Ma. Teresa Chaves Biaco, Petitioner, vs. Philippine Countryside Rural Bank
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ArtemisTzyMa. Teresa Chaves Biaco, Petitioner, vs. Philippine Countryside Rural Bank
Uploaded by
ArtemisTzyMa. Teresa Chaves Biaco, petitioner, vs.
Philippine Countryside Rural Bank,
respondent.
G.R. No. 161417, Second Division, February 8, 2007, Tinga, J
A judicial foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the
person of petitioner is not required, it being sufficient that the trial court is vested with
jurisdiction over the subject matter.
FACTS:
Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While
employed in the Philippine Countryside Rural Bank (PCRB) as branch manager,
Ernesto obtained several loans from the respondent bank. As security for the payment
of the said loans, Ernesto executed a real estate mortgage in favor of the bank covering
the parcel of land described in Original Certificate of Title (OCT) No. P-14423. The real
estate mortgages bore the signatures of the spouses Biaco. When Ernesto failed to
settle the above-mentioned loans on its due date, respondent bank through counsel
sent him a written demand on September 28, 1999. The amount due as of September
30, 1999 had already reached one million eighty thousand six hundred seventy six and
fifty centavos (p1,080,676.50). Respondent bank filed a complaint for foreclosure of
mortgage against the spouses Ernesto and Teresa Biaco before the RTC of Misamis
Oriental. Summons was served to the spouses Biaco through Ernesto at his office
(Export and Industry Bank) located at Jofelmor Bldg., Mortola Street, Cagayan de Oro
City. Ernesto received the summons but for unknown reasons, he failed to file an
answer. Hence, the spouses Biaco were declared in default upon motion of the
respondent bank. The respondent bank was allowed to present its evidence ex
parte before the Branch Clerk of Court who was then appointed by the court as
Commissioner. On the validity of the service of summons, the appellate court ruled that
judicial foreclosure proceedings are actions quasi in rem. As such, jurisdiction over the
person of the defendant is not essential as long as the court acquires jurisdiction over
the res. Noting that the spouses Biaco were not opposing parties in the case, the Court
of Appeals further ruled that the fraud committed by one against the other cannot be
considered extrinsic fraud.
ISSUE: Whether the trial court has jurisdiction depends on the nature of the action.
RULING:
An action in personam is an action against a person on the basis of his personal
liability. An action in rem is an action against the thing itself instead of against the
person. An action quasi in rem is one wherein an individual is named as defendant and
the purpose of the proceeding is to subject his interest therein to the obligation or lien
burdening the property.
In an action in personam, jurisdiction over the person of the defendant is
necessary for the court to validly try and decide the case. In a proceeding in
rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires jurisdiction over the res.
Jurisdiction over the res is acquired either (1) by the seizure of the property under legal
process, whereby it is brought into actual custody of the law; or (2) as a result of the
institution of legal proceedings, in which the power of the court is recognized and made
effective.
Nonetheless, summons must be served upon the defendant not for the purpose
of vesting the court with jurisdiction but merely for satisfying the due process
requirements.
A resident defendant who does not voluntarily appear in court, such as petitioner
in this case, must be personally served with summons as provided under Sec. 6, Rule
14 of the Rules of Court. If she cannot be personally served with summons within a
reasonable time, substituted service may be effected (1) by leaving copies of the
summons at the defendant's residence with some person of suitable age and discretion
then residing therein, or (2) by leaving the copies at defendant's office or regular place
of business with some competent person in charge thereof in accordance with Sec. 7,
Rule 14 of the Rules of Court.
In this case, the judicial foreclosure proceeding instituted by respondent PCRB
undoubtedly vested the trial court with jurisdiction over the res. A judicial foreclosure
proceeding is an action quasi in rem. As such, jurisdiction over the person of petitioner
is not required, it being sufficient that the trial court is vested with jurisdiction over the
subject matter.
Furthermore, the Court explained, citing El Banco Español-Filipino v. Palanca,
that foreclosure and attachment proceedings are both actions quasi in rem. As such,
jurisdiction over the person of the (non-resident) defendant is not essential. Service of
summons on a non-resident defendant who is not found in the country is required, not
for purposes of physically acquiring jurisdiction over his person but simply in pursuance
of the requirements of fair play, so that he may be informed of the pendency of the
action against him and the possibility that property belonging to him or in which he has
an interest may be subjected to a judgment in favor of a resident, and that he may
thereby be accorded an opportunity to defend in the action, should he be so
minded. CDaTAI
Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et al.
and Perkins v. Dizon, et al., that in a proceeding in rem or quasi in rem, the only relief
that may be granted by the court against a defendant over whose person it has not
acquired jurisdiction either by valid service of summons or by voluntary submission to its
jurisdiction, is limited to the res.
Similarly, in this case, while the trial court acquired jurisdiction over the res, its
jurisdiction is limited to a rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment enforcing petitioner's personal liability.
In doing so without first having acquired jurisdiction over the person of petitioner, as it
did, the trial court violated her constitutional right to due process, warranting the
annulment of the judgment rendered in the case.
