Title
Santiago Syjuco, Inc. vs. Castro
Case
G.R. No. 70403
Decision Date
Jul 7, 1989
Lims defaulted on a mortgage loan, filed multiple cases to delay foreclosure, and claimed property belonged to a partnership. SC ruled foreclosure valid, nullified default judgment due to improper summons, and found Lims abused judicial process.

Case Summary (G.R. No. 70403)

Factual Background: Loan, Mortgage, and Default

Between November 1964 and May 8, 1967 the Lim family (the individual Lims acting for themselves and as attorney-in-fact for Maria Moreno) obtained loans from petitioner totaling P2,460,000.00 (exclusive of interest), secured by a first mortgage on the Manila-registered parcels later identified by TCT Nos. 75413, 75415, 75416 and 75418. The mortgage obligation matured on November 8, 1967; the Lims failed to pay despite demand. Petitioner initiated extrajudicial foreclosure procedures and had auction sales scheduled beginning in December 1968, which triggered a long series of interlocutory and plenary actions seeking to enjoin or prevent the sale.

Procedural Chronology — Overview of Multiple Actions

Beginning December 24, 1968, the Lims filed Civil Case No. 75180 (CFI Manila) alleging usury and seeking to enjoin foreclosure; the court initially restrained the sale. After trial the CFI found usury but later, upon reopening and additional evidence, reversed that finding and declared the full principal P2,460,000.00 with interest at 12% from November 8, 1967. The decision was affirmed by the Court of Appeals and this Court (petition for review denied). Despite finality of that judgment, the Lims repeatedly filed multiple actions (including Civil Case Nos. 112762, 83-19018 (RTC Manila), Q-32924 (RTC Quezon City), and Q-36485/ Q-39295 (RTC Quezon City Branch 35)), obtained restraining orders or temporary reliefs, and in one instance induced a trial judge to authorize a private sale and set substantial bond conditions, resulting in decades of litigation and multiple attempts to block or delay extrajudicial foreclosure.

The Secret Action and Default Judgment (Civil Case No. Q‑36485 / Q‑39295)

On October 14, 1982 the partnership “Heirs of Hugo Lim” filed an action in RTC Quezon City (assigned to Judge Jose P. Castro) alleging that the mortgaged properties had been contributed to the partnership in 1959 and therefore individual Lims had no authority to mortgage them; the partnership sought declaratory and injunctive relief. The sheriff’s return of summons was vague (uncertainty as to place of service and recipient identified only as “Manager” or “clerk or person in charge”), and petitioner claims it never received actual notice. An ex parte motion by partnership counsel led to an order declaring Syjuco in default, receipt of ex parte evidence, and, within twelve days (February 10–22, 1983), a default judgment declaring the mortgage void as executed without partnership authority and imposing permanent injunctions against foreclosure. Notice by the sheriff was again recorded in the same vague manner; the partnership then let the judgment remain dormant for about seventeen months before executing parts of it in mid‑1984.

Procedural and Substantive Objections to the Default Judgment

Petitioner promptly challenged the default judgment on multiple grounds: lack of valid service of summons (thus absence of jurisdiction), res judicata (prior final decisions in Civil Case No. 75180 and subsequent appellate affirmances), laches, failure to state a cause of action, and estoppel. Petitioner also filed motions for reconsideration and dismissal in the RTC and then sought relief by certiorari, prohibition, and mandamus in this Court (G.R. No. L‑70403). Respondents defended the default judgment as validly obtained and final, argued that res judicata did not apply because of differences in parties (individual Lims versus partnership), and asserted that the Court below had jurisdiction only until the judgment became final.

Court’s Assessment of Service of Process and Jurisdiction

The Court examined the sheriff’s return closely and identified fatal defects: the return failed to specify clearly the place of service (gave two widely separated addresses without clarity) and failed to name the person served, contrary to Rule 14 (Rule 20 in the older numbering) requirements that the return must state manner, place and date of service and the name of the person who received the summons. Given the strict requirements for service upon a corporation and the necessity that returns provide adequate proof, the trial court could not be assured that Syjuco was validly served. The defective return could not support the presumption of regularity; without valid service there was no jurisdiction over petitioner and all proceedings from the order of default through the judgment and execution were null and void.

Res Judicata and Splitting of Causes — Identity of Parties and Causes

The Court analyzed whether the partnership’s late claim that the properties belonged to it could be relitigated after the earlier final judgment in Civil Case No. 75180 (affirmed by CA and the Supreme Court). The Court found that the substantive right sought — to avoid enforcement of the mortgage — was the same across the successive actions even though different legal theories were pressed (usury, lack of republication, alleged novation by bond, and, finally, partnership ownership and lack of authority). The Court concluded that the partnership claim was barred by prior judgment because the earlier judgment was final, rendered by a competent court, and involved the same subject matter and cause of action; in practice the Lims individually and the partnership (composed solely of those same Lims) represented the same real party in interest, so there was no substantial difference in parties that would avoid res judicata. The Court emphasized that the parties had effectively split their cause of action into multiple suits, contrary to Rule 2, and that the first final judgment should have precluded subsequent litigation of matters that could have been raised earlier.

Estoppel by Silence and Article 1819 (Mortgage by All Partners)

The Court found that equitable estoppel (estoppel by silence) applied: the partnership, composed exclusively of the individual Lims who participated in the mortgage transactions, was chargeable with knowledge of the mortgage and had a duty to assert its claim promptly. Its prolonged silence and failure to impugn the mortgage for many years misled petitioner to its prejudice. The Court also applied the last paragraph of Article 1819 of the Civil Code: when title to real property is in the names of all partners, a conveyance executed by all partners passes all their rights; a mortgage is a species of conveyance under the cited doctrine (as interpreted with reference to the Uniform Partnership Act). Given that all partners executed the mortgage, it was binding on the partnership and extinguished any later contention that the partners lacked authority to encumber the partnership properties.

Abuse of Process, Forum Shopping, and Bad Faith Conduct

The Court characterized the respondents’ litigation strategy as an abuse of judicial process: repeated filings across multiple courts and branches, clandestine or misleading tactics to forestall foreclosure, orchestrated restraint and delay, and deliberate concealment (e.g., not revealing existence of the partnership and conducting staggered suits) amounted to bad faith and manipulation. Attorney Canlas, who represented respondents in many of the proceedings, was held responsible for his active role; the Court found that counsel’s conduct contributed materially to the abuse and cited precedents and disciplinary consequences in analogous circumstances. The Court condemned the deliberate use of frivolous or sham issues (e.g., republication and alleged novation by bond) repeatedly raised solely to delay enforcement of a valid obligation.

Decision: Annulment, Dismissal, and Orders to Proceed with Foreclosure

On the combined grounds of defective service (vitiating the trial court’s jurisdiction over petitioner), res judicata, estoppel, Article 1819 application, and the absence of merit in the partnership’s claim, the Court set aside and declared null and void the default judgment, the writ of execution, and all order

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