Borlongan vs. BDO Unibank, Inc.

Service of summons by publication is invalid if the plaintiff and sheriff fail to exert diligent inquiry to locate the defendant, and a non-debtor spouse is considered a "stranger" who may file an independent action to annul a levy on conjugal property when the other spouse's surety obligation did not redound to the benefit of the family.

BDO filed a collection suit against Tancho Corporation and its sureties, including Carmelita Borlongan. After securing a judgment, BDO levied and sold the Borlongans' conjugal property at an execution sale. The spouses only discovered the levy years later when they checked their title for a prospective sale, prompting them to file separate actions to annul the proceedings and protect their property.

• Original Filing: Civil Case No. 03-0713 (RTC Makati, Branch 134) — Sum of money against Tancho Corp and Carmelita.
• Lower Court Decision (Makati RTC): November 29, 2007 — Declared defendants in default; held them liable for P32.5M+.
• Execution Sale: October 6, 2009 — Subject property sold to BDO as highest bidder.
• Original Filing (Eliseo): Civil Case No. 73761 (RTC Pasig, Branch 155) — Annulment of Surety Agreements, Levy, and Auction Sale.
• Lower Court Decision (Pasig RTC): May 31, 2013 — Dismissed for lack of jurisdiction. Reinstated on MR with qualification that it can hear the case on illegal levy but cannot annul the surety agreements.
• Appeal (BDO to CA): CA-G.R. SP No. 133994 — CA granted BDO's petition, ordered Pasig RTC to cease hearing the case for lack of jurisdiction.
• Original Filing (Carmelita): CA-G.R. SP No. 134664 — Petition for Annulment of Judgment with prayer for TRO/WPI.
• CA Decision (Carmelita): November 12, 2014 & March 23, 2015 — Denied TRO/WPI, holding purchaser's right to possession became absolute after the redemption period expired.
• SC Action: Both Eliseo and Carmelita's petitions were initially denied by the SC. Their Motions for Reconsideration were consolidated and resolved in this Resolution.

• Acquisition of Property: In 1976, Eliseo and Carmelita Borlongan acquired a real property in Valle Verde, Pasig City covered by TCT No. 0421.
• Discovery of Annotation: In 2012, the spouses checked their title for a prospective sale and found an annotation of an execution sale from CC No. 03-0713 pending in the Makati RTC.
• The Collection Case: BDO sued Tancho Corporation (principal debtor) and Carmelita (surety for P13.5M) for sum of money.
• Defective Service of Summons: BDO directed the sheriff to serve summons at the Fumakilla Compound, Tancho Corp's business address. BDO had already foreclosed this property in 2000 and consolidated ownership in 2001. The sheriff made one attempt in July 2003, failed, and reported defendants were no longer holding office there.
• Service by Publication: In October 2003, after the single failed attempt, BDO moved for service by publication, which the Makati RTC granted. In February 2006, the sheriff tried to serve at the subject property but failed. BDO published the alias summons in People's Taliba in May 2006.
• Default and Execution: The Makati RTC declared Carmelita in default and ruled against her in November 2007. A Writ of Execution was issued in August 2008. The sheriff tried serving the writ at Fumakilla and the subject property but failed. BDO moved for auction, and the property was sold to BDO in October 2009.
• Eliseo's Separate Action: Eliseo filed CC No. 73761 in the Pasig RTC to annul the surety agreements and execution sale, claiming the property is a family home, he did not consent to the surety, and the debt did not benefit the family.
• Carmelita's Petition for Annulment: After BDO secured a Writ of Possession, Carmelita filed a Petition for Annulment of Judgment with the CA, arguing the Makati RTC never acquired jurisdiction over her due to defective service of summons.

• Carmelita: The CA erred in refusing to issue a TRO/WPI. She has a clear right to due process, which was violated by invalid service of summons. The property was not foreclosed but levied upon execution; requiring redemption implies admission of valid sale, which contradicts her claim of invalidity.
• Eliseo: The Pasig RTC has jurisdiction to hear his case as a third-party claimant/stranger to the suit under Rule 39, Section 16 of the Rules of Court. The wife's surety obligation did not benefit the conjugal partnership, making him a stranger who can vindicate his claim in a separate action.

• BDO: The Pasig RTC lacks jurisdiction; Eliseo is not a stranger who can file an independent action (relying on Spouses Ching v. CA). One court cannot interfere with the orders of a co-equal court. The CA correctly denied the TRO/WPI because the redemption period expired, making BDO's right to possession absolute.

• Procedural Issues:
  • Whether the CA erred in refusing to issue a TRO/WPI to stop the consolidation of BDO's ownership over the subject property.
  • Whether the Pasig RTC has jurisdiction to hear a case filed by the non-debtor husband to annul the levy and execution sale ordered by the Makati RTC.
• Substantive Issues:
  • Whether the service of summons by publication was valid.
  • Whether a non-debtor spouse is a "stranger" who can file an independent action to vindicate claims to conjugal property levied upon execution.

• Procedural (TRO/WPI): The SC reversed the CA. The issuance of a TRO/WPI requires only a sampling of evidence to preserve the status quo, not a prejudgment of the merits. Carmelita demonstrated a clear and unmistakable right to due process (proper service of summons) and an urgent necessity to prevent serious damage (continuous violation of constitutional rights). The CA's reliance on the expiration of the redemption period was misplaced; the property was not foreclosed but sold via execution. Requiring redemption would imply admission of the sale's validity, which is inconsistent with her claim of nullity.
• Procedural (Jurisdiction of Pasig RTC): The SC reversed the CA. Eliseo can file an independent action. Under Rule 39, Section 16, third-party claimants (strangers to the suit) can vindicate their claims in a separate action. A non-debtor husband is a stranger if the wife's debt did not redound to the benefit of the conjugal partnership. Unlike in Spouses Ching, Eliseo had no opportunity to intervene in the Makati RTC because he only discovered the attachment after finality.
• Substantive (Service of Summons): The service by publication was invalid. The hierarchy of service (personal > substituted > publication) must be strictly followed. Publication requires that the defendant's whereabouts are unknown and cannot be ascertained by diligent inquiry. BDO and the sheriff failed in diligent inquiry; they attempted service at an address BDO already foreclosed, and ignored the SEC General Information Sheet which listed Carmelita's address at 41 Chicago St., Quezon City.
• Substantive (Conjugal Property Liability): A surety agreement does not presumptively benefit the conjugal partnership. BDO failed to prove the surety agreement benefited the Borlongan family. Thus, the conjugal property cannot be held liable for Carmelita's personal obligation.

• Hierarchy of Service of Summons — Personal service is the preferred mode. Substituted service is only available if prompt personal service is impossible despite diligent efforts. Service by publication is a last resort, applicable only when the defendant's whereabouts are unknown and cannot be ascertained by diligent inquiry. Applied: BDO and the sheriff skipped personal and substituted service, jumping to publication after a single failed attempt at a foreclosed address, rendering the service invalid.
• Requirements for Valid Substituted Service (Manotoc Doctrine) — To justify substituted service, there must be several attempts by the sheriff to personally serve the summons within a reasonable period (at least 3 tries on at least 2 different dates), and the sheriff must specify the details of these efforts in the Return. Applied: The sheriff made only one attempt, failing to meet the Manotoc standard.
• Third-Party Claimant / Stranger to the Suit — Under Rule 39, Section 16, a stranger to the case can file an independent action to vindicate a claim to property levied upon execution. A non-debtor spouse is considered a stranger if the other spouse's debt did not redound to the benefit of the conjugal partnership. Applied: Eliseo is a stranger because Carmelita's surety obligation did not benefit the family, entitling him to file a separate action in the Pasig RTC.
• No Presumption of Benefit in Surety Agreements — There is no presumption that the conjugal partnership is benefited when a spouse enters into a contract of surety. The creditor has the burden to establish that the benefit redounded to the family. Applied: BDO failed to prove that Carmelita's surety agreement for Tancho Corp benefited the conjugal partnership.
• Issuance of TRO/WPI — Requires (1) a clear and unmistakable right to be protected, and (2) an urgent and paramount necessity for the writ to prevent serious damage. It is based on a sampling of evidence to preserve the status quo, not a prejudgment of the merits. Applied: Carmelita's right to due process was unmistakable, and the CA erred in denying the TRO/WPI.

• Section 3, Rule 58, Rules of Court — Grounds for issuance of preliminary injunction. Applied to show Carmelita had a right to be protected (due process) and an urgent necessity to prevent serious damage.
• Section 1, Bill of Rights, 1987 Constitution — No person shall be deprived of property without due process. Applied to emphasize that proper service of summons is a vital ingredient of due process.
• Sections 6, 7, and 14, Rule 14, Rules of Court — Service in person, substituted service, and service by publication. Applied to establish the hierarchy of service and the invalidity of jumping to publication without diligent inquiry.
• Section 16, Rule 39, Rules of Court — Proceedings where property claimed by third person. Applied to affirm Eliseo's right as a third-party claimant/stranger to file a separate action to vindicate his claim over the conjugal property.
• Article 122, Family Code — Payment of personal debts shall not be charged to the conjugal partnership except if they redounded to the benefit of the family. Applied to show Carmelita's surety debt did not benefit the family.