Spouses Galura vs. Math-Agro Corporation

A substituted service of summons is invalid, and the trial court does not acquire jurisdiction over the person of the defendant, where the return of service fails to show that personal service within a reasonable time was impossible, that the person served was of suitable age and discretion, and that such person resided at the defendant's residence. A petition for annulment of judgment or final order under Rule 47 grounded on lack of jurisdiction over the person need not allege that the ordinary remedies of new trial, appeal, or petition for relief are no longer available through no fault of the petitioner.

Math-Agro Corporation supplied broiler starters and finishers to the Spouses Dante and Ma. Teresa L. Galura, creating a creditor-debtor relationship that later became the subject of a collection suit. The case turns on the Rules of Court provisions governing service of summons—Sections 6 and 7 of Rule 14—and the remedy of annulment of judgment or final order under Rule 47.

In March 1997, the Spouses Dante and Ma. Teresa L. Galura purchased broiler starters and finishers worth ₱426,000 from Math-Agro Corporation (MAC). They paid ₱72,500, leaving an unpaid balance of ₱353,500. Despite several demands, they failed to pay the balance. MAC engaged Atty. Ronolfo S. Pasamba, who sent the Spouses a letter dated 13 November 1998 demanding payment of the ₱353,500 within five days from receipt and warning that failure to pay would compel MAC to file suit.

MAC filed a complaint dated 21 June 2000 with the Regional Trial Court, Judicial Region 3, Malolos, Bulacan, Branch 22, docketed as Civil Case No. 473-M-2000. MAC prayed that the Spouses be ordered to pay the ₱353,500 unpaid balance and ₱60,000 in attorney's fees and litigation expenses. The complaint alleged that the Spouses were both of legal age, spouses, and residents of G.L. Calayan Agro System Inc., Bo. Kalayaan, Gerona, Tarlac, and/or 230 Apo St., Sta. Mesa Heights, Quezon City, where they may be served with summons and other processes. Clerk of Court Emmanuel L. Ortega issued the corresponding summons dated 15 August 2000, requiring the Spouses to file their answer within 15 days, otherwise judgment by default would be taken against them.

On 17 September 2000, Court Process Server Faustino B. Sildo went to 230 Apo Street, Sta. Mesa Heights, Quezon City, to serve the summons. There, Dante Galura's father, Dominador Galura, told Sildo that the Spouses were presently residing at Tierra Pura Subdivision, Tandang Sora, Quezon City. On 22 September 2000, Sildo went to G.L. Calayan Agro System, Inc. in Barrio Kalayaan, Gerona, Tarlac, to serve the summons, but learned that the property had been foreclosed and that the Spouses no longer resided there. On 26 September 2000, Sildo went to Tierra Pura Subdivision, Tandang Sora, Quezon City, and served the summons on Teresa L. Galura's sister, Victoria Lapuz. In his return of service dated 4 October 2000, Sildo narrated these efforts and stated that Lapuz received the copy of the summons, as evidenced by her signature on the original summons.

The Spouses failed to file their answer. In its Order dated 23 January 2001, the RTC declared them in default and allowed MAC to present its evidence ex parte. In its 27 June 2001 Decision, the RTC ruled in favor of MAC and ordered the Spouses to pay the ₱353,500 unpaid balance plus 6% interest per annum accruing from the date of their receipt of the first demand letter on October 18, 1998 until full payment, ₱30,000 attorney's fees, and costs of suit. The RTC reasoned that the Spouses' failure or refusal to file an answer was a clear admission of their obligation and that their inaction raised the presumption that they had no valid defense; it also found that the award of attorney's fees was justified because they acted in gross and evident bad faith in refusing to satisfy MAC's plainly valid, just, and demandable claim.

In its Order dated 10 November 2004, the RTC issued a writ of execution to implement the 27 June 2001 Decision. The RTC noted that the Decision had become final and executory on August 1, 2001 and was recorded in the Book of Entry of Judgment, and that the 15-day period from receipt of the order dated November 11, 2003 had lapsed without the Spouses complying, thereby waiving their right to comment on the motion for execution. On 13 December 2004, the Spouses received from their parents-in-law a copy of the 10 November 2004 Order. On 6 January 2005, they filed with the Court of Appeals a petition for annulment of judgment and final order under Rule 47, with prayer for a writ of preliminary injunction or temporary restraining order. They claimed that the RTC's 27 June 2001 Decision and 10 November 2004 Order were void because (1) the RTC failed to acquire jurisdiction over their persons due to invalid substituted service, and (2) there was extrinsic fraud because MAC made them believe it would not file a case against them, as the owner of MAC and the Spouses had an existing agreement for the settlement of their obligation and the Spouses were complying with that agreement. They alleged that MAC filed the complaint despite the commitment of its owner not to do so, preventing them from defending themselves.

The Court of Appeals found that the Spouses never informed MAC that they were leaving the address known to it; that the process server traced their whereabouts to Tierra Pura Subdivision in Tandang Sora, Quezon City, as given by Dominador Galura; that the Spouses did not deny that they were residing there when the summons was served on Victoria Lapuz; and that the Spouses attached no receipts to support their claim of payments under a settlement agreement.

• Invalid Substituted Service: Petitioners argued that the process server's resort to substituted service by leaving the summons with Victoria Lapuz was unjustified and premature because he could still serve the summons personally upon them had he exerted efforts; the return did not state that attempts at personal service at the Tierra Pura address failed or that personal service could not be made within a reasonable time, nor did it state facts showing why personal service was impossible or that Lapuz was of sufficient age and discretion and residing at the Tierra Pura address.
• Extrinsic Fraud: Petitioners claimed extrinsic fraud because MAC made them believe that it would not file a case against them; the owner of MAC and petitioners had an existing agreement for the settlement of their obligation, and petitioners were complying with that agreement, yet MAC filed the complaint despite the commitment of its owner not to do so, preventing petitioners from defending themselves.
• Availability of Ordinary Remedies: Petitioners argued that because the assailed decision was rendered on 27 June 2001 and more than three years had passed, the remedies of motion to lift order of default, new trial, appeal, and petition for relief had already prescribed, leaving them with no remedy but a petition for annulment of judgment.

• Validity of Substituted Service: Whether the Court of Appeals erred in ruling that there was a valid substituted service of summons.
• Availability of Ordinary Remedies: Whether the Court of Appeals erred in ruling that the Spouses Galura should have first availed of the ordinary remedies of new trial, appeal, or petition for relief before filing the Rule 47 petition.

• Validity of Substituted Service: No. The substituted service was invalid because the return of service did not show that personal service within a reasonable time was impossible, that Lapuz was of suitable age and discretion, or that she resided at the Spouses Galura's residence; consequently, the RTC did not acquire jurisdiction over their persons.
• Availability of Ordinary Remedies: No. A petition for annulment of judgment or final order under Rule 47 grounded on lack of jurisdiction over the person need not allege that the ordinary remedies of new trial, appeal, or petition for relief are no longer available through no fault of the petitioner.

• Validity of Substituted Service: Section 6, Rule 14 requires that, whenever practicable, summons be served by handing a copy to the defendant in person. Section 7, Rule 14 permits substituted service only if, for justifiable causes, the defendant cannot be served within a reasonable time, by leaving copies at the defendant's residence with some person of suitable age and discretion then residing therein, or at the defendant's office or regular place of business with some competent person in charge. In Sandoval II vs. HRET, the requisites of valid substituted service were enumerated: (1) service of summons within a reasonable time is impossible; (2) the person serving the summons exerted efforts to locate the defendant; (3) the person to whom the summons is served is of sufficient age and discretion; (4) the person to whom the summons is served resides at the defendant's place of residence; and (5) pertinent facts showing these circumstances are stated in the return of service. The Court held in Sandoval that statutory restrictions for substituted service must be strictly, faithfully, and fully observed. Here, no showing existed that personal service within a reasonable time was impossible. Sildo went to 230 Apo Street, where Dominador Galura told him the Spouses were residing at Tierra Pura Subdivision, Tandang Sora, Quezon City; despite being told the correct address, Sildo still went to G.L. Calayan Agro System, Inc. in Barrio Kalayaan, Gerona, Tarlac, only to find the property foreclosed and the Spouses no longer residing there. On 26 September 2000, Sildo went to Tierra Pura Subdivision and, without explanation, served the summons on Lapuz. The return of service did not state the impossibility of personal service, that Lapuz was of suitable age and discretion, or that Lapuz resided at the Spouses' residence. Because substituted service is extraordinary and in derogation of the usual method of service, and because due process requires service reasonably expected to give notice, the RTC did not acquire jurisdiction over the persons of the Spouses Galura, and they were not bound by the RTC's 27 June 2001 Decision and 10 November 2004 Order. Keister vs. Judge Navarro was cited for the rule that service of summons is the means by which the court acquires jurisdiction over the defendant's person and that, absent a valid waiver, trial and judgment without such service are null and void.
• Availability of Ordinary Remedies: Rule 47 allows annulment of judgment or final order of the RTC. When the petition is grounded on lack of jurisdiction over the person of the defendant or over the nature or subject of the action, the petitioner need not allege that the ordinary remedy of new trial or reconsideration, or appeal, is no longer available through no fault of the petitioner. This is because a judgment rendered or final order issued by the RTC without jurisdiction is null and void and may be assailed at any time, either collaterally or in a direct action, or by resisting such judgment or final order in any action or proceeding whenever it is invoked, unless barred by laches. The Court relied on Ancheta vs. Ancheta, which held that a petition for annulment based on lack of jurisdiction over the person states a sufficient cause of action notwithstanding the absence of an allegation that ordinary remedies are no longer available through no fault of the petitioner. The Spouses had argued that more than three years had passed since the 27 June 2001 Decision, so the ordinary remedies had prescribed; the Court agreed that they were left with the remedy of annulment of judgment. Thus, the Court of Appeals erred in dismissing the petition on the ground that the Spouses should have first availed of new trial, appeal, or petition for relief.

• Substituted Service of Summons; Strict Compliance — Under Sections 6 and 7, Rule 14 of the Rules of Court, summons must be served personally on the defendant whenever practicable. Substituted service may be resorted to only if, for justifiable causes, the defendant cannot be served within a reasonable time. The requisites of valid substituted service are: (1) service of summons within a reasonable time is impossible; (2) the server exerted efforts to locate the defendant; (3) the person served is of sufficient age and discretion; (4) the person served resides at the defendant's residence; and (5) the return of service states the pertinent facts showing these circumstances. These restrictions must be strictly, faithfully, and fully observed because substituted service is extraordinary and in derogation of the usual method of service. In this case, the return of service failed to show the impossibility of personal service, Lapuz's suitable age and discretion, and her residence at the Spouses' residence; hence, the substituted service was invalid and the RTC did not acquire jurisdiction over the Spouses' persons.
• Rule 47 Annulment of Judgment Based on Lack of Jurisdiction over the Person — A petition for annulment of judgment or final order under Rule 47 grounded on lack of jurisdiction over the person of the defendant or over the nature or subject of the action need not allege that the ordinary remedies of new trial, reconsideration, or appeal are no longer available through no fault of the petitioner. A judgment rendered without jurisdiction is null and void and may be assailed at any time, collaterally or in a direct action, or by resisting it whenever invoked, unless barred by laches. The Court applied this doctrine to hold that the Spouses Galura could maintain their Rule 47 petition without first availing of the ordinary remedies.
• Due Process and Service of Summons — Service of summons is the means by which the court acquires jurisdiction over the defendant's person and affords the defendant an opportunity to be heard. In the absence of a valid waiver, trial and judgment without valid service are null and void. The Court applied this principle in finding that the invalid substituted service deprived the RTC of jurisdiction over the Spouses Galura and rendered the default judgment and execution order void as to them.

• "The summons must be served to the defendant in person. It is only when the defendant cannot be served personally within a reasonable time that a substituted service may be made. Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the fact that such efforts failed. This statement should be made in the proof of service." — This passage states the strict standard for substituted service and explains why the return of service must contain the facts showing impossibility of personal service.
• "In the present case, there was no showing in the return of service (1) of the impossibility of personal service within a reasonable time; (2) that Lapuz, the person on whom summons was served, was of suitable age and discretion; and (3) that Lapuz resided in the residence of the Spouses Galura. Consequently, the RTC did not acquire jurisdiction over the persons of the Spouses Galura, and thus the Spouses Galura are not bound by the RTC’s 27 June 2001 Decision and 10 November 2004 Order." — This is the ratio decidendi on the invalid substituted service and its jurisdictional consequence.
• "In a case where a petition for annulment of a judgment or final order of the RTC filed under Rule 47 of the Rules of Court is grounded on lack of jurisdiction over the person of the defendant/respondent or over the nature or subject of the action, the petitioner need not allege in the petition that the ordinary remedy of new trial or reconsideration of the final order or judgment or appeal therefrom are no longer available through no fault of her own." — This passage states the Rule 47 exception applied by the Court.
• "Service of summons upon the defendant is the means by which the court may acquire jurisdiction over his person. In the absence of a valid waiver, trial and judgment without such service are null and void." — This quotation from Keister vs. Judge Navarro, adopted in the decision, defines the jurisdictional importance of service of summons and the consequence of invalid service.

• Sandoval II vs. HRET, 433 Phil. 290, 301 (2002) — Enumerated the requisites of a valid substituted service of summons and held that statutory restrictions for substituted service must be strictly, faithfully, and fully observed; applied to invalidate the substituted service in this case.
• Keister vs. Judge Navarro, 167 Phil. 567, 572-573 (1977) — Held that service of summons is the means by which the court acquires jurisdiction over the defendant's person and that, absent a valid waiver, trial and judgment without such service are null and void; cited to support the jurisdictional consequence of the invalid substituted service.
• Ancheta vs. Ancheta, 468 Phil. 900, 911 (2004) — Held that a Rule 47 petition for annulment grounded on lack of jurisdiction over the person need not allege that ordinary remedies are no longer available through no fault of the petitioner; relied on to reject the Court of Appeals' dismissal on that ground.
• Orion Security Corporation vs. Kalfam Enterprises, Inc., G.R. No. 163287, 27 April 2007, 522 SCRA 617, 623-624 — Cited in the decision's footnote to support the conclusion that the RTC did not acquire jurisdiction over the persons of the Spouses Galura.

• Section 6, Rule 14, Rules of Court — Provides that, whenever practicable, summons shall be served by handing a copy to the defendant in person, or, if the defendant refuses to receive and sign for it, by tendering it to him. The Court applied this to hold that personal service is the preferred mode and that substituted service was improper absent a showing that personal service within a reasonable time was impossible.
• Section 7, Rule 14, Rules of Court — Allows substituted service if, for justifiable causes, the defendant cannot be served within a reasonable time, by leaving copies of the summons at the defendant's residence with some person of suitable age and discretion then residing therein, or at the defendant's office or regular place of business with some competent person in charge. The Court found the requirements not satisfied because the return of service did not show the required circumstances.
• Rule 47, Rules of Court — Governs annulment of judgment or final order. The Court applied the rule to hold that a petition grounded on lack of jurisdiction over the person need not allege that the ordinary remedies of new trial, appeal, or petition for relief are no longer available through no fault of the petitioner.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Renato C. Corona, Associate Justice Teresita J. Leonardo-De Castro, and Associate Justice Lucas P. Bersamin concurred in the decision.