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ROBERT SAN PEDRO v. WILLY ONG

FACTS:

The petitioner, Robert San Pedro, purchased two parcels of land from the spouses Guillermo Narciso and Brigida Santiago. He hired Adora Dela Peña, recommended by the spouses Narciso, to transfer the titles of the properties into his name. However, San Pedro later discovered that the properties were still registered under the names of the spouses Narciso and were mortgaged to Willy Ong. It was found that Dela Peña, with the help of Rufino Landayan, procured special powers of attorney (SPAs) from the spouses Narciso to mortgage the properties to Ong. Normita Caballes, Ong's agent, caused the registration of the mortgages. San Pedro filed a petition for the nullification of the mortgages and damages against the spouses Narciso, Dela Peña, Landayan, Ong, and Caballes. Summonses were served to all defendants, but Dela Peña failed to file an answer and was declared in default. The spouses Narciso admitted to selling the properties to San Pedro but denied authorizing the mortgages. Caballes and Ong claimed to be mortgagees in good faith. Landayan denied participation in the procurement of the SPAs and the mortgage. Testimony was presented during the trial, including that of Landayan.

The case involves disputed ownership and mortgages over two parcels of land in Bulacan. San Pedro purchased the properties from the spouses Narciso for P35,000 and later discovered that the properties were encumbered by mortgages in favor of Ong, allegedly executed by Dela Peña as the attorney-in-fact of the spouses Narciso. San Pedro filed a complaint against Ong and Caballes, alleging that the mortgages were fraudulent and that the signatures of the spouses Narciso on the SPAs were forged. During the trial, San Pedro presented evidence, including testimonies from himself, his sister Luz San Pedro Tominago, and a document examiner from the National Bureau of Investigation, regarding the purchase of the properties, the encumbrances, and the alleged forgery of signatures. Ong and Caballes filed a demurrer to evidence but was denied by the RTC. They then presented their defense, with Ong claiming that he became interested in the properties through Caballes, and Caballes testifying about Dela Peña's approach regarding a loan and the verification process she underwent before transacting with Ong. Dela Peña's bounced checks for the loan payment were also mentioned. The RTC eventually ruled in favor of San Pedro, declaring him the rightful owner of the properties, invalidating the mortgages in favor of Ong, and ordering the cancellation of the mortgage recordings at the Registry of Deeds.

In a separate case, San Pedro sought to foreclose a mortgage it holds over a property owned by Dela Peña. The highest bidder at the public auction sale conducted by sheriff Ong was Caballes, who then filed a Petition for Consolidation of Ownership after the expiration of the redemption period. San Pedro also filed a complaint for Annulment of Foreclosure, Cancellation of TCTs, and Annulment of Sale against Dela Peña, Caballes, and Ong, with the RTC ruling in favor of San Pedro and ordering Ong and Caballes to pay him a sum of money. The Court of Appeals, however, reversed the RTC decision, stating that there was a lack of jurisdiction over Dela Peña due to invalid service of summons, and remanded the case to the RTC for appropriate proceedings.

ISSUES:

  1. Whether or not the RTC has jurisdiction to hear and decide the case filed by San Pedro.

  2. Whether or not Dela Peña is an indispensable party to the case.

  3. Whether or not Ong was a mortgagee-in-good faith.

  4. Whether jurisdiction over the person of the defendant is necessary in an action in rem or quasi in rem.

  5. Whether the improper service of summons on one of the defendants voided the proceedings conducted by the RTC.

  6. Whether or not the presence of Dela Peña in the proceedings before the RTC was indispensable.

  7. Whether or not San Pedro's title is superior to that of Ong's.

  8. Whether or not Ong can be considered a mortgagee-in-good-faith.

  9. Whether or not the Court of Appeals erred in reversing the decision of the Regional Trial Court.

  10. Whether or not Adora Dela Peña should be ordered to pay Willy G. Ong the sum of P245,000.00 plus legal interest.

RULING:

  1. The Court of Appeals granted the appeal of Ong and Caballes, thereby reversing the RTC Decision. The Court of Appeals held that the service of summons on Dela Peña was invalid, rendering the proceedings before the RTC fatally defective. The Court of Appeals found that the substituted service of summons employed by the Sheriff was ineffective for failing to comply with the statutory requirements. The Court of Appeals further held that Dela Peña was an indispensable party to the controversy, and without her, no final determination of the case could be made. Therefore, the Court of Appeals set aside the RTC Decision for want of jurisdiction and remanded the case back to the lower court for appropriate proceedings.

  2. In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. However, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite for the court to acquire jurisdiction, as long as the court has jurisdiction over the res. The service of summons to the defendant is merely for satisfying the due process requirements.

  3. The improper service of summons on one of the defendants did not void the proceedings conducted by the RTC. The defect in the service of summons infringed the defendant's right to due process but did not affect the jurisdiction of the court. The defendant's right to due process only affected her personal liability and could not be invoked by the other co-defendants to escape liability.

  4. Dela Peña's presence in the proceedings before the RTC is not indispensable.

  5. San Pedro's title is superior to that of Ong's.

  6. Ong cannot be considered a mortgagee-in-good-faith.

  7. The decision of the Court of Appeals is reversed and set aside. The decision of the Regional Trial Court is reinstated.

  8. The portion of the decision ordering Adora Dela Peña to pay Willy G. Ong the sum of P245,000.00 plus legal interest is deleted.

PRINCIPLES:

  • Summons is a writ by which the defendant is notified of the action brought against him. The service of summons is the means by which the court acquires jurisdiction over the defendant's person. Any judgment without such service, in the absence of a valid waiver, is null and void.

  • The rules on service of summons under Rule 14 of the Revised Rules of Court apply according to the nature of the action, whether it is in personam, in rem, or quasi in rem.

  • In an action quasi in rem, an individual is named as defendant, and the purpose of the proceeding is to subject the defendant's interests in the property to the obligation or claim being challenged. Quasi in rem judgments are binding only upon the parties who joined in the action.

  • In actions in personam, summons must be served by handing a copy to the defendant in person, or if he refuses to receive it, by tendering it to him. In actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite as long as the court acquires jurisdiction over the property involved.

  • In quasi in rem proceedings, jurisdiction over the person of the defendant is not necessary as long as the court has jurisdiction over the res.

  • The service of summons in quasi in rem proceedings is for satisfying the due process requirements.

  • Personal service of summons is preferred over substituted service. If personal service is not possible, the process server may resort to substituted service only if certain requirements are met.

  • The failure to comply with the requirements of substituted service renders the service of summons ineffective.

  • The improper service of summons on one defendant does not invalidate the proceedings if the court has acquired jurisdiction over the res.

  • An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had.

  • A party is not indispensable if his/her interest in the controversy is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by the judgment.

  • A person dealing with an agent is put upon inquiry and must discover at their own peril the authority of the agent.

  • The mortgagee has a higher degree of diligence to be exercised when not dealing directly with the registered owner of real property.

  • Every person dealing with an agent is expected to examine not only the certificate of title but all factual circumstances necessary to determine the validity of the transfer of the land.

  • A person who deliberately ignores a significant fact that could create suspicion is not an innocent purchaser for value.

  • Forged powers of attorney are without force and effect and any mortgage constituted on the strength thereof is null and void.

  • The Supreme Court has the power to reverse or set aside the decision of the Court of Appeals and reinstate the decision of the Regional Trial Court.

  • The Supreme Court has the authority to modify the decision of the Regional Trial Court by deleting certain portions if deemed necessary.