BORLONGAN v. BDO

Carmelita Borlongan, Petitioner, vs. Banco de Oro, Respondent

G.R. No. 217617

April 5, 2017

FACTS:

 In 1976, Eliseo Borlongan, Jr. and his wife Carmelita, acquired a real property covered by Transfer Certificate of Title. In 2012, they went to the Registry of Deeds of Pasig City to obtain a copy of the TCT in preparation for a prospective sale of the subject property. To their surprise, the title contained an annotation that the property covered thereby was the subject of an execution sale in a Civil Case pending before Branch 134 of Makati RTC. Petitioner immediately procured a copy of the records and found out that respondent Banco de Oro (BDO), formerly Equitable PCI Bank, filed a complaint for sum of money against Tancho Corporation, the principal debtor of loan obligations obtained from the bank. Likewise impleaded were several persons, including Carmelita, who supposedly signed four (4) security agreements totaling ₱13, 500,000 to guarantee the obligations of Tancho Corporation.

On July 2, 2003, the Makati RTC issued an Order directing the service of summons to all the defendants at the business address of Tancho Corporation and IT appears that respondent BDO already foreclosed the said Fumakilla Compound as early as August 21, 2000, following Tancho Corporation's failure to pay its obligation. BDO already consolidated its ownership of the property on November 16, 2001. On July 31, 2003, the process server filed an Officer's Return stating that summons remained unserved as the "defendants are no longer holding office at [Fumakilla Compound]."

After the single attempt at personal service on Carmelita and her co-defendants, BDO moved for leave to serve the summons by publication and the RTC granted the motion. BDO filed an ex-parte Motion for the Issuance of a Writ of Attachment against the defendants, including Carmelita. During the hearing on the motion, BDO submitted a copy of the title of the subject property. The Makati RTC thereafter granted BDO's motion and a Writ of Attachment was issued against the defendants effectively attaching the subject property on behalf of BDO.

On December 20, 2005, BDO filed an ex-parte motion praying, among others, that the summons and the complaint be served against Carmelita at the subject property. The Makati RTC granted the motion. On February 9, 2006, the Sheriff filed a return stating that no actual personal service was made as Carmelita "is no longer residing at the given address and the said address is for 'rent,' as per information gathered from the security guard on duty." BDO filed a manifestation stating that it had complied with the October 28, 2003 Order of the Makati RTC having caused the publication of the alias summons and the complaint in People's Taliba on May 15, 2006. Thereafter, upon BDO's motion, the Makati RTC declared the defendants including Carmelita, in default. BDO soon after proceeded to present its evidence ex-parte. On November 29, 2007, the Makati RTC rendered a Decision holding the defendants liable to pay BDO ₱32,543,856.33 plus 12% interest per annum from the time of the filing of the complaint until fully paid and attorney's fees.

Following the discovery of the sale of their property, Eliseo executed an affidavit of adverse claim and filed a Complaint for Annulment of Surety Agreements, Notice of Levy on Attachment, Auction Sale and Other Documents with the Regional Trial Court of Pasig City alleging in his Complaint that the subject property is a family home that belongs to the conjugal partnership of gains he established with his wife. He further averred that the alleged surety agreements upon which the attachment of the property was anchored were signed by his wife without his consent and did not redound to benefit their family. Thus, he prayed that the surety agreements and all other documents and processes, including the ensuing attachment, levy and execution sale, based thereon be nullified.

BDO filed a Motion to Dismiss the Complaint, asserting that the Pasig RTC has no jurisdiction to hear Eliseo's complaint and the complaint failed to state a cause of action. The Pasig RTC dismissed the case citing lack of jurisdiction and held that it could not pass upon matters already brought before the RTC Makati and, citing Spouses Ching v.Court of Appeals, the husband of a judgment debtor is not a stranger to a case who can file a separate and independent action to determine the validity of the levy and sale of a property.

On a motion for reconsideration filed by Eliseo, the Pasig RTC reinstated the case with qualification. Relying on Buado v. Court of Appeals, the Pasig RTC held that since majority of Eliseo's causes of action were premised on a claim that the obligation contracted by his wife has not redounded to their family, and, thus, the levy on their property was illegal, his filing of a separate action is not an encroachment on the jurisdiction of the Makati RTC, which ordered the attachment and execution in the first place. The Pasig RTC clarified, however, that it cannot annul the surety agreements supposedly signed by Carmelita since Eliseo was not a party to those agreements and the validity and efficacy of these contracts had already been decided by the Makati RTC. Both Eliseo and BDO referred the Pasig RTC's Decision to the Court of Appeals (CA).

Eliseo moved for, but was denied, reconsideration by the appellate court. Hence, he elevated the matter to the SC via a Petition for Review on Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 218540. The Court issued a Resolution denying Eliseo's petition. Meanwhile, on an ex-parte omnibus motion filed by BDO, the Makati RTC ordered the issuance of a Writ of Possession and the issuance of a new TCT covering the subject property in favor of the respondent bank. Arguing that the Makati RTC had not acquired jurisdiction over her person as the service of the summons and the other processes of the court was defective, Carmelita filed a Petition for Annulment of Judgment (With Urgent Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction) which was denied by the appellate court. Aggrieved, Carmelita interposed a motion for the reconsideration of the CA's November 12, 2014 Resolution but was again denied. Thus, on April 27, 2015, Carmelita filed a Petition for Review, docketed as G.R. No. 217617 ascribing to the appellate court the commission of serious reversible errors. Hence, Carmelita interposed a Motion for Reconsideration urging the Court to take a second hard look at the facts of the case and reconsider its stance.

 Considering that both cases originated from the same facts and involved interrelated issues, on January 25, 2016, the Court resolved to consolidate G.R. No. 218540 with G.R. No. 217617.

ISSUE/S:

1. Whether or not the CA erred in refusing to issue a TRO and/or WPI stopping the consolidation of BDO’s ownership over the subject property.

2. Whether or not Pasig RTC has jurisdiction to hear and decide a case filed by the non-debtor husband to annul the levy and execution sale of the subject property ordered by the Makati RTC against his wife.

HELD:

Yes. It is clear that a writ of preliminary injunction is warranted where there is a showing that there exists a right to be protected and that the acts against which the writ is to be directed violate an established right. Otherwise stated, for a court to decide on the propriety of issuing a TRO and/or a WPI, it must only inquire into the existence of two things: (1) a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage. The primary prayer of the Petition for Annulment before the appellate court is the declaration of the nullity of the proceedings in the RTC and its Decision dated November 29, 2007; it is not merely confined to the prevention of the issuance of the writ of possession and the consolidation of the ownership of the subject property in BDO's name-the concerns of the prayer for the TRO and/or WPI. Indeed, the petitioner's prayer for the issuance of a TRO and/or WPI was intended to preserve the status quo ante, and not to pre-empt the appellate court's decision on the merits of her petition for annulment. Thus, it was a grievous error on the part of the CA to deny her of this provisional remedy.

As to the question of the Pasig RTC’s jurisdiction to hear Eliseo's complaint, Section 16, Rule 39 of the Rules of Court allows third-party claimants of properties under execution to vindicate their claims to the property in a separate action with another court. The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such bond is filed. Nothing shall prevent such claimant or any third person from vindicating his claim to the property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate action against a third-party claimant who filed a frivolous or plainly spurious claim. The availability of the remedy provided under the foregoing provision requires only that that the claim is a third-party or a "stranger" to the case. The poser then is this: is the husband, who was not a party to the suit but whose conjugal property was executed on account of the other spouse's debt, a "stranger" to the suit? In Buado v. Court of Appeals, the Supreme Court had the opportunity to clarify that, to resolve the issue, it must first be determined whether the debt had redounded to the benefit of the conjugal partnership or not. In the negative, the spouse is a stranger to the suit who can file an independent separate action, distinct from the action in which the writ was issued. A third-party claim must be filed [by] a person other than the judgment debtor or his agent. In other words, only a stranger to the case may file a third-party claim.

 Pursuant to Mariano however, it must further be settled whether the obligation of the judgment debtor redounded to the benefit of the conjugal partnership or not. By no stretch of imagination can it be concluded that the civil obligation arising from the crime of slander committed by Erlinda redounded to the benefit of the conjugal partnership. Conjugal property cannot be held liable for the personal obligation contracted by one spouse, unless some advantage or benefit is shown to have accrued to the conjugal partnership. Hence, the filing of a separate action by respondent is proper and jurisdiction is thus vested on Branch 21. Thus, to now deny Eliseo the opportunity to question the attachment made by the RTC Makati in a separate and independent action will be to, again, refuse him the due process of law before their property is taken. As the Court is duty-bound to protect and enforce Constitutional rights, this it will not allow. Hence the petitions are granted.