foreclosure is a non-resident and refuses to appear or otherwise submit
himself to the authority of the court, the jurisdiction of the court is limited to the mortgaged property. With respect
to property, the jurisdiction of the court is based upon the fact that it is located within the district and that the
court, under the law, is vested with the power to subject the property to the obligation created by the mortgage.
In such case personal jurisdiction over the nonresident defendant is nonessential and in fact cannot be acquired.
 Jurisdiction may have reference to:
o The authority of the court to entertain a particular kind of action or to administer a particular kind of
relief, or
o It may refer to the power of the court over the parties, or
o Over the property which is the subject to the litigation.
 Jurisdiction over the person
o Acquired by the voluntary appearance of a party in court and his submission to its authority
o Or by the coercive power of legal process exerted over the person
 Jurisdiction over the property which is the subject of litigation may result either from
o A seizure of the property under legal process, whereby it is brought into the actual custody of the law,
(e.g. attachment proceedings) or
o It may result from the institution of legal proceedings, wherein under the special provisions of law, the
power of the court over the property is recognized and made effective. (e.g. proceeding to register a
land title)
 The jurisdiction of the court over the property subject of a mortgaged is based on the following considerations:
o That the property is located within the district;
o That the purpose of the litigation is to subject the property by sale to an obligation fixed upon it by the
mortgage;
o That the court at a proper stage of the proceedings take the property into its custody, if necessary, and
exposes it to sale for the purpose of satisfying the mortgage debt.
 In a foreclosure proceeding against the property of a non-resident mortgagor who fails to come in and submit
himself personally to the jurisdiction of the court the following rules apply:
o That the jurisdiction of the court is derived from the power which it possesses over the property (from
law, territory)
o That the jurisdiction over the person is not acquired and is nonessential;
o That the relief granted by the court must be limited to such as can be enforced against the property
itself.
 Action in rem v. quasi in rem
o Action in rem is, used only with reference to certain proceedings in courts of admiralty wherein the
property alone is treated as responsible for the claim or obligation upon which the proceedings are
based.
o The action quasi in rem an individual is named as defendant, and the purpose of the proceeding is to,
subject his interest therein to the obligation or lien burdening the property. All proceedings having for
their sole object the sale or other disposition of the property of the defendant, whether by attachment,
foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in
these proceedings is conclusive only between the parties. In these kinds of proceedings, if the
defendant appears in court, the action becomes an action in personam. If the defendant fails to appear,
the action is quasi in rem.
 In proceedings in rem or quasi in rem against a nonresident who is not served personally within the state, and
who does not appear, the relief must be confined to the res, and the court cannot lawfully render a personal
judgment against him. Therefore, in an action to foreclose a mortgage against a nonresident, upon whom
service has been effected exclusively by publication, as in this case, no personal judgment for the deficiency
can be entered, but the mortgage can be foreclosed.
 Under the Code of Civil Procedure, in a foreclosure proceeding against a nonresident owner, it is necessary for
the court to:
o Ascertain the amount due
o And to make an order requiring the defendant to pay the money into court.
 The trial court did all these and it cannot be interpreted as rendering a personal judgment, which requires
jurisdiction over the person of the defendant. In an action to foreclose a mortgage against a nonresident
defendant who fails to submit himself to the jurisdiction of the court, no adjudication can be made which involves
a determination of a personal liability of either party arising out of the contract of mortgage. A personal judgment
against the debtor for the deficiency can only be rendered after the property mortgaged has been sold and the
proceeds applied to the mortgage debt.
 Hence, since a personal judgment is not rendered in this case and the action is quasi in rem. The failure of the
clerk to send notice by mail to the nonresident defendant in a foreclosure proceeding, as required by an order
of the court, does not defeat the jurisdiction of the court over the mortgaged property.
  Clarification by the Court of the Pennoyer v. Neff ruling:
o In Pennoyer v. Neff, a personal judgment upon constructive or substituted service against a nonresident
who does not submit himself to the jurisdiction of the court is invalid. This applies to all kinds of
constructive or substituted process, including service by publication and personal service outside of the
jurisdiction in which the judgment is rendered; and the only exception is where the nonresident
defendant has expressly or impliedly consented to the mode of service.
o Process of one State cannot run into other States or countries and that due process of law requires
that the defendant shall be brought under the power of the court by service of process within the State,
or by his voluntary appearance, in order to authorize the court to pass upon the question of his personal
liability.

2. YES, due process was observed.

Due process of law implies that there must be:
a. A court or tribunal clothed with power to hear and determine the matter before it,
b. That jurisdiction shall have been lawfully acquired,
c. That the defendant shall have an opportunity to be heard,
d. That judgment shall be rendered upon lawful hearing.

 In an action to foreclose a mortgage against a non-resident some notification of the proceedings

must be given to the defendant. Under statutes generally prevailing, this notification commonly
takes the form of publication in a newspaper of general circulation and the sending of notice, by
mail, by which means the owner is admonished that his property is the subject of judicial
proceedings. The provisions of law providing for notice of this character must be complied with.
 In a foreclosure proceeding against a non-resident defendant, the court is required to make an
order for the clerk to mail a copy of the summons and complaint to the defendant at his last place
of residence if known.
 The idea upon which the law proceeds in recognizing the efficacy of a means of notification which
may fall short of actual notice is apparently this: Property is always assumed to be in the
possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its
condemnation and sale.
 It is the duty of the owner of real estate, who is a non-resident, to take measures that in some
way he shall be represented when his property is called into requisition, and if he fails to do this.
and fails to get notice by the ordinary publications which have usually been required in such cases,
it is his misfortune, and he must abide the consequences.
 In the present case, an order was made directing the clerk to mail the required copy to the
defendant at Amoy, China. No evidence appeared in the record showing that such notice had in
fact been mailed by the clerk; but publication was regularly made in a periodical as the law
requires. The order by the court constituted a compliance with the law, in so far as necessary to
constitute due process of law, and that if the clerk failed to send the notice, his dereliction in the
performance of his duty was an irregularity, which did not constitute an infringement of the due
process clause.

SC DECISION: The Supreme Court ruled in favor of El Banco Español- Filipino. The conclusions stated in this
opinion indicate that the judgment appealed from is without error, and the same is accordingly affirmed, with costs.
So ordered.

NOTES:
Malcolm, J., dissenting
 The defendant did not receive any notice and had no opportunity to be heard, certainly we cannot say
that there is due process of law.
 "A judgment which is void upon its face, and which requires only an inspection of the judgment roll to
demonstrate its want of vitality is a dead limb upon the judicial tree, which should be lopped off, if the
power so to do exists. It can bear no fruit to the plaintiff, but is a constant menace to the defendant." (Mills
vs. Dickson, 6 Rich. [S. C.], 487.)