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MA. TERESA CHAVES BIACO v. PHILIPPINE COUNTRYSIDE RURAL BANK

FACTS:

Ma. Teresa Chaves Biaco filed a petition for review to challenge the decision of the Court of Appeals denying her petition for annulment of judgment. The case stems from her husband, Ernesto Biaco, obtaining loans from the Philippine Countryside Rural Bank (PCRB) secured by a real estate mortgage. When Ernesto failed to settle the loans, the bank demanded payment. The bank then filed a complaint for foreclosure of mortgage against the spouses Ernesto and Teresa Biaco. The spouses were declared in default, and the bank was allowed to present its evidence ex parte. The court ordered the spouses to pay the outstanding loan amount within a specified period, with the mortgaged property to be sold in case of non-payment. The court also held the spouses personally liable for any deficiency. The judgment was served to Ernesto, and the spouses did not appeal. The bank moved for execution, and the property was sold at public auction but did not cover the full debt. The bank then sought judgment to enforce the remaining obligation and attempted to levy properties registered under petitioner Teresa's name, but the notices of levy were denied registration as the properties had already been sold to her daughters. Teresa sought annulment of the trial court decision, alleging that she learned of the judgment after more than six months. She claimed extrinsic fraud due to the bank's failure to verify her signature on the real estate mortgage and failure to explain the absence of her signature on the promissory notes. She also argued that the trial court lacked jurisdiction over her for serving summons through her husband without explanation. The Court of Appeals ruled in favor of the bank, holding that personal service of summons is not essential in judicial foreclosure proceedings. The court also found that the fraud between spouses is not extrinsic fraud. Teresa's motion for reconsideration was denied, prompting her to file the present petition for review.

ISSUES:

  1. Whether personal service of summons is necessary in a quasi in rem action to afford due process.

  2. Whether the deficiency judgment is void for lack of jurisdiction over the petitioner's person.

  3. Whether the trial court acquired jurisdiction over the person of petitioner.

  4. Whether the violation of petitioner's constitutional right to due process warrants the annulment of the judgment rendered by the trial court.

  5. Whether the trial court exceeded its jurisdiction and rendered a personal judgment against the spouses Biaco.

RULING:

  1. 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. However, summons must still be served upon the defendant to satisfy the due process requirements. In this case, the petitioner should have been personally served with summons, and if she cannot be personally served, substituted service may be effected in accordance with the Rules of Court.

  2. The allegations of extrinsic fraud by the petitioner were not substantiated. The Court ruled that there was no fraud perpetrated by the respondent bank on the petitioner. Additionally, the use of forged instruments during trial does not constitute extrinsic fraud. Therefore, the deficiency judgment is not void for lack of jurisdiction over the petitioner's person.

  3. No. The trial court did not acquire jurisdiction over the person of the petitioner, as she was not personally served summons and instead summons was served to her husband at his office without any explanation. The violation of petitioner's right to due process arising from the lack of valid service of summons warrants the annulment of the judgment of the trial court.

  4. Yes. The violation of petitioner's constitutional right to due process warrants the annulment of the judgment rendered by the trial court.

  5. Yes. The trial court exceeded its jurisdiction and rendered a personal judgment against the spouses Biaco. The trial court's jurisdiction is limited to a rendition of judgment on the res, and it cannot extend its jurisdiction beyond the res and issue a judgment enforcing petitioner's personal liability without first acquiring jurisdiction over her person.

PRINCIPLES:

  • Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases on the grounds of extrinsic fraud and lack of jurisdiction or denial of due process.

  • Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of the trial of the case, whereby the defeated party was prevented from presenting fully his side of the case by fraud or deception practiced on him by the prevailing party.

  • 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. However, summons must still be served upon the defendant to satisfy the due process requirements.

  • A judicial foreclosure proceeding is an action quasi in rem, and jurisdiction over the person of the defendant is not required, as long as the trial court has jurisdiction over the subject matter.

  • The violation of a party's constitutional right to due process arising from a lack of valid service of summons warrants the annulment of the judgment rendered by the trial court.

  • In a proceeding quasi in rem, the court's jurisdiction is limited to a rendition of judgment on the res, and it cannot extend its jurisdiction beyond the res and issue a judgment enforcing the defendant's personal liability without first acquiring jurisdiction over their person.