Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=51713:gr-177598-2008&amp;catid=1510&amp;Itemid=566
Timestamp: 2019-04-24 22:41:48+00:00

Document:
ROBERT SAN PEDRO, Petitioner, v. WILLY ONG and NORMITA CABALLES, Respondents.
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner Robert San Pedro (San Pedro), seeking to reverse and set aside the Decision1 of the Court of Appeals dated 29 December 2006 and its Resolution2 dated 13 April 2007 in CA-G.R. CV No. 79399. In its assailed Decision, the Court of Appeals reversed the Decision3 dated 21 February 2003 of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 19, in Civil Case No. 515-M-99, declaring, inter alia, that the deeds of real estate mortgage constituted on the subject properties are null and void; while, in its assailed Resolution, the appellate court denied San Pedro's Motion for Reconsideration.
In order to free the subject properties from the said encumbrances, San Pedro filed with the RTC on 7 May 1999 a Petition for Nullification of Mortgage with Damages against the spouses Narciso, Dela PeÃ±a, Landayan, Ong, and Caballes, docketed as Civil Case No. 515-M-99.
The original copy of Summons is, therefore, respectfully returned DULY SERVED.
While the spouses Narciso, Landayan, Ong, and Caballes separately filed their Answers in accordance with the summons, thereby voluntarily submitting themselves to the jurisdiction of the RTC, Dela PeÃ±a failed to do so and she was, thus, declared by the RTC to be in default.
In their Answer,9 the spouses Narciso admitted to selling the subject properties to San Pedro, and denied authorizing the mortgage of the same to Ong. Their signatures on the SPAs were fraudulently secured by Dela PeÃ±a who misrepresented to them that such document was necessary to facilitate the transfer of the TCTs of the subject properties to San Pedro. The spouses Narciso denied that they participated in or benefited from the loan obligation obtained by Dela PeÃ±a from Ong.
For their part, Caballes and Ong raised in their Joint Answer10 the defense of mortgagee-in-good-faith. They claimed that they both relied in good faith on the SPAs granting Dela PeÃ±a the authority to mortgage the subject properties since there was nothing on the face thereof which would have raised their suspicion as to the authenticity of the document. Ong alleged that the subject properties were used by Dela PeÃ±a as collateral for the loan, amounting to P170,000.00, which she obtained from Ong. Since the said loan obligation already became due and demandable, Ong sought the foreclosure of the subject properties. During the auction sale, Ong emerged as the highest bidder but the TCTs of the subject properties were not yet transferred to his name.
Landayan, in his Answer,11 denied any participation in the procurement of the SPAs or in the mortgage of the subject properties, except that he was hired by Dela PeÃ±a to bring her to the spouses Narciso's residence at the time the alleged SPAs were fraudulently procured.
After the Pre-Trial Conference, trial on the merits ensued.
In an Order dated 24 August 2001, the RTC denied the demurrer to evidence filed by Ong and Caballes. Hence, trial proceeded with the presentation of evidence by the defense.
1. Declaring [San Pedro] the legal and rightful owner of the two (2) parcels of land subject of this litigation, covered by TCT No. T-82381 and TCT No. 82382 presently in the name of [the spouses Narciso].
2. Adjudging the sale by [the spouses Narciso] to [San Pedro], legal, valid, subsisting and in all respect enforceable.
3. Resolving to declare the Special Power[s] of Attorney constituted in favor of [Dela PeÃ±a] null and void.
4. Declaring the Deeds of Mortgage purportedly executed by [Dela PeÃ±a] as Attorney-in-fact of [the spouses Narciso], in favor of [Ong] constituted in [sic] TCT No. T-82381 and TCT No. 82382 void ab initio.
5. Ordering the Registry of Deeds for the Province of Bulacan to cancel the recordings of mortgages in favor of Ong constituted in [sic] TCT No. 82381 and TCT No. 82382 as well as any annotation of foreclosure proceedings if there are any by [Ong].
6. Ordering [Ong] to return to [San Pedro] the owner's duplicate copy of TCT No. 82381 and TCT No. 82382 which are presently in his possession.
7. Ordering [Dela PeÃ±a] to pay [Ong] the sum of P245,000.00 plus legal interest from September, 1998 until the whole obligation is fully extinguished.
Without filing any Motion for Reconsideration before the RTC, Ong and Caballes appealed the adverse RTC Decision to the Court of Appeals, assigning as error the lack of jurisdiction of the RTC over the person of Dela PeÃ±a which rendered all the proceedings held before said court fatally defective. Their appeal was docketed as CA-G.R. CV No. 79399.
The Motion for Reconsideration filed by San Pedro was denied by the Court of Appeals in its Resolution22 dated 13 April 2007 for the issues raised therein were already sufficiently threshed out in its Decision.
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE THE CASE FILED BY SAN PEDRO.
WHETHER OR NOT DE LA PEÃ‘A IS AN INDISPENSABLE PARTY TO THE CASE.
WHETHER OR NOT ONG WAS MORTGAGEE-IN-GOOD FAITH.
Vital to the resolution of the present controversy are the questions on whether there was a valid service of summons upon Dela PeÃ±a; and if there was none, whether the improper service of summons on Dela PeÃ±a invalidates the entire proceedings before the court a quo.
In the case at bar, Civil Case No. 515-M-99, instituted by San Pedro, is anchored on his claim that he is the real and rightful owner of the subject properties, thus, no one else has the right to mortgage them. The real estate mortgages constituted on the subject properties in favor of Ong, annotated on their TCTs, are encumbrances on said properties, which may be considered a cloud on San Pedro's title thereto.
San Pedro alleged in his Petition in Civil Case No. 515-M-99 that the mortgages in favor of Ong may, at first, appear valid and effective, but are actually invalid or voidable for having been made without the knowledge and authority of the spouses Narciso, the registered owners of the subject properties and San Pedro's predecessors-in-interest. In asking the cancellation of the mortgages on the TCTs of the subject properties, San Pedro was ultimately asking the RTC to remove a cloud on his title to the same. It is, thus, irrefragable that Civil Case No. 515-M-99 is an action for quieting of title.
Given that Civil Case No. 515-M-99 is a an action for quieting of title, settled to be quasi in rem, the RTC was not required to acquire jurisdiction over the persons of the defendants, it being sufficient for the said court to acquire jurisdiction over the subject matter of the case. By San Pedro's institution of Civil Case No. 515-M-99, the RTC already acquired jurisdiction over the subject properties - the res. Therefore, the service of summons to the defendants in said case, including Dela PeÃ±a, did not affect the jurisdiction of the RTC to hear and decide Civil Case No. 515-M-99, and did not invalidate the proceedings held therein on the basis of jurisdiction.
Admittedly, there was a defect in the service of the summons on Dela PeÃ±a. The Sheriff immediately resorted to substituted service of summons on Dela PeÃ±a without attempting first to effect personal service within reasonable time. The Sheriff's Return31 merely stated that he served a copy of the summons on Dela PeÃ±a's sister-in-law who refused to sign the same.
Personal service of summons is preferred to substitute service. Only if the former cannot be made promptly can the process server resort to the latter. Moreover, the proof of service of summons must (a) indicate the impossibility of service of summons within a reasonable time; (b) specify the efforts exerted to locate the defendant; and (c) state that the summons was served upon a person of sufficient age and discretion who is residing in the address, or who is in charge of the office or regular place of business, of the defendant. It is likewise required that the pertinent facts proving these circumstances be stated in the proof of service or in the officer's return. The failure to comply faithfully, strictly and fully with all the foregoing requirements of substituted service renders the service of summons ineffective.32 Indisputably, the Sheriff did not comply with any of the foregoing requirements, thus, rendering his service of summons on Dela PeÃ±a invalid.
Nonetheless, the improper service of summons on Dela PeÃ±a did not void the proceedings conducted by the RTC in Civil Case No. 515-M-99, for lack of jurisdiction. As the Court has underscored herein, in quasi in rem proceedings, the court need not acquire jurisdiction over the persons of the defendants, for as long as it has acquired jurisdiction over the res. The defect in the service of summons merely infringed Dela PeÃ±a's right to due process that precluded the RTC from rendering a valid judgment with respect to her personal liability. And since Dela PeÃ±a's right to due process is personal and pertains to her alone, it could not be invoked by her other co-defendants in Civil Case No. 515-M-99 so as to escape the judgment of liability against them.
Contrary to the pronouncement of the Court of Appeals, Dela PeÃ±a was not an indispensable party to this case, without whom, no final conclusion of the case can be arrived at.
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. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties' (sic) that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable.
Evidently, Dela PeÃ±a does not fall within the definition of an indispensable party. As the Court has explained, Civil Case No. 515-M-99 is an action for quieting of title, intended to remove any cloud upon San Pedro's title to the subject properties. The real estate mortgages in favor of Ong annotated on the TCTs of the subject properties constitute the cloud to be removed. Thus, the crux of the controversy is the title of San Pedro to the subject properties vis - Ã -vis that of Ong, for the determination of which, Dela PeÃ±a's participation is not an absolute necessity. The judgment of the RTC upholding San Pedro's title to the subject properties over Ong's, or even if it were the other way around, would not have affected Dela PeÃ±a, because Dela PeÃ±a never claimed title to the subject properties; she only misrepresented that she had authority to mortgage the same on behalf of the registered owners, namely, the spouses Narciso. After she successfully, albeit, fraudulently, obtained the loan using the subject properties as mortgage, her interest in the same had ended. She may have perpetrated fraud for which she may be held liable but, clearly, these may be established in a separate and subsequent case. Her presence in the proceedings before the RTC would have only permitted complete relief since the said court could have already determined therein her liability for the damages she had caused to any of the parties, but it does not make her presence indispensable.
San Pedro's title proved to be superior to that of Ong's. The subject properties were sold to him prior to the mortgage of the same to Ong. The spouses Narciso, registered owners of the subject properties, admitted the sale thereof to San Pedro and denied giving any authority to Dela PeÃ±a to mortgage the said properties. An expert witness affirmed that the signature of Guillermo Narciso on one of the purported SPAs in favor of Dela PeÃ±a was forged, while the signatures of his wife Brigida Santiago on both SPAs were spurious. Ong and Caballes cannot even point out any defect in San Pedro's title to the subject properties. Ong can only assert better right to the same as allegedly a mortgagee in good faith.
While one who buys from the registered owner does not need to look behind the certificate of title, one who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term "purchaser."
Considering Ong's undue haste in granting the loan without inquiring into the ownership of the subject properties being mortgaged, as well as the authority of the supposed agent to constitute the mortgages on behalf of the owners, he cannot be considered a mortgagee-in-good-faith. Ong's averment that he exercised prudence in the loan-mortgage transaction is debunked by his own admission that he merely relied on Caballes' representations thereon, without personally meeting or speaking with Dela PeÃ±a, the supposed agent, or the spouses Narciso, the registered owners of the subject properties. Although he instructed Caballes to check the TCTs of the subject properties, he did not bother to personally meet Dela PeÃ±a and ascertain the genuineness and authenticity of the latter's authority to mortgage the same on behalf of the spouses Narciso especially considering that the one mortgaging the property is not the registered owner.
In view of the forgoing facts, the court held that pursuant to Article 1714 of the Civil Code and under the Torrens Act in force in this jurisdiction, the forged powers of attorney prepared by Del Mar were without force and effect and that the registration of the mortgages constituted by virtue thereof were likewise null and void and without force and effect, and that they could not in any way prejudice the rights of the plaintiff as the registered owner of her participations in the properties in question.
Consequently, the foreclosure proceedings on the mortgaged properties are likewise void ab initio. Since Ong cannot be deemed a mortgagee-in-good-faith nor an innocent purchaser for value of the subject properties at the auction sale thereof, his claim to the said properties cannot prevail over that of San Pedro. The Court's ruling, however, is without prejudice to the right of Ong to proceed against those who perpetrated the fraud to his prejudice.
WHEREFORE, in view of the foregoing, the instant Petition is GRANTED. The Decision dated 29 December 2006 rendered by the Court of Appeals in CA-G.R. CV No. 79399 is REVERSED and SET ASIDE. The Decision dated 21 February 2003 of the Regional Trial Court of Malolos, Bulacan, Branch 19, in Civil Case No. 515-M-99, is hereby REINSTATED with the modification that the portion ordering Adora Dela PeÃ±a to pay Willy G. Ong the sum of P245,000.00 plus legal interest, is DELETED.
1 Penned by Associate Justice Normandie B. Pizzaro with Associate Justices Juan Q. Enriquez, Jr., and Aurora Santiago-Lagman, concurring. Rollo, pp. 109-116.
3 Penned by Presiding Judge Renato C. Francisco; rollo, pp. 84-108.
24 Casimina v. Legaspi, G.R. No. 147530, 29 June 2005, 462 SCRA 171, 177-178.
25 Gomez v. Court of Appeals, 469 Phil. 38, 47-48 (2004).
26 Portic v. Cristobal, G.R. No. 156171, 22 April 2005, 456 SCRA 577, 584-585.
27 Domagas v. Jensen, G.R. No. 158407, 17 January 2005, 448 SCRA 663, 674.
30 G.R. No. 164041, 29 July 2005, 465 SCRA 495, 505-506.
32 Spouses Jose v. Spouses Boyon, 460 Phil. 354, 363 (2003).
33 G.R. No. 164801, 18 August 2005, 467 SCRA 377, 384.
34 G.R. No. 157002, 29 July 2005, 465 SCRA 356, 369.
36 G.R. No. 167848, 27 April 2007, 522 SCRA 713, 728.
37 58 Phil. 681, 683 (1933).

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