Beltran vs. Land Bank of the Philippines

A government-owned or controlled corporation created by a special charter is a "public corporation" for purposes of service of summons under Rule 14, Section 15 of the Rules of Court, requiring service on its executive head or such other officer as the law or court may direct. Where summons is improperly served and counsel makes a special appearance to question its validity, the court may deputize the counsel of record to serve summons on the client under Rule 14, Section 13, thereby curing the defect and precluding dismissal.

Jerry U. Beltran and his deceased wife Estrella were co-owners of two parcels of land covered by Transfer Certificate of Title Nos. T-173733 and T-576231. The Land Bank of the Philippines is a government-owned or controlled corporation created under Republic Act No. 3844, as amended by Republic Act No. 10374, tasked with financing the acquisition by the Government of landed estates for division and resale to small landowners. The Constitution recognizes two classes of corporations: private corporations created under a general law, and government-owned or controlled corporations created by special charters. The rules on service of summons have historically distinguished between private and public corporations, with the 2019 Amendments to the Rules of Civil Procedure liberalizing service on domestic private juridical entities while leaving the rule on public corporations unchanged.

Jerry U. Beltran and his deceased wife Estrella Beltran were the owners of two parcels of land covered by Transfer Certificate of Title Nos. T-173733 and T-576231. On January 19, 2017, Jerry filed a Complaint for Declaration of Nullity of Real Estate Mortgage with Preliminary Injunction against the Land Bank of the Philippines before the Regional Trial Court, Branch 2, Tagum City, Davao del Norte. Jerry alleged that while going through the files left by Estrella after her death on June 14, 2014, he discovered that the subject properties were mortgaged to LBP. He claimed that his signature appearing on the real estate mortgage was falsified or forged by Estrella. The mortgages on the subject properties were eventually foreclosed and new titles were issued in LBP's name.

LBP filed its Answer with Special Affirmative Defenses and Compulsory Counterclaim, raising as one of its defenses the RTC's lack of jurisdiction over its person because summons was improperly served. LBP contended that it is an entity vested with juridical personality by virtue of Republic Act No. 3844, thus summons should have been served on the responsible corporate officers in accordance with Rule 14, Section 11 of the Rules of Court. However, the summons, together with a copy of the Complaint, was served at the LBP Field Legal Services XI in Davao City instead of at its principal office in Manila where the corporate officers are located. The Sheriff's Return stated that the sheriff caused service of summons "upon defendant [LBP], thru Irish Jeswani – Legal Assistant on March 7, 2017, at Torres Street, Davao City." LBP thus sought the immediate dismissal of Jerry's Complaint.

The RTC dismissed the Complaint for lack of jurisdiction over the person of LBP due to the defective service of summons. Jerry filed a Motion for Reconsideration, which was denied, and then appealed to the CA. Before the CA, LBP filed its Brief coupled with a Motion to Dismiss the appeal, arguing that Jerry filed the wrong mode of appeal because the appeal raised a pure question of law. The CA granted the Motion to Dismiss, holding that the appeal raised a pure question of law—whether the RTC drew an erroneous legal conclusion as to the circumstances of how service of summons was made—and that Rule 50, Section 2 authorized the outright dismissal of such appeals. Jerry's Motion for Reconsideration was denied, prompting the present Petition.

During the pendency of the case before the Supreme Court, the parties complied with a Resolution dated March 29, 2023 directing them to move in the premises. LBP manifested that the title of the subject properties had been consolidated in its name, while Jerry continued to physically possess the property, a portion of which was occupied by informal settlers. Jerry likewise manifested that the properties had been occupied by informal settlers.

• Mode of Appeal: Jerry argued that the appeal raised mixed questions of both fact and law, citing the following factual issues: (a) the clerk of court of the RTC decided to send the summons to LBP's branch office in Davao City; (b) the sheriff was directed to LBP Field Legal Services XI instead; (c) the sheriff served the summons to a legal assistant in the said field office after receiving confirmation that the office receives summonses; and (d) upon receipt of the said summons, LBP filed its Answer.

• Substantial Justice: Jerry implicitly invoked the relaxation of procedural rules, as the Court noted that the merits of the case may be regarded as a special or compelling reason to relax procedural rules.

• Improper Service of Summons: LBP argued that the RTC lacked jurisdiction over its person because summons was improperly served. LBP contended that as an entity vested with juridical personality by virtue of Republic Act No. 3844, summons should have been served on the responsible corporate officers in accordance with Rule 14, Section 11 of the Rules of Court, at its principal office in Manila, not at its Field Legal Services XI in Davao City.

• Wrong Mode of Appeal: LBP argued that Jerry filed the wrong mode of appeal because the appeal raised a pure question of law, and under Rule 50, Section 2 of the Rules of Court, the CA was authorized to dismiss the appeal outright.

• Mode of Appeal: Whether the CA erred in dismissing Jerry's appeal on the ground that it raised a pure question of law under Rule 50, Section 2 of the Rules of Court.

• Nature of LBP for Service of Summons: Whether the Land Bank of the Philippines is a "public corporation" for purposes of service of summons under Rule 14, Section 15 of the Rules of Court.

• Validity of Service of Summons: Whether the service of summons upon the LBP Field Legal Services XI in Davao City was valid so as to vest the RTC with jurisdiction over the person of the defendant.

• Application of Rule 14, Section 13: Whether the Court may deputize the counsel of record of LBP to serve summons on its client under Rule 14, Section 13 of the 2019 Amendments to the Rules of Civil Procedure.

• Mode of Appeal: No reversible error. The appeal raised a pure question of law because the facts were uncontested—the only question was the application of the rules on service of summons to the undisputed factual milieu. The CA correctly dismissed the appeal under Rule 50, Section 2.

• Nature of LBP for Service of Summons: Yes. The LBP is a public corporation. It was created under a special charter, Republic Act No. 3844, as amended by Republic Act No. 10374, and is tasked with the governmental function of supporting the State's agrarian reform program. Applying the "charter test" and the "totality of relation test," the LBP is a public corporation.

• Validity of Service of Summons: No. The summons was not validly served because it was served on a legal assistant at the LBP Field Legal Services XI, not on LBP's executive head or such other officer as the law or court may direct, as required by Rule 14, Section 15. The RTC did not acquire jurisdiction over the person of the LBP.

• Application of Rule 14, Section 13: Yes. The 2019 Amendments to the Rules of Civil Procedure apply to pending proceedings, and Rule 14, Section 13 authorizes the court to deputize the counsel of record to serve summons on the client where counsel made a special appearance to question the validity of service. The Court deputized LBP's Legal Services Group to serve the summons.

• Mode of Appeal: The Court applied the test from Century Iron Works, Inc. vs. Bañas: a question of law arises when there is doubt as to what the law is on a certain state of facts, while a question of fact arises when the doubt concerns the truth or falsity of the alleged facts. The test is whether the appellate court can determine the issue without reviewing or evaluating the evidence. Here, the fact that service of summons was made to LBP's Field Legal Services XI in Davao City remained uncontested. The only question was the application of the rules on service of summons to the undisputed factual milieu—a pure legal question. The circumstances Jerry cited (the clerk of court's decision, the sheriff's direction, the legal assistant's receipt, and LBP's filing of an Answer) were not factual issues but a mere narration of the circumstances as to how the summons was served. The CA was correct to dismiss the appeal under Rule 50, Section 2.

• Nature of LBP for Service of Summons: The Court traced the history of the rules on service of summons from Section 396 of the Code of Civil Procedure (Act No. 190) through the 1940 Rules of Court, the 1964 Rules of Court, the 1997 Rules of Civil Procedure, and the 2019 Amendments. The 1940 Rules first distinguished between "private domestic" and "public" corporations. The Court applied the rule of ejusdem generis to Rule 14, Section 15, noting that "public corporations" should be read in relation to the preceding words "province, city, municipality." However, to follow this interpretation strictly would lead to a lacuna legis—a vacuum in the law—because a GOCC would fall under neither Rule 14, Section 12 (private corporations) nor Rule 14, Section 15 (public corporations). The Court applied two tests: the "charter test" from Baluyot vs. Holganza (whether the corporation is created by its own charter for the exercise of a public function or by incorporation under the general corporation law) and the "totality of relation test" from Phil. Society for the Prevention of Cruelty to Animals vs. Commission on Audit (whether the corporation is created by the State as its own agency or instrumentality to help carry out governmental functions). The LBP was created under a special charter (Republic Act No. 3844, as amended by Republic Act No. 10374) and is tasked with the governmental function of supporting the State's agrarian reform program. Thus, the LBP is a public corporation, and service of summons must be made on its executive head or such other officer as the law or court may direct under Rule 14, Section 15.

• Validity of Service of Summons: The undisputed fact was that the summons was served on a legal assistant at the LBP Field Legal Services XI, not on LBP's executive head. The Sheriff's Return confirmed service "thru Irish Jeswani – Legal Assistant on March 7, 2017, at Torres Street, Davao City." Evidently, the summons was not validly served, and the RTC did not acquire jurisdiction over the person of the LBP.

• Application of Rule 14, Section 13: The Court applied the 2019 Amendments to the Rules of Civil Procedure pursuant to Rule 144, which provides that the amendments "shall govern all cases filed after their effectivity on May 1, 2020, and also all pending proceedings, except to the extent that in the opinion of the court, their application would not be feasible or would work injustice." Procedural laws are generally given retroactive application. Rule 14, Section 13 provides that where summons is improperly served and a lawyer makes a special appearance to question the validity of service, the counsel shall be deputized by the court to serve summons on the client. The rationale is that a civil case should proceed notwithstanding defects in service since the defendant has already been substantially notified of the complaint upon the filing of the special appearance. The LBP had known of the summons and the Complaint since service to its field legal office, was substantially informed, and was able to file an Answer. The Court noted that the case was initiated in 2017, social developments had taken hold on the ground, and too long a time had lapsed. In the interest of efficiency and judicial economy, the Court deputized the Legal Services Group of the LBP, as the defendant's counsel of record, to serve the summons to its client so that the case may proceed and trial may ensue.

• Charter Test — A corporation is public if it is created by its own charter for the exercise of a public function; it is private if incorporated under the general corporation law. The Court applied this test from Baluyot vs. Holganza to determine that the LBP, created under Republic Act No. 3844, is a public corporation.

• Totality of Relation Test — The true criterion to determine whether a corporation is public or private is the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter's own agency or instrumentality to help it carry out its governmental functions, then that corporation is public; otherwise, it is private. The Court applied this test from Phil. Society for the Prevention of Cruelty to Animals vs. Commission on Audit to conclude that the LBP, tasked with supporting the State's agrarian reform program, is a public corporation.

• Ejusdem Generis — Where a general word or phrase follows an enumeration of particular and specific words of the same class, the general word or phrase is to be construed to include—or to be restricted to—things akin to or resembling, or of the same kind or class as, those specifically mentioned. The Court applied this rule to interpret "public corporations" in Rule 14, Section 15 in relation to the preceding words "province, city, municipality," but avoided a lacuna legis by holding that a GOCC is a public corporation.

• Lacuna Legis — A vacuum in the law. The Court noted that if a GOCC cannot be a public corporation under Rule 14, Section 15 and cannot be a private corporation under Rule 14, Section 12, there would be no provision governing service of summons on a GOCC. The Court avoided this result by construing the rules to harmonize and give effect to all their provisions.

• Question of Law vs. Question of Fact — A question of law arises when there is doubt as to what the law is on a certain state of facts; a question of fact arises when the doubt concerns the truth or falsity of the alleged facts. The test is whether the appellate court can determine the issue without reviewing or evaluating the evidence. The Court applied this test to hold that Jerry's appeal raised a pure question of law.

• "Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact." — This passage from Century Iron Works, Inc. v. Bañas, quoted by the Court, articulates the controlling test for distinguishing questions of law from questions of fact, which the Court applied to uphold the CA's dismissal of the appeal.

• "The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter's own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private." — This passage from Phil. Society for the Prevention of Cruelty to Animals v. Commission on Audit, quoted by the Court, defines the totality of relation test used to classify the LBP as a public corporation.

• "Where the summons is improperly served and a lawyer makes a special appearance on behalf of the defendant to, among others, question the validity of service of summons, the counsel shall be deputized by the court to serve summons on his or her client." — This is the text of Rule 14, Section 13 of the 2019 Amendments to the Rules of Civil Procedure, which the Court applied to deputize LBP's counsel of record and cure the defective service of summons.

• Century Iron Works, Inc. vs. Bañas, 711 Phil. 576 (2013) — Controlling precedent on the distinction between questions of law and questions of fact; the Court applied its test to determine that Jerry's appeal raised a pure question of law.

• Baluyot vs. Holganza, 382 Phil. 131 (2000) — Controlling precedent establishing the "charter test" for determining whether a corporation is public or private; applied to classify the LBP as a public corporation.

• Phil. Society for the Prevention of Cruelty to Animals vs. Commission on Audit, 560 Phil. 385 (2007) — Controlling precedent establishing the "totality of relation test" for determining whether a corporation is public or private; applied to classify the LBP as a public corporation.

• Engr. Feliciano vs. Commission on Audit, 464 Phil. 439 (2004) — Followed for the proposition that the Constitution recognizes two classes of corporations: private corporations created under a general law and government-owned or controlled corporations created by special charters.

• Cando vs. Spouses Olazo, 547 Phil. 630 (2007) — Followed for the proposition that the Court may relax the application of Rule 50, Section 2 in the interest of substantial justice.

• The Veterans Federation of the Phils. vs. Hon. Reyes, 518 Phil. 668 (2006) — Cited for the proposition that land reform is a compulsory function of sovereignty, supporting the LBP's governmental function in the agrarian reform program.

• Poizat vs. Morgan, 28 Phil. 597 (1914) — Historical precedent tracing the development of rules on service of summons on corporations.

• Rule 14, Section 12, Rules of Court — Governs service of summons on domestic private juridical entities; service may be made on the president, managing partner, general manager, corporate secretary, treasurer, or inhouse counsel, or in their absence, on their secretaries, or on the person who customarily receives correspondence at the principal office. The Court held this provision does not apply to the LBP because it is a public corporation.

• Rule 14, Section 15, Rules of Court — Governs service of summons on public corporations; service may be effected on the executive head of a province, city, municipality, or like public corporations, or on such other officer or officers as the law or the court may direct. The Court held this provision applies to the LBP as a public corporation.

• Rule 14, Section 13, Rules of Court (2019 Amendments) — Provides that where summons is improperly served and counsel makes a special appearance to question its validity, the counsel shall be deputized by the court to serve summons on the client. The Court applied this provision to deputize LBP's Legal Services Group.

• Rule 41, Section 2, Rules of Court — Provides the modes of appeal from RTC decisions: ordinary appeal to the CA for cases in the exercise of original jurisdiction; petition for review to the CA for cases in the exercise of appellate jurisdiction; and petition for review on certiorari to the Supreme Court where only questions of law are raised. The Court applied this provision to determine that Jerry's appeal raised a pure question of law.

• Rule 50, Section 2, Rules of Court — Provides that an appeal under Rule 41 taken from the RTC to the CA raising only questions of law shall be dismissed. The Court upheld the CA's application of this provision.

• Rule 144, Rules of Court — Provides that the 2019 Amendments to the Rules of Civil Procedure shall govern all cases filed after their effectivity on May 1, 2020, and also all pending proceedings. The Court applied this provision to apply the 2019 Amendments retroactively.

• Republic Act No. 3844, Section 74 — The Agricultural Land Reform Code, which created the LBP and states its purpose to finance the acquisition by the Government of landed estates for division and resale to small landowners. The Court cited this provision to establish the LBP's governmental function.

• Republic Act No. 10374 — Extended the corporate life of the LBP for 50 years, renewable for another 50 years. The Court cited this to establish the LBP's special charter.

• Constitution, Article XII, Section 16 — Provides that Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations, and that government-owned or controlled corporations may be created or established by special charters. The Court cited this provision to support the distinction between private and public corporations.

Inting, J. (Acting Chairperson), Gaerlan, J., and Dimaampao, J., concurred. Caguioa, J. (Chairperson), was on official business.