Equitable PCI Bank vs. Ku

A judgment in an ejectment suit is binding not only upon the defendants in the suit but also against those not made parties thereto, if they are trespassers, squatters, agents, guests, transferees pendente lite, sub-lessees, co-lessees, or members of the family, relatives, and other privies of the defendant. Respondent, as the daughter of the defendant in the ejectment case, fell within this category and was thus bound by the MeTC decision despite not being formally joined as a party.

Rosita Ku, as treasurer of Noddy Dairy Products, Inc., together with Ku Giok Heng as Vice-President/General Manager of the same corporation, mortgaged a residential house and lot in La Vista, Quezon City — registered in respondent's name — to Equitable Banking Corporation (now Equitable PCI Bank) to secure Noddy Inc.'s loan. The mortgage and the subsequent foreclosure, consolidation of ownership, and ejectment proceedings form the backdrop of the dispute. The legal question centers on whether the daughter of the defendant in an ejectment suit, who was not herself named as a party, can be bound by the judgment ordering the defendant to vacate the premises.

On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc., and Ku Giok Heng, as Vice-President/General Manager of the same corporation, mortgaged a residential house and lot located in La Vista, Quezon City — registered in respondent's name — to Equitable Banking Corporation, now known as Equitable PCI Bank, to secure Noddy Inc.'s loan. Noddy, Inc. subsequently failed to pay the loan, prompting the bank to foreclose the property extrajudicially. As the winning bidder in the foreclosure sale, the bank was issued a certificate of sale. Respondent failed to redeem the property, and on December 10, 1984, the Register of Deeds canceled the Transfer Certificate of Title in respondent's name and issued a new one in petitioner's name.

On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City Metropolitan Trial Court against respondent's father, Ku Giok Heng. Petitioner alleged that it allowed Ku Giok Heng to remain in the property on the condition that he pay rent, and his failure to do so warranted his ejectment. Ku Giok Heng denied that any lease agreement existed over the property. On December 8, 1994, the MeTC rendered a decision in favor of petitioner, ordering Ku Giok Heng to vacate the premises, among other things. The MeTC ruled that the absence of a lease agreement was of no moment, citing jurisprudence that the buyer in a foreclosure sale becomes the absolute owner of the property if it is not redeemed within one year, and is entitled to possession upon consolidation of ownership and issuance of a new certificate of title.

Ku Giok Heng did not appeal the MeTC decision. Instead, he and his daughter, respondent Rosita Ku, filed on December 20, 1994 an action before the RTC of Quezon City to nullify the MeTC decision. The RTC found no merit in the complaint and, on September 13, 1999, dismissed it and ordered the execution of the MeTC decision. Respondent then filed a special civil action for certiorari in the Court of Appeals, contending that she was not made a party to the ejectment suit and was therefore deprived of due process. The CA agreed and, on March 31, 2000, rendered a decision enjoining the eviction of respondent from the premises.

Petitioner filed a motion for extension of 30 days from May 10, 2000 to file its petition for review, alleging receipt of the CA decision on April 25, 2000. The Court granted the motion, conditioned upon the timeliness of the filing. On June 13, 2000, petitioner filed its petition, contending that there was no need to name respondent as a party in the ejectment suit since she was neither a resident nor in possession of the property. Respondent, however, challenged the timeliness of the petition, pointing to a Central Post Office certification showing that the CA decision was actually received by Joel Rosales, an authorized representative, on April 24, 2000 — making the motion for extension filed on May 10, 2000 one day beyond the reglementary period.

• Non-Party Not Required in Ejectment: Petitioner contended that there was no need to name respondent Rosita Ku as a party in the action for ejectment since she was not a resident of the premises nor was she in possession of the property.
• Invalid Service of CA Decision: Petitioner argued that receipt on April 25, 2000 by Joel Rosales, who was not an agent of its counsel's law office, did not constitute valid notice to counsel as required by Sections 2 and 10, Rule 13 of the Rules of Court, citing Philippine Long Distance Telephone Co. vs. NLRC. Petitioner maintained that actual receipt by its counsel was on April 27, 2000, not April 25, 2000, making the motion for extension filed two days before the lapse of the reglementary period.
• Suspension of Rules in Interest of Justice: Assuming the motion for extension was one day late, petitioner urged the Court to suspend its rules and admit the petition in the interest of justice, invoking Philippine National Bank vs. Court of Appeals and other cases where reglementary periods were relaxed.

• Denial of Due Process: Respondent contended that she was not made a party to the ejectment suit and was therefore deprived of due process, a position the Court of Appeals adopted.
• Defective Petition for Late Filing: Respondent pointed to a Central Post Office certification showing that the CA decision was received by Joel Rosales on April 24, 2000, making the motion for extension filed on May 10, 2000 one day beyond the reglementary period, rendering the petition defective.

• Binding Effect of Ejectment Judgment on Non-Party: Whether a person can be evicted by virtue of a decision rendered in an ejectment case where she was not joined as a party.
• Timeliness of Filing: Whether the petition was filed within the reglementary period, given the dispute over the date of receipt of the CA decision.

• Binding Effect of Ejectment Judgment on Non-Party: Yes. A judgment in an ejectment suit is binding not only upon the defendants but also against those not made parties thereto if they are members of the family, relatives, or other privies of the defendant. Respondent, as the daughter of the defendant Ku Giok Heng, is bound by the MeTC decision.

• Timeliness of Filing: The Court did not definitively resolve the date-of-receipt issue, finding the facts inadequate to rule in petitioner's favor on the implied-agency question. However, the petition was admitted in the interest of justice, the Court suspending its rules given the merits of the petition and the minimal (one-day) delay.

• Binding Effect of Ejectment Judgment on Non-Party: The general rule is that no person shall be affected by any proceeding to which he is a stranger. Nevertheless, an exception applies in ejectment cases: a judgment in an ejectment suit is binding not only upon the defendants but also against non-parties who fall under enumerated categories — trespassers, squatters, or agents of the defendant fraudulently occupying the property; guests or other occupants with the defendant's permission; transferees pendente lite; sub-lessees; co-lessees; and members of the family, relatives, and other privies of the defendant. Respondent is the daughter of Ku Giok Heng, the defendant in the ejectment suit. Thus, even if respondent were a resident of the property — a point disputed by the parties — she is nevertheless bound by the MeTC judgment despite being a non-party thereto, because she falls within the category of family members and privies of the defendant.

• Timeliness of Filing: Petitioner argued that Joel Rosales, who received the CA decision on April 24, 2000, was not the constituted agent of petitioner's counsel's law office, and therefore receipt by Rosales did not constitute valid service upon counsel under Sections 2 and 10, Rule 13 of the Rules of Court. The Court was not wholly convinced. While Rosales averred in his affidavit that he was "not the constituted agent" of the law office, the Court noted that agency may be implied from the acts of the principal, from silence, lack of action, or failure to repudiate the agency. Rosales himself stated that "on occasions when I receive mail matters for said law office, it is only to help them receive their letters promptly," implying that counsel had allowed the practice and never objected to it or took steps to stop it. The facts were thus inadequate for the Court to rule that service was invalid. Assuming the motion was one day late, the Court nonetheless found persuasive petitioner's invocation of Philippine National Bank vs. Court of Appeals, which held that while perfection of an appeal within the reglementary period is mandatory and jurisdictional, the Court always has the power to suspend its own rules whenever the purposes of justice require it, especially given the merits of the petition.

• Binding Effect of Ejectment Judgments on Non-Parties — A judgment in an ejectment suit is binding not only upon the defendants in the suit but also against those not made parties thereto, if they are: (a) trespassers, squatters, or agents of the defendant fraudulently occupying the property to frustrate the judgment; (b) guests or other occupants of the premises with the permission of the defendant; (c) transferees pendente lite; (d) sub-lessees; (e) co-lessees; or (f) members of the family, relatives, and other privies of the defendant. The Court applied this doctrine to hold that respondent, as the daughter of the defendant in the ejectment case, was bound by the MeTC decision even though she was not formally joined as a party.

• Implied Agency in Service of Court Papers — Agency may be express but may also be implied from the acts of the principal, from silence, lack of action, or failure to repudiate the agency, knowing that another person is acting on his behalf without authority (Civil Code Art. 1869). Acceptance by the agent may also be implied from acts carrying out the agency (Civil Code Art. 1870). The Court applied this principle to find that the practice of Joel Rosales receiving mail for the law office, without objection from counsel, raised at least an implication of agency, making the facts inadequate to rule that service was invalid.

• Suspension of Procedural Rules in the Interest of Justice — While perfection of an appeal within the reglementary period is mandatory and jurisdictional, the Supreme Court retains the power to suspend its own rules or except a particular case from their operation whenever the purposes of justice require it. Strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof warrant the suspension of the rules. The Court applied this doctrine to admit the petition despite a possible one-day delay, given the merits of the petition.

• "Generally, no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the court." — This states the general rule on non-binding effect of judgments on strangers, which the Court then qualified with the enumerated exceptions applicable to ejectment cases.

• "An agency may be express but it may also be implied from the acts of the principal, from his silence, or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority." — This articulates the doctrine of implied agency under Civil Code Article 1869, which the Court applied to the question of whether receipt of court papers by a non-counsel employee constituted valid service on counsel.

• "It has been said time and again that the perfection of an appeal within the period fixed by the rules is mandatory and jurisdictional. But, it is always in the power of this Court to suspend its own rules, or to except a particular case from its operation, whenever the purposes of justice require it." — This is the canonical formulation of the Court's power to suspend procedural rules in the interest of justice, quoted from Philippine National Bank vs. Court of Appeals and applied to admit the petition despite a possible one-day delay.

• David Enterprises vs. IBAA, 191 SCRA 116 — Cited by the MeTC for the proposition that the buyer in a foreclosure sale becomes the absolute owner of the property if unredeemed, and is entitled to possession and a writ of possession as a matter of right.

• Oro Cam Enterprises, Inc. vs. Court of Appeals, 319 SCRA 444 (1999) — Source of the enumerated categories of persons bound by an ejectment judgment despite not being parties to the suit.

• Philippine Long Distance Telephone Co. vs. NLRC, 128 SCRA 402 (1984) — Cited by petitioner for the rule that service of a decision at the ground floor of a building rather than at the address of record of counsel is not valid service; the Court found the facts of the present case distinguishable on the implied-agency issue.

• Philippine National Bank vs. Court of Appeals, 246 SCRA 304 (1995) — Cited for the doctrine that the Court may suspend its own rules in the interest of justice despite the mandatory and jurisdictional nature of reglementary periods; applied to admit the petition despite a possible one-day delay.

• Matuguina Integrated Wood Products, Inc. vs. Court of Appeals, 263 SCRA 490 (1996) — Cited for the general rule that no person shall be affected by any proceeding to which he is a stranger.

• Sections 2 and 10, Rule 13, Rules of Court — Section 2 defines filing and service, requiring that service upon a party who has appeared by counsel be made upon counsel. Section 10 provides that service by registered mail is complete upon actual receipt by the addressee, or after five days from receipt of the first notice of the postmaster, whichever is earlier. Petitioner invoked these provisions to argue that receipt by Joel Rosales did not constitute valid service on counsel.

• Articles 1869 and 1870, Civil Code — Article 1869 provides that agency may be express or implied from the acts of the principal, his silence, lack of action, or failure to repudiate the agency. Article 1870 provides that acceptance by the agent may be express or implied from acts carrying out the agency. The Court applied these provisions to the question of whether Rosales's receipt of mail for the law office constituted implied agency.

Davide, Jr., C.J., Puno, Pardo, and Ynares-Santiago, JJ., concurred.