Villarama vs. Guno

Service of summons upon one spouse is binding upon the other spouse in an action in personam involving an obligation of the conjugal partnership, where the spouses are not shown to have been separated in fact or their marriage annulled, and the spouse served actively participates in the proceedings litigating their common interests.

Petitioner Ramon Villarama was an irrevocable beneficiary under an Amended Trust Agreement executed by the Spouses Marcial and Rita Reyes covering promissory notes issued by the Spouses Crisantomas and Carmelita Guno in connection with the sale of a house and lot in Quezon City. The property had been the subject of a prior foreclosure by Prudential Bank and Trust Company, which was later nullified by the RTC, the Court of Appeals, and the Supreme Court in a case that attained finality on March 11, 1997. The spouses Guno were married prior to the effectivity of the Family Code on August 3, 1988, and no marriage settlement was shown to have been executed, so the regime of conjugal partnership of gains governed their property relations.

The Spouses Marcial and Rita Reyes sold a house and lot located at No. 19 Jose Escaller Street, Loyola Heights, Quezon City to the Spouses Crisantomas and Carmelita Yadao Guno. A deed of absolute sale was executed, and eighteen promissory notes were issued by the Sps. Guno in favor of the Sps. Reyes. The Sps. Reyes thereafter executed a Trust Agreement with Prudential Bank and Trust Company covering the promissory notes, naming their children as beneficiaries. On May 22, 1990, the Sps. Reyes executed an Amended Trust Agreement naming petitioner Ramon Villarama as an irrevocable beneficiary.

The Sps. Guno obtained loans from Prudential and, as security, executed promissory notes and real estate mortgages on the property, with TCT No. 298124 issued under their name. When the Sps. Guno defaulted, Prudential foreclosed the mortgage, sold the property at public auction, emerged as the highest bidder, consolidated ownership, obtained TCT No. 355218, and caused the eviction of the Sps. Guno, placing Villarama in possession.

On November 20, 1987, the Sps. Guno lodged a complaint for annulment of foreclosure sale and title against Prudential before the RTC-Branch 95 of Quezon City. The RTC nullified the foreclosure sale for failure to comply with Section 3 of Act No. 3135, as amended, ordered the cancellation of Prudential's title, and reinstated the Sps. Guno's title. The CA and the Supreme Court affirmed this decision, which attained finality on March 11, 1997.

On July 17, 1997, Villarama instituted a Complaint for Rescission of Promissory Notes, Deed of Sale of Real Property and Cancellation of Title with Damages against the Sps. Guno before the RTC-Branch 223, docketed as Civil Case No. Q-97-31700. On September 19, 1997, the RTC issued an Alias Summons to the Sps. Guno at the U.P. Law Center, Diliman, Quezon City. The Sheriff's Return dated September 24, 1997 stated that substituted service was effected on Carmelita through a clerk at her office, Ms. Francesa V. Tadeo, who acknowledged receipt "only for defendant Carmelita Guno," and that summons to Crisantomas was returned unserved because he did not reside nor hold office at the address provided in the complaint. On March 6, 1998, the process server issued an Officer's Return stating that alias summons was served upon Crisantomas through substituted service at 408 P. Bernal Street, Ugong, Pasig City, by leaving copies with Ruby Guno Santiago, his sister, a person of suitable age and discretion residing therein.

On November 7, 1997, Carmelita filed her Answer with Counterclaim, admitting the allegation in paragraph 1.02 of the Complaint that the Sps. Guno had a postal address at UP Law Center, Diliman, Quezon City where they may be served with summons. Crisantomas was declared in default for failure to file an answer. In a Decision dated May 9, 2005, the RTC granted Villarama's complaint, declaring the eighteen promissory notes and the deed of sale rescinded, ordering the cancellation of TCT No. 218121, and directing the Sps. Guno to pay liquidated damages of ₱50,000.00 and attorney's fees of ₱50,000.00. Carmelita and Prudential appealed, docketed as CA-G.R. No. 87062.

On July 6, 2005, Crisantomas filed a Special Appearance with Motion to Vacate Judgment, claiming the decision was void for improper service of summons on his person. He submitted an affidavit stating that he never resided at 408 P. Bernal Street, Ugong, Pasig City, was never served summons, and was never notified of the proceedings. The RTC denied the motion in an Order dated November 16, 2005, ruling that service upon Carmelita was binding upon Crisantomas as co-administrator of the conjugal property, and that Crisantomas was estopped from denying residence at the Pasig City address. Crisantomas then questioned the order before the CA, which ruled in his favor, finding that the return did not state that prompt and personal service was rendered impossible and that no efforts were shown to have been made to serve him personally.

• RTC's Position of Fact-Finding: Petitioner argued that the RTC was in the best position to determine the veracity of the parties' allegations, and that the only evidence submitted by Crisantomas was his affidavit denying receipt of summons.
• Burden of Proof on Crisantomas: Petitioner insisted that it was incumbent upon Crisantomas to prove the fact or details of his separation from Carmelita, and that he did not allege any meritorious defense, which is a requirement before the relief sought can be granted.
• Compliance with Substituted Service: Petitioner insisted that the requirements of substituted service had been complied with.
• Finality of Related Appeal: Petitioner raised that the CA decision in Carmelita's and Prudential's appeal (CA-G.R. No. 87062) had already attained finality, and that the RTC had issued an Order dated November 28, 2016 granting a writ of execution ordering Carmelita to pay Prudential the unpaid principal obligation plus accrued interests, penalty, and attorney's fees.

• Echo of Petitioner's Arguments (Prudential): Respondent Prudential echoed Villarama's arguments, contending that since the Sps. Guno were still married at the time of the complaint, nullifying the proceedings to allow Crisantomas to prosecute his separate claim would serve no purpose other than to delay the resolution of the case.
• Correct Application of Law (Carmelita): Carmelita submitted that the CA decision was the correct application of law and prevailing jurisprudence, stressing that Crisantomas did not and never held office in the same address as she did, and that long before the filing of the complaint, they had been separated in fact.
• Fatally Deficient Officer's Return (Crisantomas): Crisantomas insisted that the fatally deficient Officer's Return could not establish a valid substituted service of summons, and that the laws do not support Villarama's "no need for service on husband after service of summons on wife" argument.

• Validity of Service of Summons: Whether the alias summons was validly served on Crisantomas in Civil Case No. Q-97-31700.

• Validity of Service of Summons: Yes. The alias summons served upon Carmelita was binding upon Crisantomas as well, because the obligation sued upon was conjugal, the spouses were not shown to have been separated in fact, and Carmelita actively participated in the proceedings litigating their common interests.

• Validity of Service of Summons: The Court began with the settled principle that a court's jurisdiction over a defendant is founded on a valid service of summons, citing Manotoc vs. Court of Appeals, and that proper service protects one's right to due process. The Court found that the alias summons was served upon both Crisantomas and Carmelita at the 3rd Floor Quezon Hall, UP Diliman, Quezon City, albeit with the caveat that it was received only insofar as Carmelita was concerned. Carmelita then proceeded to participate fully in the proceedings until rendition of judgment on May 9, 2005.

The Court rejected Crisantomas' denial of receipt of summons as a mere unsubstantiated denial. His affidavit stated only that he never resided at 408 P. Bernal Street, Ugong, Pasig City, was never served summons, and was never notified of the proceedings. The Court noted that he never stated in his affidavit that he and Carmelita were separated in fact—this was merely stated in his motion as a footnote—and no dates or evidence were supplied as to when they were separated or when their annulment took place. The Court applied the basic rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent to proof.

The Court further observed that the records were barren of any indication that Carmelita ever stated during the RTC proceedings that she and Crisantomas were separated in fact. In fact, Carmelita admitted in her answer the allegation in paragraph 1.02 of the Complaint that the Sps. Guno had a postal address at UP Law Center, Diliman, Quezon City where they may be served with summons. It was only in her Comment before the Supreme Court that Carmelita echoed the claim of separation, again without evidence.

The Court characterized the action as one in personam, as Villarama sought rescission of promissory notes, deed of sale, and cancellation of title based on personal liability. Since Crisantomas and Carmelita were married prior to the effectivity of the Family Code on August 3, 1988, and no marriage settlement was shown, the regime of conjugal partnership of gains governed their property relations under Article 118 of the Civil Code. All property acquired during the marriage is presumed conjugal unless the contrary is proved, citing Carandang vs. Heirs of Quirino A. de Guzman. As the deed of sale and promissory notes were entered into during the marriage, the obligations thereunder were subsumed under the conjugal partnership, which is liable for all debts and obligations contracted by the husband for the benefit of the conjugal partnership and those contracted by the wife for the same purpose, under Article 161(1) of the New Civil Code (now Article 121(2) and (3) of the Family Code).

Because the obligation clearly appeared to be a transaction for which the conjugal partnership was liable, the spouses were correctly made co-defendants as they had the same interests therein. The Court deemed the receipt of Carmelita of the summons as binding to her as it was to Crisantomas. The core of the service of summons—protection of the right to due process—was not transgressed, as Crisantomas failed to substantiate his claims, Carmelita actively participated and litigated their identical interests, and Crisantomas failed to prove separation in fact or annulment. Citing Montefalcon, et al. vs. Vasquez, the Court noted that a plaintiff is merely required to know the defendant's residence, office, or regular business place, and is not duty-bound to ensure that the person upon whom service was made actually delivers the summons to the defendant; it is immaterial that the defendant does not receive actual notice. The Court concluded that to rule otherwise would serve nothing but to delay a case already in litigation since the 1990's, and would compel Villarama to file anew a case for rescission against Crisantomas, who is in no better position than Carmelita. Having deemed the alias summons served upon Carmelita as service upon and binding on Crisantomas, the Court no longer deemed it necessary to discuss the correctness and ramifications of the substituted service upon him.

• Service of Summons Upon One Spouse in Actions Involving Conjugal Obligations — In an action in personam involving an obligation of the conjugal partnership, service of summons upon one spouse is binding upon the other spouse where the spouses are not shown to have been separated in fact or their marriage annulled, and the spouse served actively participates in the proceedings litigating their common interests. The Court applied this doctrine to hold that Carmelita's receipt of the alias summons bound Crisantomas, as the deed of sale and promissory notes were conjugal obligations and no evidence of separation was proffered.

• Conjugal Partnership of Gains — All property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. The conjugal partnership is liable for all debts and obligations contracted by the husband for the benefit of the conjugal partnership and those contracted by the wife for the same purpose. The Court applied this doctrine to conclude that the obligations under the deed of sale and promissory notes were conjugal, making the spouses co-defendants with the same interests.

• Bare Allegations Are Not Evidence — Bare allegations, unsubstantiated by evidence, are not equivalent to proof; mere allegations are not evidence. The Court applied this rule to reject Crisantomas' affidavit denying receipt of summons and his claim of separation in fact, as no corroborating evidence was adduced.

• Presumption of Delivery of Summons — A plaintiff is merely required to know the defendant's residence, office, or regular business place; he need not know where a resident defendant actually is at the very moment of filing suit, and is not duty-bound to ensure that the person upon whom service was actually made delivers the summons to the defendant or informs him about it. The law presumes that for him, and it is immaterial that the defendant does not receive actual notice. The Court cited this doctrine from Montefalcon, et al. vs. Vasquez to support the binding effect of service upon Carmelita.

• "The courts' jurisdiction over a defendant is founded on a valid service of summons. Without a valid service, the court cannot acquire jurisdiction over the defendant, unless the defendant voluntarily submits to it. The defendant must be properly apprised of a pending action against him and assured of the opportunity to present his defenses to the suit. Proper service of summons is used to protect one's right to due process." — This passage from Manotoc vs. Court of Appeals states the foundational principle that valid service of summons is necessary for the court to acquire jurisdiction over the defendant, and frames the due process purpose of summons.

• "It is basic in the rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent to proof. In short, mere allegations are not evidence." — This passage, citing GSIS v. Prudential Guarantee and Assurance, Inc., et al., articulates the evidentiary rule applied to reject Crisantomas' unsubstantiated denial of receipt of summons and his claim of separation.

• "All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. Credits are personal properties, acquired during the time the loan or other credit transaction was executed. Therefore, credits loaned during the time of the marriage are presumed to be conjugal property." — This passage from Carandang vs. Heirs of Quirino A. de Guzman defines the presumption of conjugal property, which the Court applied to characterize the obligations under the deed of sale and promissory notes as conjugal.

• "A plaintiff is merely required to know the defendant's residence, office or regular business place. He need not know where a resident defendant actually is at the very moment of filing suit. He is not even duty-bound to ensure that the person upon whom service was actually made delivers the summons to the defendant or informs him about it. The law presumes that for him. It is immaterial that defendant does not receive actual notice." — This passage from Montefalcon, et al. vs. Vasquez supports the Court's conclusion that the core purpose of summons—due process—was not transgressed even if Crisantomas did not receive actual notice.

• Manotoc vs. Court of Appeals, 530 Phil. 454 (2006) — Cited as controlling authority for the principle that a court's jurisdiction over a defendant is founded on valid service of summons, and that proper service protects the right to due process.

• Carandang vs. Heirs of Quirino A. de Guzman, 538 Phil. 319 (2006) — Cited as controlling authority defining the presumption that all property acquired during the marriage is conjugal unless the contrary is proved, applied to characterize the obligations as conjugal.

• Montefalcon, et al. vs. Vasquez, 577 Phil. 383 (2008) — Cited as controlling authority for the principle that a plaintiff is not duty-bound to ensure actual delivery of summons to the defendant, and that it is immaterial that the defendant does not receive actual notice.

• GSIS vs. Prudential Guarantee and Assurance, Inc., et al., 721 Phil. 740, 753-754 (2013) — Cited for the evidentiary rule that bare allegations, unsubstantiated by evidence, are not equivalent to proof.

• Perkin Elmer Singapore PTE Ltd. vs. Dakila Trading Corp., 556 Phil. 822, 839 (2007) — Cited for the definition of an action in personam as an action against a person on the basis of his personal liability.

• Biaco vs. Phil. Countryside Rural Bank, 544 Phil. 45 (2007) — Cited in support of the principle that the core of the service of summons is the protection of the right to due process.

• Section 3, Act No. 3135, as amended — The provision governing foreclosure sale requirements; the RTC nullified the foreclosure sale for failure to comply with these requirements in the prior case between the Sps. Guno and Prudential.

• Article 118, Civil Code — The provision establishing that the regime of conjugal partnership of gains governs the property relations of spouses married before the effectivity of the Family Code, absent a marriage settlement; applied because Crisantomas and Carmelita were married prior to August 3, 1988.

• Article 160, Civil Code — The provision establishing the presumption that all property acquired during the marriage is conjugal unless the contrary is proved; applied to the deed of sale and promissory notes.

• Article 161(1), New Civil Code (now Article 121(2) and (3), Family Code) — The provision making the conjugal partnership liable for all debts and obligations contracted by the husband for the benefit of the conjugal partnership and those contracted by the wife for the same purpose; applied to characterize the obligations as conjugal, making the spouses co-defendants with the same interests.

• Article 116, Family Code — Cited in connection with the presumption of conjugal property; the Court cited this alongside Article 160 of the Civil Code.

• Justice Leonardo-De Castro (Acting Chairperson)
• Justice Peralta
• Justice Del Castillo
• Justice Leonen