G.R. No. 70403 - Santiago Syjuco, Inc. vs. Castro

Case Digest (G.R. No. 70403)
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Facts:

Background and Loan Agreements

In November 1964, Eugenio Lim—acting on his own behalf and as attorney‐in‐fact for his mother, Maria Moreno, and his brother Lorenzo, together with his siblings Aramis, Mario, Paulino, and Nila (collectively “the Lims”)—borrowed P800,000.00 from petitioner Santiago Syjuco, Inc. (“Syjuco”), secured by a first mortgage over property registered under TCT Nos. 75413 and 75415.
Subsequent additional loans on the same security increased the aggregate debt to P2,460,000.00 (as of May 8, 1967), with the security augmented by other properties (TCT Nos. 75416 and 75418) held in common by the Lims.
The mortgage deed stipulated that the obligation matured on November 8, 1967; however, after repeated demands the Lims failed to pay, prompting Syjuco to initiate extrajudicial foreclosure proceedings.

Initial Foreclosure Proceedings and Early Litigation

Syjuco caused extra-judicial foreclosure proceedings to be commenced by the Sheriff of Manila with an auction sale scheduled on December 27, 1968.
On December 24, 1968, the Lims filed Civil Case No. 75180 in the Court of First Instance of Manila (Branch 5), alleging that the mortgage was usurious (with an interest rate of 23% on top of an 11% “kickback”) and claiming that it should be declared void.
A restraining order was issued on December 26, 1968 based, in part, on the Lims’ waiver of the right to republish the sale notice.
On November 25, 1970, the Trial Court held that although usury tainted the mortgage, the operation was not void; it fixed the debt at P1,136,235.00 and allowed foreclosure on that basis.
Syjuco moved for a new trial to introduce additional evidence against the usury claim. The case was reopened, and the Lims opposed this reopening through an appeal in CA-G.R. No. 00242-R, which failed; their subsequent petition for certiorari (G.R. No. L-34683) was likewise dismissed.
On remand, the Trial Court reversed its earlier usury finding on August 16, 1972, declaring the principal debt at P2,460,000.00 (exclusive of interest at 12% per annum from November 8, 1967) and permitting foreclosure.

Subsequent Appeals and Additional Litigation

On September 9, 1972, Atty. Paterno R. Canlas joined the representation of the Lims and appealed the amended decision (docketing CA-G.R. No. 51752) seeking to again declare the mortgage void for usury and to reduce the debt, but the Court of Appeals affirmed the Trial Court’s decision on October 25, 1976.
The Lims’ further attempt to secure relief by filing a petition for review (G.R. No. L-45752) was denied, and judgment was entered on September 24, 1977.
In a separate effort to stop Syjuco’s foreclosure, the Lims filed Civil Case No. 112762 on December 19, 1977, alleging lack of republication of the notice of sale—even though their earlier waiver had effectively allowed such non-republication.
In an anomalous development within Civil Case No. 75180, Judge Jose H. Tecson granted a restraining order on December 19, 1977, and even authorized a private sale of the mortgaged property upon the filing of a bond (initially P6 million, later increased by P3 million), arguing that such bond superseded and novated the mortgage.
After further delays and unresolved incidents over the next few years, Syjuco filed a petition for certiorari and prohibition in G.R. No. L-56014 on January 28, 1981, challenging Judge Tecson’s delays, his permitting of a private sale, and the supposed novation by the Lims’ bond.
On September 21, 1982, the Supreme Court issued a judgment setting aside Judge Tecson’s orders, declaring that the republication by Syjuco rendered the alleged defect moot, the bonds could not discharge the mortgage, and directing that the Sheriff of Manila proceed with the foreclosure sale.

The “Secret Action” and Further Court Proceedings

On October 14, 1982, shortly after notice of the Supreme Court decision in G.R. No. L-56014 was served on the Lims, they filed yet another action (Civil Case No. Q-36485) in the Regional Trial Court of Quezon City, now in the name of their partnership “Heirs of Hugo Lim.”

The complaint claimed that the mortgage was void because the underlying property had been contributed to the partnership on March 30, 1959, without proper authority, thereby negating the individual Lims’ capacity to mortgage the property.

A restraining order was issued on October 15, 1982 by Judge Jose P. Castro, and the Sheriff’s return of service was notably vague—failing to identify the person served and the exact place of service.
A default judgment by default was rendered on February 22, 1983 against Syjuco; however, despite this, the matter lay dormant for about seventeen months as Atty. Canlas did not move for its execution.
Additional actions were also filed by the Lims in other branches of the RTC (Civil Case No. 83-19018 in Manila and Civil Case No. Q-32924 in Quezon City) aiming to further enjoin the foreclosure sale.
Syjuco then reactivated Civil Case No. Q-36485 when the Sheriff set another auction date, but a letter from Atty. Canlas drawing attention to the default judgment halted the sale. Subsequent motions by Syjuco challenging service of summons and jurisdiction were met with arguments by the lower courts that the default judgment was final.

The Supreme Court’s Intervention in G.R. No. L-70403

On April 3, 1985, Syjuco filed the instant petition for certiorari, prohibition, and mandamus seeking:

Annulment of the default judgment in Civil Case No. Q-36485 on grounds of lack of service of summons, res judicata, laches, and failure to state a cause of action.
An order directing the Sheriff to proceed immediately with the foreclosure sale of the mortgaged property.
Perpetual injunctions restraining the Lims, their partnership, and their counsel from further hindering the foreclosure.

The respondents—including Judge Castro, the Lims and their partnership, and Atty. Paterno R. Canlas—argued that Syjuco was properly served and that the earlier default judgment was valid, among other defenses.
The record revealed duplicative and sham defenses by the Lims (and by extension their partnership), intended to delay the foreclosure indefinitely.
A critical element in the Supreme Court’s review was the defective sheriff’s return of service, which cast doubt on the validity of the default judgment in Civil Case No. Q-36485.

Issues:

Validity of the Foreclosure Proceedings

Whether the extrajudicial foreclosure pursued by Syjuco could be halted continuously by the Lims’ successive litigation and the issuance of multiple restraining orders.
Whether the filing of multiple actions by the Lims and their partnership (including the “secret” action in Civil Case No. Q-36485) amounted to abuse of the judicial process and forum shopping.

Service of Summons and Jurisdiction

Whether Syjuco was properly served with summons in Civil Case No. Q-36485 considering the ambiguities in the sheriff’s return.
Whether the lack of proper service rendered the trial court’s default judgment and all subsequent proceedings null and void due to a failure to confer jurisdiction.

Claims of Usury, Novation, and Unauthorized Mortgage

Whether the mortgage was void for usury—as initially raised in Civil Case No. 75180—and if the enforcement of the mortgage was consequently invalid.
Whether the alleged novation of the mortgage by virtue of a bond filed by the Lims was legally tenable.
Whether the claim that the property had been contributed to the partnership “Heirs of Hugo Lim” (and was hence not part of the individual Lims’ assets) could negate the mortgage.

Application of Res Judicata and Estoppel

Whether the final, executory judgment in Civil Case No. 75180 (and its subsequent appellate affirmations) should preclude the re-litigation of issues raised in later cases.
Whether the doctrine of equitable estoppel barred the Lims and their partnership from now asserting that the mortgage was unauthorized due to their earlier conduct and silence.

Ruling:

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Ratio:

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