Santiago Syjuco, Inc. vs. Castro

A default judgment is void for lack of jurisdiction where service of summons on a corporation is proved only by a sheriff's return that fails to state the place of service and the name of the person served. A partnership composed exclusively of the same individuals who executed a mortgage over property registered in their names is barred by res judicata and estoppel by silence from later asserting that the property belonged to the partnership; a conveyance executed by all partners passes all their rights and includes a mortgage.

Santiago Syjuco, Inc. was the creditor of the Lim family under a mortgage over parcels of land in Manila registered in the names of the individual Lims as owners in common. The Lims were also associated with a partnership called "Heirs of Hugo Lim," composed exclusively of the same family members. The governing legal backdrop included the Civil Code provisions on partnership conveyances and equitable estoppel, and the Rules of Court on service of summons upon corporations.

In November 1964, Eugenio Lim, for and in his own behalf and as attorney-in-fact of his mother, the widow Maria Moreno (now deceased), and of his brother Lorenzo, together with his other brothers Aramis, Mario and Paulino, and his sister Nila, collectively referred to as the Lims, borrowed P800,000.00 from Santiago Syjuco, Inc. The loan was secured by a first mortgage on property registered in the names of the borrowers as owners in common under Transfer Certificates of Title Nos. 75413 and 75415 of the Registry of Deeds of Manila. Additional loans on the same security were later obtained, so that as of May 8, 1967, the aggregate loans stood at P2,460,000.00, exclusive of interest, and the security was augmented by bringing into the mortgage other property registered as owned pro indiviso by the Lims under TCT Nos. 75416 and 75418 of the Manila Registry. The obligation matured on November 8, 1967; the Lims failed to pay despite demands; Syjuco caused extrajudicial foreclosure proceedings to be commenced by the Sheriff of Manila; and the auction sale was scheduled on December 27, 1968.

To stop the foreclosure, the Lims filed Civil Case No. 75180 on December 24, 1968 in the Court of First Instance of Manila, alleging that their mortgage was void for being usurious, having stipulated interest of 23% on top of 11% that they had been required to pay as a "kickback." A restraining order issued on December 26, 1968, premised on the Lims' express waiver of their rights to notice and republication of the notice of sale. On November 25, 1970, the trial court found that usury tainted the mortgage without rendering it void, declared the amount due to be only P1,136,235.00, and allowed foreclosure for that amount. Syjuco moved for new trial to present additional evidence; the court reopened the case; the Lims challenged the reopening in the Court of Appeals and then in the Supreme Court, but both attempts failed. On August 16, 1972, the trial court issued an amended decision reversing its usury finding, declaring the principal obligation to be P2,460,000.00, exclusive of interest at 12% per annum from November 8, 1967, and allowing extrajudicial foreclosure. The Lims appealed to the Court of Appeals, which affirmed in toto on October 25, 1976. The Supreme Court denied their petition for review in G.R. No. L-45752 on August 5, 1977; the motion for reconsideration was denied and entry of judgment was made on September 24, 1977.

Syjuco then resumed its efforts to proceed with the foreclosure and caused the auction sale to be scheduled on December 20, 1977. The Lims again frustrated the sale by filing Civil Case No. 112762 on December 19, 1977, claiming lack of republication, despite their earlier waiver. On the same day, they obtained a restraining order in Civil Case No. 75180 on the same ground, producing two restraining orders against the same auction sale. Syjuco republished the notice of sale in January 1978. Judge Jose H. Tecson, instead of allowing the sale, authorized the Lims to sell the mortgaged property in a private sale and entertained the theory that the bonds of P6,000,000.00 and P3,000,000.00 had novated the mortgage. Syjuco filed G.R. No. L-56014. On September 21, 1982, the Supreme Court granted the writ, nullified Judge Tecson's orders, held that the republication mooted Civil Case No. 112762, that the bonds did not novate the mortgage and had become worthless, and ordered the Sheriff of Manila to proceed with the mortgage sale. Notice was served on the Lims on October 2, 1982; the motion for reconsideration was denied and entry of final judgment was made on March 22, 1983.

Twelve days after the Lims were served with notice of the judgment in G.R. No. 56014, or on October 14, 1982, they caused the filing of Civil Case No. Q-36485 in the Regional Trial Court of Quezon City, Branch 35, Judge Jose P. Castro presiding. This time the complaint was presented in the name of a partnership, "Heirs of Hugo Lim," of which the Lims themselves were the only partners. The complaint alleged that the mortgage was void because the properties had been deeded to the partnership on March 30, 1959, so the Lims had no authority to mortgage them. Judge Castro issued a restraining order on October 15, 1982. Sheriff Perfecto G. Dalangin submitted a return of summons on December 6, 1982, stating that he served summons at defendant's office formerly at 313 Quirino Ave., Paranaque, Metro-Manila, and now at 407 Dona Felisa Syjuco Building, Remedios St., corner Taft Avenue, Manila, through the Manager, a person of sufficient age and discretion duly authorized to receive service, but who refused to accept service and signed receipt thereof. The return did not identify the manager by name. Syjuco asserted that it was never served with summons or with any other notice, pleading, or motion relative to the case. On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco in default; the order of default issued the next day; and on February 22, 1983, judgment by default was rendered, declaring the mortgage void and making permanent the injunction against the foreclosure sale. Notice of the default judgment was allegedly served on February 23, 1983 through a similarly defective return. The case was thereafter allowed to remain dormant for seventeen months.

In the interim, Syjuco once again tried to proceed with the foreclosure after entry of judgment in G.R. No. 56014 on March 22, 1983. It scheduled the auction sale on July 30, 1983, but the Lims filed Civil Case No. 83-19018 in the Manila Regional Trial Court to stop the sale, and a restraining order issued on July 20, 1983. The auction sale was rescheduled for September 20, 1983, but was aborted because the Lims obtained another restraining order in Civil Case No. Q-32924 of the Quezon City Regional Trial Court; that action was dismissed on February 3, 1984. Upon dismissal, Syjuco resumed efforts to effect the mortgage sale, but on the date of the sale, a letter of Atty. Canlas was handed to the sheriff drawing attention to the permanent injunction embodied in the judgment by default in Civil Case No. Q-36485. Syjuco then learned of the default judgment and the antecedent events. On July 9, 1984, Judge Castro ordered execution of the judgment; on July 16, 1984, he granted Atty. Canlas' motion to declare cancelled the titles to the mortgaged properties and to direct the Register of Deeds of Manila to issue new titles in the name of the partnership. Syjuco filed motions on July 17, 20, and 24, 1984, alleging that it had never been served with summons, that it had never received notice of the decision, that the action was barred by prior judgment, and that the complaint failed to state a cause of action. The motions remained pending until January 31, 1985, when Syjuco moved for their immediate resolution. Judge Castro allegedly issued an order on February 22, 1985 declaring that he had lost jurisdiction to act thereon because his decision had already become final and executory.

• Lack of Service of Summons: Petitioner maintained that it was never served with summons or with any other notice, pleading, or motion in Civil Case No. Q-36485; the sheriff's return was vague as to the place of service and failed to name the person served, so the trial court never acquired jurisdiction over it.
• Res Judicata: Petitioner argued that the action was barred by prior judgment, based on the final decisions in Civil Case No. 75180, G.R. No. L-45752, and G.R. No. 56014.
• Failure to State a Cause of Action: Petitioner asserted that the mortgaged property remained registered in the names of the individual Lims, not the partnership, and that even assuming ownership by the partnership, the mortgage executed by all the partners was valid and binding under Articles 1811 and 1819 of the Civil Code.
• Laches: Petitioner invoked laches as a ground for dismissal.
• Relief: Petitioner prayed that the default judgment be annulled, that the sheriff be commanded to proceed with the foreclosure of the mortgage, and that respondents be perpetually enjoined from taking any further steps to prevent the foreclosure.

• Validity of Service and Finality: Respondents countered that Syjuco was validly served with summons in Civil Case No. Q-36485, that the default decision was valid, and that it became final by operation of law after the lapse of the reglementary appeal period; finality removed the case from the trial court's jurisdiction.
• Improper Remedy: Respondents argued that the petition was in effect an action to annul a judgment, a proceeding within the original jurisdiction of the Court of Appeals.
• Res Judicata Not Applicable: Respondents maintained that res judicata was raised too late and that no identity of parties existed because the Lims sued in their personal capacities while the partnership was a separate and distinct juridical entity; the causes of action also differed, usury in the earlier cases and authority to encumber partnership property in the case under review.
• Laches Waived: Respondents argued that laches was also invoked too late, not having been raised in the lower court.
• Partnership Assets: Respondents asserted that the property involved constituted assets of the Lim partnership, being registered as such with the Securities and Exchange Commission.
• Atty. Canlas's Position: Atty. Canlas claimed no knowledge of the institution of Civil Case No. Q-36485, denied representing the Lims in all their cases against Syjuco, and denied any duty to inform opposing counsel of the pendency of Civil Case No. Q-36485.
• Judge Castro's Position: Judge Castro disclaimed knowledge of previous controversies regarding the mortgaged property, asserted that Syjuco was properly declared in default for failure to answer despite service of summons, and claimed that he lost jurisdiction after the decision became final.
• Register of Deeds: The Register of Deeds stated that by virtue of the order of execution, he had cancelled the TCTs and prepared new certificates of title in lieu thereof, but that cancellation had been held in abeyance for lack of registration requirements and by reason of Syjuco's motion and the temporary restraining order issued by the Court.

• Validity of Service of Summons: Whether the trial court acquired jurisdiction over petitioner Santiago Syjuco, Inc. in Civil Case No. Q-36485 where the sheriff's return failed to specify the place of service and the name of the person served.
• Validity of Default Judgment and Jurisdiction: Whether the default judgment, writ of execution, and subsequent orders in Civil Case No. Q-36485 are null and void for lack of valid service of summons, and whether the trial judge gravely abused discretion in refusing to act on petitioner's motions on the ground of lost jurisdiction.
• Res Judicata: Whether the cause of action in Civil Case No. Q-36485 is barred by prior judgment in Civil Case No. 75180 and the related final decisions.
• Estoppel by Silence: Whether the respondent partnership is estopped from asserting ownership of the mortgaged property after failing to impugn the mortgage for more than seventeen years.
• Partnership Conveyance/Mortgage: Whether the mortgage executed by all the partners over property registered in their names is valid under Article 1819, last paragraph, of the Civil Code.
• Propriety of Certiorari: Whether certiorari, prohibition, and mandamus are appropriate remedies against a judgment alleged to have been rendered without valid service of summons, instead of an action to annul judgment.
• Damages and Sanctions: Whether nominal and exemplary damages, treble costs, and referral of counsel to the Integrated Bar of the Philippines are warranted.

• Validity of Service of Summons: No. The sheriff's return was defective for failure to state the place of service and the name of the person served; the presumption of regularity did not lie, and the trial court did not acquire jurisdiction over Syjuco.
• Validity of Default Judgment and Jurisdiction: The default judgment, execution, and all proceedings after the filing of the complaint were null and void; the judge's refusal to resolve the invalidity on the ground of lost jurisdiction was grave abuse of discretion.
• Res Judicata: Yes. The cause of action was barred by prior judgment; the first judgment in Civil Case No. 75180 was final and executory, rendered by a competent court, and involved identity of parties, subject matter, and cause of action.
• Estoppel by Silence: Yes. The partnership, composed exclusively of the Lims and chargeable with knowledge of the mortgage, was estopped from denying it after more than seventeen years of silence.
• Partnership Conveyance/Mortgage: Yes. Under Article 1819, last paragraph, Civil Code, where title to real property is in the names of all partners, a conveyance executed by all partners passes all their rights; "conveyance" includes a mortgage.
• Propriety of Certiorari: Yes. Certiorari is appropriate against judgments or proceedings rendered without valid service of summons; an action for annulment is not a plain, speedy, and adequate remedy.
• Damages and Sanctions: Yes. Nominal damages of P25,000.00 and exemplary damages of P100,000.00, treble costs, and referral of Atty. Canlas to the Integrated Bar of the Philippines were warranted.

• Validity of Service of Summons: The Rules of Court require proof of service of summons to set forth the manner, place, and date of service, to specify the papers served, and to name the person who received the same. The sheriff's return did not state whether service was effected at Quirino Avenue, Paranaque, or at Taft Avenue, Manila, and did not name the manager, describing him only as "the Manager" or "a person of sufficient age and discretion." Under Delta Motor Sales Corporation vs. Mangosing, strict compliance with the mode of service is necessary to confer jurisdiction over a corporation, and service must be made on an officer named in the statute. A defective return cannot support the presumption of regularity in the performance of official functions. Because there was no valid service, the trial court did not acquire jurisdiction over Syjuco, and all subsequent proceedings, from the order of default up to the judgment by default and the order for its execution, were null and void.

• Validity of Default Judgment and Jurisdiction: Since the trial court never acquired jurisdiction over Syjuco, the default judgment and all issuances in implementation thereof were void. Judge Castro's refusal to resolve the motion for reconsideration and motion to dismiss on the merits, on the excuse that he had lost jurisdiction, was grave abuse of discretion. The issue of invalid service had been expressly raised in the defendant's motion for reconsideration, and the judge should have resolved it instead of begging the question.

• Res Judicata: The first judgment, rendered in Civil Case No. 75180 and affirmed by both the Court of Appeals in CA-G.R. No. 51752 and the Supreme Court in G.R. No. L-45752, was final and executory. It had been rendered by a competent court. Between the first and subsequent cases, there was identity of subject matter, cause of action, and parties. The Lims and the partnership were substantially the same because the partnership was composed exclusively of the Lims, who were the real parties in interest. The Lims split their cause of action by filing multiple suits on different grounds—usury, lack of republication, novation, and partnership ownership—when all could have been raised in the first action. Under Rule 39, Section 49, the judgment was conclusive not only as to the matter directly adjudged but also as to any other matter that could have been raised in relation thereto. Thus, Civil Case No. Q-36485 was barred.

• Estoppel by Silence: Article 1432 of the Civil Code makes equitable estoppel, or estoppel in pais, part of Philippine law. Estoppel by silence arises where a person under a duty to another to speak refrains from doing so and thereby leads the other to believe in a state of facts in reliance on which he acts to his prejudice. The partnership was chargeable with knowledge of the mortgage because all the partners executed it and the property remained registered in their names as owners in common. Despite this, the partnership remained silent and failed to impugn the mortgage for more than seventeen years. That silence induced Syjuco to rely on the validity of the mortgage. Equity therefore barred the partnership from later asserting ownership of the mortgaged property.

• Partnership Conveyance/Mortgage: Article 1819, last paragraph, of the Civil Code provides that where the title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property. The term "conveyance" includes a mortgage, as distinguished from the agency rule that a special power to sell excludes the power to mortgage under Article 1879. Since all the Lims, who were the only partners, executed the mortgage over property registered in their names, the mortgage was valid even if the property belonged to the partnership.

• Propriety of Certiorari: The respondents' contention that the petition was in effect an action to annul a judgment within the exclusive original jurisdiction of the Court of Appeals was answered in Matanguihan vs. Tengco, which held that an action for annulment of judgment is not a plain, speedy, and adequate remedy. Certiorari is appropriate against judgments or proceedings alleged to have been rendered without valid service of summons. The ruling also cited Ang vs. Navarro, Olar vs. Cuna, Cavili vs. Vamenta, Jr., and Filmerco Commercial Co., Inc. vs. IAC as cases where the Court took cognizance of similar petitions without regard to whether annulment was the appropriate recourse.

• Damages and Sanctions: The Lims, the partnership, and Atty. Canlas acted in bad faith and with intent to defraud by presenting piecemeal defenses and claims that were available from the very beginning, staving off the liquidation of an undenied debt for more than twenty years, and culminating in the clandestine filing and prosecution of Civil Case No. Q-36485. This was an abuse of process and a trifling with the courts. Atty. Canlas shared responsibility because he controlled the proceedings and had represented the Lims since September 9, 1972, despite his claim that he became their lawyer only in 1977. Similar actuations in Prudential Bank vs. Castro were deemed sufficient cause for disbarment. Nominal damages were awarded under the general prayer and Rule 65, Section 3, and exemplary damages under Article 2229. Treble costs and referral to the Integrated Bar of the Philippines were also imposed.

• Estoppel by Silence — An estoppel may arise from silence as well as from words. It arises where a person who, by force of circumstances, is under a duty to another to speak, refrains from doing so and thereby leads the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice; silence may support an estoppel whether the failure to speak is intentional or negligent. In this case, the partnership, composed of the same Lims who executed the mortgage and knew of it, was estopped from later denying the mortgage after more than seventeen years of silence.
• Res Judicata (Bar by Prior Judgment) — A final and executory judgment rendered by a competent court is conclusive between the parties and their successors in interest, not only as to the matter directly adjudged but also as to any other matter that could have been raised in relation thereto. The requisites are finality, competent court, and identity of parties, subject matter, and cause of action. The Court applied it to bar Civil Case No. Q-36485 because the Lims and their partnership were substantially the same parties and the partnership-ownership claim could have been raised in the first action.
• Rule Against Splitting a Cause of Action — Only one suit may be instituted for a single cause of action; if multiple suits are filed on different grounds for the same relief, the judgment on the merits in any one is available as a bar in the others. The Lims violated this rule by filing four actions, each on a different ground, to strike down the same mortgage.
• Partnership Conveyance of Real Property — Under Article 1819, last paragraph, of the Civil Code, where title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property. The term "conveyance" includes a mortgage. Thus, the mortgage executed by all the Lims over property registered in their names was valid even if the property belonged to the partnership.
• Strict Compliance with Service of Summons on Corporations — Service of summons on a corporation must be made on an officer named in the statute; strict compliance is necessary to confer jurisdiction. The sheriff's return must set forth the manner, place, and date of service and the name of the person served. A defective return cannot support the presumption of regularity. The trial court therefore never acquired jurisdiction over Syjuco.
• Certiorari as Remedy for Void Judgment for Lack of Jurisdiction — Certiorari is an appropriate remedy against judgments or proceedings alleged to have been rendered without valid service of summons; an action for annulment of judgment is not a plain, speedy, and adequate remedy.
• Abuse of Process and Sanctions — The repeated filing of actions and restraining orders to delay a just obligation, including a secretly filed action, constitutes abuse of process and trifling with the courts, warranting nominal and exemplary damages, treble costs, and referral of counsel to the Integrated Bar of the Philippines.

• "The defective sheriffs return thus being insufficient and incompetent to prove that summons was served in the manner prescribed for service upon corporations, there is no alternative to affirming the petitioner's claim that it had not been validly summoned in Civil Case No. Q-36485. It goes without saying that lacking such valid service, the Trial Court did not acquire jurisdiction over the petitioner Syjuco, rendering null and void all subsequent proceedings and issuances in the action from the order of default up to and including the judgment by default and the order for its execution." — This passage states the ratio decidendi on the jurisdictional defect arising from the defective sheriff's return, and explains why the default judgment and all subsequent issuances were void.
• "'Estoppel by silence' arises where a person, who by force of circumstances is under a duty to another to speak, refrains from doing so and thereby leads the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice. Silence may support an estoppel whether the failure to speak is intentional or negligent." — This is the canonical formulation of estoppel by silence applied against the respondent partnership, which had knowledge of the mortgage but remained silent for more than seventeen years.
• "Where the title to real property is in the names of all the partners a conveyance executed by all the partners passes all their rights in such property." — This is the last paragraph of Article 1819 of the Civil Code, which the Court applied to validate the mortgage executed by all the Lims over property registered in their names.
• "What was done by the Lims — or by the partnership of which they were the only members-was to split their cause of action in violation of the well known rule that only one suit may be instituted for a single cause of action." — This passage articulates the rule against splitting a cause of action, which the Court used to bar Civil Case No. Q-36485.

• Delta Motor Sales Corporation vs. Mangosing, 70 SCRA 598, 602-603 — Cited for the rule that strict compliance with the mode of service of summons is necessary to confer jurisdiction over a corporation, and that service must be made on an officer named in the statute; liberal construction cannot substitute for the plain legal requirements.
• Venturanza vs. CA, 156 SCRA 305, 313 — Cited for the rule that where the sheriff's return is defective, the presumption of regularity in the performance of official functions will not lie.
• Matanguihan vs. Tengco, 95 SCRA 478, 485 — Cited for the rule that an action for annulment of judgment is not a plain, speedy, and adequate remedy, thereby affirming certiorari as appropriate against judgments rendered without valid service of summons.
• Surigao Mineral Reservation Board vs. Cloribel, 31 SCRA 1, 23 — Cited for the principle that a party's lawyer of record has control of the proceedings and that whatever steps the client takes should be within the lawyer's knowledge and responsibility.
• Prudential Bank vs. Castro, 155 SCRA 604, 621 — Cited for similar actuations revealing an "unholy alliance," railroaded proceedings, and clever maneuvers to foreclose appeal, which were deemed sufficient cause for disbarment.
• Ang vs. Navarro, 81 SCRA 458; Olar vs. Cuna, 90 SCRA 114; Cavili vs. Vamenta, Jr., 114 SCRA 343; Filmerco Commercial Co., Inc. vs. IAC, 149 SCRA 193 — Cited as cases where the Court took cognizance of similar petitions without regard to whether an action for annulment was the appropriate recourse.
• Bosler vs. Sealfon, 82 Pa. Sup. Ct., 254 — Cited in the discussion that the right to mortgage is included in the right to convey under the Uniform Partnership Act.

• Article 1432, Civil Code — Makes equitable estoppel, or estoppel in pais, part of Philippine law; it is the basis for the estoppel by silence applied against the respondent partnership.
• Article 1819, last paragraph, Civil Code — Provides that where title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property; "conveyance" includes a mortgage, validating the mortgage executed by all the Lims.
• Article 1879, Civil Code — Cited to distinguish the agency rule that a special power to sell excludes the power to mortgage from the partnership rule that the right to convey includes the right to mortgage.
• Article 2229, Civil Code — Basis for the exemplary damages awarded against the private respondents and Atty. Canlas.
• Rule 14, Section 20, Rules of Court — Requires proof of service of summons to set forth the manner, place, and date of service, specify the papers served, and name the person who received the same; the defective return failed these requirements.
• Rule 39, Section 49, Rules of Court — Provides that a judgment rendered by a competent court is conclusive between the parties, not only as to the matter directly adjudged but also as to any other matter that could have been raised in relation thereto; applied to bar Civil Case No. Q-36485.
• Rule 2, Sections 3 and 4, Rules of Court — Prohibit splitting a single cause of action and make the judgment on the merits in one action a bar to the others; applied to the Lims' multiple suits.
• Rule 65, Section 3, Rules of Court — Authorizes payment of damages sustained by petitioner by reason of the wrongful acts of defendant in a petition for mandamus; basis for the nominal damages awarded.
• Section 9(2), B.P. 129 — Cited by respondents as vesting original jurisdiction in the Court of Appeals over actions to annul judgment; the Court held certiorari was nevertheless proper under Matanguihan vs. Tengco.

Justices Cruz, Gancayco, Griño-Aquino, and Medialdea concurred.