G.R. No. 78328 - Sahagun vs. Court of Appeals

Case Summary (G.R. No. 78328)

Factual Background

Private respondent Filinvest Credit Corporation sued petitioner’s spouse, Abel (alias Abelardo) Sahagun, on a promissory note secured by a chattel mortgage on a motor vehicle which Rallye Motor Co., Inc., through Abel Sahagun, had purportedly sold to Ernesto Salazar and thereafter assigned to Filinvest. Filinvest discovered that the mortgaged vehicle had not been delivered to Salazar. Filinvest obtained a writ of attachment which was levied upon a house and lot registered in Abel Sahagun’s name at No. 16 Mangga Chupoy Street, Pilar Village Subdivision, Las Piñas, Metro Manila, where petitioner and her children had been residing. The Commission on Immigration and Deportation certified that Abel had left the Philippines on April 23, 1978.

Trial Court Proceedings and Early Orders

The trial court initially denied Filinvest’s motion to declare Abel in default on June 2, 1983 but ordered steps for extraterritorial service pursuant to Section 17, Rule 14. On June 23, 1983 the complaint was dismissed without prejudice for failure to effect extraterritorial service. Filinvest filed for reconsideration. The court thereafter granted petitioner time to file a complaint in intervention. Petitioner intervened on July 27, 1983. For failure to appear at the pre-trial on November 25, 1983, petitioner was declared in default; Abel was declared in default for failure to answer. On February 20, 1984 the trial court rendered judgment against Abel for P97,066.59 with interest, liquidated damages, attorney’s fees, and costs.

Intermediate Appellate Court Ruling and Subsequent Proceedings

Petitioner obtained relief from the then Intermediate Appellate Court in AC-G.R. SP No. 05044 which, in a decision promulgated February 27, 1985, granted certiorari with prohibition and set aside the trial court judgment and the order granting execution. The Intermediate Appellate Court found that petitioner had been deprived of the opportunity to present evidence in intervention. Filinvest’s petition to the Supreme Court in G.R. No. 70357 was denied in the resolution of July 8, 1985.

Orders for Extraterritorial Service by Publication and Amended Complaint

On September 26, 1985 Filinvest moved for leave to serve summons by publication. The trial court granted the motion on November 15, 1985, ordering publication in a newspaper of general circulation and directing the Clerk of Court to send copies of the summons and the order by registered mail to Abel’s last known address at No. 16 Mangga Chupoy. Filinvest filed an amended complaint on December 11, 1985 adding petitioner and Rallye as defendants. On January 10, 1986 the trial court admitted the amended complaint and directed service upon Abel at a different last known address, No. 1228-A Antipolo Street, Makati. Summons was published in the Manila Evening Post on March 7, 14 and 21, 1986; the affidavit and notices contained inconsistent addresses. Petitioner filed an answer on March 11, 1986.

Motion for Default, Court of Appeals Review, and Question Presented

Filinvest moved on June 26, 1986 that Abel and Rallye be declared in default. On July 18, 1986 Judge Job Madayag declared Abel in default but did not declare Rallye in default for lack of service. Petitioner sought certiorari in the Court of Appeals (CA-G.R. SP No. 09909), which dismissed her petition on February 6, 1987 and denied reconsideration on April 22, 1987. The principal issue presented to the Supreme Court was whether the trial court acquired jurisdiction over Abel by the publication of summons in the Manila Evening Post so as to justify his declaration in default.

Supreme Court’s Determination that Extraterritorial Service Was Warranted

The Supreme Court found that the facts warranted extraterritorial service under Section 17, Rule 14, Rules of Court because Abel was a nonresident who had left the Philippines on April 23, 1978 and because the action affected property in the Philippines in which he had an interest, namely the attached house and lot. The Court held that the trial court correctly ordered service out of the Philippines and that publication in a newspaper of general circulation is an authorized mode of such service.

Scope of Publication and the Trial Court’s Discretion

The Court addressed the contention that publication must be made in a foreign newspaper circulating where the defendant actually resided. The Court declined to adopt a rule mandating foreign publication in all such cases. It reviewed precedent including Tolaram Menghra v. Bulchand Tarachand, El Banco Espanol-Filipino v. Palanca, De Midgely v. Ferandos, and Perkins v. Dizon, and reasoned that publication in the Philippines had long been accepted practice for quasi in rem proceedings. The Court emphasized that extraterritorial service by publication is primarily a means to satisfy due process by notifying an absent owner that property in the Philippines is subject to judicial proceedings. The Court concluded that whether to order publication in a foreign or local paper is a matter committed to the sound discretion of the trial court in each case, absent a showing of abuse.

Fatal Defect: Failure to Mail Copies by Registered Mail to Last Known Correct Address

Despite upholding the trial court’s discretion to order publication in the Philippines, the Supreme Court found that service was nevertheless defective in this case. The court below’s January 10, 1986 order had required that a copy of the summons and the order be sent by registered mail to Abel’s last known address. The Supreme Court observed there was no showing that the copies were duly mailed to Abel’s last known correct address. The Court reiterated the rule of strict compliance with statutory and rule requirements for service by publication, citing Dy Reyes v. Ortega and Dulap v. Court of Appeals, and held that failure to comply with the mailing requirement constituted a fatal defect in the service of summons.

Remedy, Disposition and Directions on Remand

The Supreme Court did not order dismissal of the underlying action despite the defective service. The Court reasoned that the prior attachment afforded a prima facie justification for extraterritorial service and that the defect as to mailing could be more readily remedied by the trial court. The Court also noted that the interests of a defaulting nonresident might be represented by a non-defaulting co-defendant where a common cause of action exists. Accordingly, the Supreme Court granted the petition, set aside the Court of Appeals decision and resolution, and remanded the case to the lower court for proper extraterritorial service of summons upon Abel in accordance with Section 17, Rule 14, Rules of Court, and for further proceedings consistent with

Case Syllabus (G.R. No. 78328)

Parties and Procedural Posture

Carmelita Pelaez Sahagun was the petitioner who intervened in the underlying civil action and later sought certiorari from the Court of Appeals and review in the Supreme Court.
Filinvest Credit Corporation was the private respondent and plaintiff in the underlying action to collect on a promissory note and to foreclose the chattel mortgage assigned to it.
Abel (alias Abelardo) Sahagun was the original defendant and alleged nonresident debtor who allegedly caused non-delivery of a mortgaged vehicle and later left the Philippines for the United States.
Rallye Motor Co., Inc. was the company managed by Abel Sahagun and was impleaded as co-defendant in the amended complaint.
The petition assailed the Court of Appeals decision dismissing petitioner’s certiorari and the orders of the Regional Trial Court of Makati, Branch 145 declaring Abel Sahagun in default after summons by publication.

Key Factual Allegations

Abel Sahagun caused Rallye to execute a chattel mortgage on a motor vehicle as security for a promissory note allegedly issued by one Ernesto Salazar.
Rallye assigned the promissory note and the chattel mortgage to Filinvest Credit Corporation for value.
The mortgaged motor vehicle was never delivered to Salazar and Salazar failed to pay the note upon maturity.
Filinvest procured a writ of attachment which was levied upon a house and lot registered in Abel Sahagun’s name at No. 16 Mangga Chupoy Street, Pilar Village, Las Piñas, where petitioner and her children had been residing.
Abel Sahagun left the Philippines on April 23, 1978 and was certified as residing in the United States at the time the action was instituted.

Procedural History

Filinvest filed Civil Case No. 46556 in the Court of First Instance of Rizal on June 25, 1982, which later became Civil Case No. 3161 and was assigned to Branch 145 of the Regional Trial Court of Makati.
The trial court initially denied a motion to declare Abel in default but later dismissed Filinvest’s complaint without prejudice for failure to effect extraterritorial service of summons.
The trial court rendered judgment in favor of Filinvest against Abel on February 20, 1984 for P97,066.59 with 14% interest, liquidated damages of 25% of principal, attorney’s fees of 25% of the obligation, and costs.
The Intermediate Appellate Court granted certiorari and set aside the trial court’s judgment and the order granting execution on February 27, 1985.
Filinvest’s subsequent petition to the Supreme Court in G.R. No. 70357 was denied on July 8, 1985.
Filinvest obtained leave to serve summons by publication on November 15, 1985 under Section 17, Rule 14, Rules of Court, and filed an amended complaint on December 11, 1985 impleading Carmelita Pelaez Sahagun and Rallye Motor Co., Inc.
The trial court ordered publication and directed that copies be mailed by registered mail to Abel’s last known address, but the addresses in the court orders and the affidavit of publication were inconsistent.
Abel was declared in default for failure to answer after publication, Rallye was not declared in default for lack of service, and petitioner filed an answer and later sought relief in the Court of Appeals which dismissed her petition on February 6, 1987 and denied reconsideration on April 22, 1987.

Issue

Whether the trial court acquired jurisdiction over Abel (Abelardo) Sahagun by means of summons by publication so as to justify declaring him in default for failure to file an answer.

Contentions of the Parties

Petitioner contended that extraterritorial service by publication and the subsequent declarati