Case Summary (G.R. No. 195619)
Background and Antecedent Facts
The dispute arose from a contract to sell a parcel of land located in Talon Dos, Las Piñas City, covered by Transfer Certificate of Title No. T-10779, initially executed between BF Homes, Inc. and Julie Chandumal. On February 12, 1993, BF Homes sold its rights under this contract to PDB. Chandumal made payments from December 1990 until May 1994 but subsequently defaulted. On July 14, 1998, PDB issued a Notice of Delinquency and Rescission of Contract demanding payment within thirty days, warning that failure to settle would result in termination of all rights under the contract. Chandumal did not comply.
Initiation of Judicial Proceedings and Service of Summons
On June 18, 1999, PDB filed an action for judicial confirmation of notarial rescission and possession delivery under RA 6552, alleging Chandumal’s default caused automatic rescission. PDB attempted to pay the statutory cash surrender value but claimed Chandumal was unavailable. The sheriff attempted personal service of summons on three dates but failed and resorted to substituted service by delivering summons to Chandumal’s mother on August 5, 1999.
Default and Motion to Set Aside
As Chandumal failed to respond, PDB filed a motion to declare her in default, which the RTC granted on January 12, 2001. Subsequently, Chandumal filed a motion to set aside the default order and admit her answer, alleging lack of formal notice of summons and asserting defenses: no demand for payment was made, and PDB failed to tender full cash surrender value as required by RA 6552. The RTC denied her motion and allowed PDB to present evidence ex parte.
RTC Decision on Merits
On May 31, 2004, the RTC ruled in favor of PDB, confirming the notarial rescission of the contract, ordering PDB to deposit ₱10,000 representing the cash surrender value per RA 6552, and requiring Chandumal to pay ₱50,000 in attorney’s fees. Chandumal appealed to the Court of Appeals (CA).
Court of Appeals’ Ruling and Issues Raised in Petition
The CA, on July 27, 2010, nullified and vacated the RTC decision solely due to invalidity of substituted service of summons, without deciding on the substantive question of rescission. The CA denied PDB’s motion for reconsideration on February 16, 2011.
PDB filed a petition for review before the Supreme Court raising three main issues:
- Validity of substituted service of summons;
- Whether the RTC acquired jurisdiction by Chandumal’s voluntary submission; and
- The propriety of judicial confirmation of the notarial rescission of the contract.
Jurisdiction and Rules on Service of Summons
Under the 1987 Constitution and Rules of Court, jurisdiction over person must be acquired either by valid service of summons or voluntary appearance. For in-personam actions such as this, personal service is preferred. Substituted service is only allowed if personal service cannot be effected within reasonable time. It requires (a) impossibility of prompt personal service, (b) detailed description of failed attempts, (c) service to a person of suitable age and discretion at the defendant’s residence, and (d) competent person in charge understanding the summons’ importance.
Invalidity of Substituted Service of Summons in This Case
The Supreme Court upheld the CA’s finding that the substituted service was invalid, as the sheriff’s return failed to establish diligent efforts for personal service. The return was perfunctory, merely stating Chandumal was away without verifying her whereabouts or attempting to wait for her return. There was no detailed narrative to justify substituted service, rendering the summons service ineffective.
Effect of Voluntary Submission to Court’s Jurisdiction
Despite invalid service, the Court found that Chandumal voluntarily submitted to the RTC’s jurisdiction by filing an Urgent Motion to Set Aside Order of Default and attached Answer. Under Section 20, Rule 14 of the Rules of Court, voluntary appearance is equivalent to summons service. Filing pleadings where an affirmative relief is sought, such as motions to admit an answer, constitutes voluntary submission. Chandumal also failed to assert a lack of jurisdiction in her motion. Moreover, her subsequent appeal to the CA confirmed acquiescence to the trial court’s jurisdiction.
Validity of Notarial Rescission Under RA No. 6552
The Court ruled that notwithstanding RTC jurisdiction, there was no valid rescission of the contract under RA 6552. The law allows cancellation by the seller upon buyer’s default but mandates:
- A thirty-day period after notice of cancellation by notarial act, and
- Full payment of the cash surrender value, which must be refunded to the buyer at specified rate
Case Syllabus (G.R. No. 195619)
Parties and Procedural History
- The petitioner is Planters Development Bank (PDB); the respondent is Julie Chandumal.
- The case involves a petition for review under Rule 45 of the Rules of Court seeking to overturn the Court of Appeals (CA) decision dated July 27, 2010, and its Resolution dated February 16, 2011.
- CA’s ruling nullified the Regional Trial Court’s (RTC) decision from May 31, 2004, which had judicially confirmed the notarial rescission of a contract to sell.
- The case arose from Civil Case No. LP-99-0137 filed in RTC Las Piñas City, Branch 255, involving the sale of real property under a contract to sell.
- The dispute centers on the validity of the notarial rescission of the contract to sell and the regularity of summons service.
Facts
- BF Homes, Inc. initially executed a contract to sell a parcel of land located in Talon Dos, Las Piñas City, covered by Transfer Certificate of Title No. T-10779, to respondent Julie Chandumal.
- BF Homes sold all rights, interests, and participation in the contract to PDB on February 12, 1993.
- Chandumal paid amortizations from December 1990 to May 1994 but defaulted thereafter.
- PDB issued a Notice of Delinquency and Rescission of Contract with Demand to Vacate on July 14, 1998, giving Chandumal 30 days to settle arrearages or face contract rescission.
- Chandumal failed to comply; thus, on June 18, 1999, PDB filed a judicial confirmation of notarial rescission and delivery of possession action.
- PDB attempted but failed personal service of summons on Chandumal on at least three occasions before resorting to substituted service by leaving summons with her mother.
- Chandumal did not file an answer within the required period, leading PDB to file a motion to declare her in default; RTC granted this on January 12, 2001.
- Subsequently, Chandumal filed an Urgent Motion to Set Aside the Order of Default and to Admit Attached Answer, denying receipt of summons and contesting debited payments and tender of cash surrender value as required by R.A. No. 6552 (Maceda Law).
- The RTC denied her motion and allowed PDB to present evidence ex parte.
- RTC ruled in favor of PDB, confirming the notarial rescission, ordering PDB to deposit the cash surrender value of P10,000, and granted attorney’s fees to PDB.
- Chandumal appealed to the CA.
- The CA nullified the RTC decision on the ground of invalid substituted service of summons, without ruling on the merits of the rescission.
- PDB’s motion for reconsideration before the CA was denied, leading to the present petition for review.
Issues Presented
- Whether substituted service of summons on Chandumal was valid.
- Whether Chandumal voluntarily submitted to the jurisdiction of the RTC.
- Whether the contract to sell was validly rescinded by notarial act pursuant to Section 3(b) of R.A. No. 6552 (Maceda Law).
Jurisdiction Over Person and Validity of Service of Summons
- Jurisdiction over a defendant in personam action is acquired by valid service of