Facts:

This case revolves around a petition for review on certiorari filed by Banco de Oro-EPCI, Inc. (petitioner) against JAPRL Development Corporation (respondent), Rapid Forming Corporation (RFC), and Jose U. Arollado. The events unfolded after the petitioner, having reviewed JAPRL's financial statements for the fiscal years 1998, 1999, and 2000, extended credit facilities amounting to P230,000,000 on March 28, 2003. The loan was backed by sureties from RFC and Arollado. However, shortly after obtaining the loan, JAPRL defaulted on its payment obligations concerning four trust receipts. Alarm bells rang when the petitioner learned from MRM Management, JAPRL's financial adviser, that JAPRL had allegedly tampered with its financial statements to guarantee the loan and portray itself as financially healthy.

Subsequently, the petitioner issued a formal demand for JAPRL to settle its outstanding liabilities amounting to P194,493,388.98. On August 30, 2003, JAPRL, together with RF

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Facts:

Parties and Credit Extension

• Banco de Oro-EPCI, Inc. (petitioner) extended credit facilities amounting to P230,000,000 to JAPRL Development Corporation (JAPRL) on March 28, 2003 based on its 1998–2000 financial statements.
• Respondents include JAPRL, its subsidiary Rapid Forming Corporation (RFC), and Jose U. Arollado (one of the sureties for JAPRL’s obligations).

Falsification of Financial Statements and Default

• Despite JAPRL’s apparently strong financial position, the corporation defaulted on payments of four trust receipts shortly after its loan approval.
• The petitioner later discovered, through JAPRL’s financial adviser (MRM Management), that JAPRL had altered and falsified its financial statements by inflating its sales revenues and misrepresenting its income from operations for the fiscal years in question.
• Based on provisions in the Trust Receipt Agreement, Banco de Oro demanded the immediate payment of JAPRL’s outstanding obligations amounting to P194,493,388.98.

Initiation of Rehabilitation Proceedings

• JAPRL (and its subsidiary RFC) filed a petition for rehabilitation in the Quezon City Regional Trial Court (RTC) on August 30, 2003, disclosing a decline in sales over the previous three years as well as significant losses in 2002.
• A stay order was issued by the Quezon City RTC, and although a rehabilitation plan was eventually proposed, it was rejected on May 9, 2005.
• Subsequently, on February 20, 2006, JAPRL and RFC also filed a petition for rehabilitation in the RTC of Calamba, Laguna, which resulted in another stay order being issued on March 13, 2006.

Filing of the Complaint and Service of Summons

• After JAPRL ignored its demand for payment, petitioner filed a complaint for a sum of money with an application for the issuance of a writ of preliminary attachment in the Makati City RTC on August 21, 2003, alleging that JAPRL fraudulently altered its financial statements.
• The Makati RTC ordered the service of summons on the respondents. Summonses were served on JAPRL, RFC, and Arollado; however, the return of service indicated that an “administrative assistant” received the summons.
• Respondents argued that under Section 11, Rule 14 of the Rules of Court, service must be made on specified corporate officers, not on an administrative assistant, while Arollado contended that personal service was required based on Section 6, Rule 14.

Jurisdictional and Procedural Disputes

• The Makati RTC, in its October 10, 2005 order, noted that due to the busy schedules of corporate officers, it is customary for summonses to be received by administrative assistants as part of routine business, and thus denied the motion to dismiss the complaint.
• Respondents later moved for reconsideration; however, they eventually withdrew their motion in the Makati RTC.
• Respondents subsequently filed a petition for certiorari in the Court of Appeals (CA) alleging that the service of summons was defective, thereby challenging the court’s jurisdiction over them.
• The CA, in its June 7, 2007 decision, ruled in favor of respondents on the ground that the service on an administrative assistant deprived the Makati RTC of jurisdiction.

Petition for Review on Certiorari and Related Allegations

• Banco de Oro-EPCI, Inc. filed the petition for review on certiorari, asserting that respondents had deliberately employed procedural technicalities to evade proper service and delay proceedings, thereby protecting themselves from their financial obligations.
• The petitioner argued that the waiver of any defect in service occurred when respondents moved for the suspension of proceedings in the rehabilitation case before the Calamba RTC.
• The petition further emphasized the significance of maintaining a sound banking system and the vital public interest in ensuring that fraudulent practices do not hinder the prompt collection of debts.

Issue:

Validity of the Service of Summons

• Whether the summons served on an “administrative assistant” complied with the Rules of Court for service upon a corporation and its representative individuals.
• Whether the service defect, if any, was consequential and sufficient to deprive the Makati RTC of jurisdiction over the respondents.

Waiver of the Service Defect

• Whether respondents, by voluntarily participating in subsequent rehabilitation proceedings and moving to suspend the case, effectively waived any alleged defects in service of summons.
• If such waiver should compel the Makati RTC to proceed with the complaint despite the earlier jurisdictional issue raised by respondents.

Timeliness and Merits of the Petition for Certiorari

• Whether the petition for certiorari filed by the respondents in the CA was timely, considering it was filed 10 months and 1 day after the contested order.
• Whether the respondents’ procedural arguments were intended solely to delay the payment of their obligations.

Impact of Fraud on Credit Accommodation

• Whether JAPRL’s alleged fraudulent alterations in its financial statements justify the immediate demand for payment under the Trust Receipt Agreement and Section 40 of the General Banking Law.
• How a finding of fraud might affect the status of the rehabilitation proceedings and the petitioner’s right to demand liquidated sums.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)