Posted by: Kristina M. Egnar on July 26, 2018
FACTS:
Sometime from 1996 to 1998, Ernesto Biaco, husband of Teresa Biaco, acquired several loans from Philippine Countryside Rural Bank (PCRB). To secure the loans, he mortgaged certain property in favor of the bank. He was able to pay loans from 1996 to 1997 but he defaulted in loans obtained in 1998 which amounted to more than a million pesos. Eventually, PCRB filed a complaint for foreclosure against the spouses Biaco. Summons were issued by the trial judge. The Sherriff served the summons to Ernesto at the latter's office. No summons was served to Teresa.
Ernesto did not file a responsive pleading (so did Teresa because she was not aware sans the summons being served her). The case was heard ex-parte and the spouses were ordered to satisfy the debt and failure to do so will authorize the Sheriff to auction the mortgaged the property.
Eventually, the mortgaged property was auctioned for P150k which is not sufficient to cover the P1 M+ debt. Upon motion by PCRB, a notice of levy was issued against the personal properties of Teresa to satisfy the deficiency.
It was only at this point that Teresa learned of the previous ex parte proceedings. She then sought to have the judgment annulled as she now claims that she was deprived of due process when she did not receive summons; that it was only her husband who received the summons; that there was extrinsic fraud because her husband deliberately hid the fact of the foreclosure proceeding.
PRCB argued that the foreclosure proceeding is an action quasi in rem, hence Teresa's participation is not required so long as the court acquires jurisdiction over the res which is what happened in the case at bar; that Teresa cannot invoke extrinsic fraud because such situation cannot occur in her case because she is a co-defendant of Ernesto.
ISSUE:
Whether or not the deficiency judgment is a personal judgment which should be deemed void for lack of jurisdiction over her person.
HELD: Yes.
FACTS:
Sometime from 1996 to 1998, Ernesto Biaco, husband of Teresa Biaco, acquired several loans from Philippine Countryside Rural Bank (PCRB). To secure the loans, he mortgaged certain property in favor of the bank. He was able to pay loans from 1996 to 1997 but he defaulted in loans obtained in 1998 which amounted to more than a million pesos. Eventually, PCRB filed a complaint for foreclosure against the spouses Biaco. Summons were issued by the trial judge. The Sherriff served the summons to Ernesto at the latter's office. No summons was served to Teresa.
Ernesto did not file a responsive pleading (so did Teresa because she was not aware sans the summons being served her). The case was heard ex-parte and the spouses were ordered to satisfy the debt and failure to do so will authorize the Sheriff to auction the mortgaged the property.
Eventually, the mortgaged property was auctioned for P150k which is not sufficient to cover the P1 M+ debt. Upon motion by PCRB, a notice of levy was issued against the personal properties of Teresa to satisfy the deficiency.
It was only at this point that Teresa learned of the previous ex parte proceedings. She then sought to have the judgment annulled as she now claims that she was deprived of due process when she did not receive summons; that it was only her husband who received the summons; that there was extrinsic fraud because her husband deliberately hid the fact of the foreclosure proceeding.
PRCB argued that the foreclosure proceeding is an action quasi in rem, hence Teresa's participation is not required so long as the court acquires jurisdiction over the res which is what happened in the case at bar; that Teresa cannot invoke extrinsic fraud because such situation cannot occur in her case because she is a co-defendant of Ernesto.
ISSUE:
Whether or not the deficiency judgment is a personal judgment which should be deemed void for lack of jurisdiction over her person.
HELD: Yes.
It is admitted that the proceeding is a quasi in rem proceeding and that the presence of Teresa is not required because the trial court was able to acquire jurisdiction over the res (mortgaged property). However, her constitutional right to due process is superior over the procedural matters mentioned. Her right to due process was violated when she did not receive summons. Teresa, as a resident defendant, who does not voluntary appear in court must be personally served with summons as provided under Section 6, Rule 14 of the Rules of Court. Even if the action is quasi in rem, personal service of summons is essential in order to afford her due process. The substituted service made by the sheriff at her husband's office cannot be deemed proper service absent any explanation that efforts had been made to personally serve summons upon her but that such efforts failed. Further, the order of the trial court compelling Teresa to pay off the debt using her personal property is a judgment in personam which the court cannot do because it only acquired jurisdiction over the res and not over the person of Teresa.
Credits to: UberDigests
