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    Chaves Biaco vs. Philippine Countryside Rural Bank

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    Maribel Nicole Lopez
    1) The petitioner's husband obtained several loans from the respondent bank and used properties co-owned by the petitioner as collateral without her consent or signature. When the loans were not repaid, the bank initiated foreclosure proceedings against both spouses. 2) The trial court had jurisdiction over the foreclosure case since it was an action quasi in rem concerning the mortgaged properties. However, the trial court exceeded its jurisdiction by ordering execution against other properties owned solely by the petitioner, violating her right to due process. 3) There was no extrinsic fraud committed by the bank, as any facts concealed by the husband from the petitioner could not be attributed to the bank as they were not opposing parties. The

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    Chaves Biaco vs. Philippine Countryside Rural Bank

    Uploaded by

    Maribel Nicole Lopez
    167 views2 pages
    1) The petitioner's husband obtained several loans from the respondent bank and used properties co-owned by the petitioner as collateral without her consent or signature. When the loans were not repaid, the bank initiated foreclosure proceedings against both spouses. 2) The trial court had jurisdiction over the foreclosure case since it was an action quasi in rem concerning the mortgaged properties. However, the trial court exceeded its jurisdiction by ordering execution against other properties owned solely by the petitioner, violating her right to due process. 3) There was no extrinsic fraud committed by the bank, as any facts concealed by the husband from the petitioner could not be attributed to the bank as they were not opposing parties. The

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    53. Chaves Biaco vs. Philippine Countryside Rural Bank

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    1) The petitioner's husband obtained several loans from the respondent bank and used properties co-owned by the petitioner as collateral without her consent or signature. When the loans were not repaid, the bank initiated foreclosure proceedings against both spouses. 2) The trial court had jurisdiction over the foreclosure case since it was an action quasi in rem concerning the mortgaged properties. However, the trial court exceeded its jurisdiction by ordering execution against other properties owned solely by the petitioner, violating her right to due process. 3) There was no extrinsic fraud committed by the bank, as any facts concealed by the husband from the petitioner could not be attributed to the bank as they were not opposing parties. The

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    167 views2 pages

    Chaves Biaco vs. Philippine Countryside Rural Bank

    Uploaded by

    Maribel Nicole Lopez
    1) The petitioner's husband obtained several loans from the respondent bank and used properties co-owned by the petitioner as collateral without her consent or signature. When the loans were not repaid, the bank initiated foreclosure proceedings against both spouses. 2) The trial court had jurisdiction over the foreclosure case since it was an action quasi in rem concerning the mortgaged properties. However, the trial court exceeded its jurisdiction by ordering execution against other properties owned solely by the petitioner, violating her right to due process. 3) There was no extrinsic fraud committed by the bank, as any facts concealed by the husband from the petitioner could not be attributed to the bank as they were not opposing parties. The

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    of 2

    University of the Philippines College of Law

    2D

    Topic GENERAL CONCEPTS


    Case No. GR No. 161417 / Feb 8, 2007
    Case Name MA. TERESA CHAVES BIACO vs PHILIPPINE COUNTRYSIDE RURAL BANK
    Ponente TINGA, j.

    RELEVANT FACTS

     Petitioner’s husband, a branch manager of respondent, obtained several loans as shown in various
    promissory notes (8 notes with different values). Such were secured by executing a real estate mortgage
    signed by Sps Biaco. Upon failure to settle the loans, bank sent him a written demand (which has
    reached P1,080,676.50), which proved futile.
     Feb 2000: Respondent-Bank filed a complaint for foreclosure of mortgage against the Sps Biaco before
    RTC.
     Summons was served in Ernesto’s office but he failed to answer for unknown reasons. They were then
    declared in default upon motion by the bank.
     Judge ordered the Sps Biaco to pay the bank the remaining loan (1.26M), litigation expenses and atty’s
    fees and that in case of non-payment, the Sheriff is ordered to sell the lot at a public auction.
     Eventually, the lot was sold for P150K in a public auction
     Resp-bank filed an “ex parte motion for judgment” for the issuance of a writ of execution against the
    other properties of the spouses Biaco for the full settlement of the remaining obligation, which was
    granted.
     Sheriff executed 2 notices of levy against other properties registered under the name of petitioner Ma.
    Teresa Chaves Biaco. But they were denied registration because she sold them to her daughters.
     Petitioner sought annulment of the RTC decision contending that extrinsic fraud prevented her from
    participating in the judicial foreclosure proceedings. She alleged that:
    o She only came to know about the judgment 6 months after its finality.
    o The bank failed to verify the authenticity of her signature on the real estate mortgage and did
    not inquire into the reason for the absence of her signature on the promissory notes.
    o RTC failed to acquire jurisdiction because summons were served on her through her husband
    without any explanation as to why personal service could not be made. (substituted service)
     CA ruled that since judicial foreclosure proceedings are quasi in rem, the jurisdiction over the person of
    defendant is not essential as long as the court acquires jurisdiction over the res and that since the Sps
    Biaco were not opposing parties, there can be no extrinsic fraud between them.
     She filed the instant Petition for Review
    ISSUE AND RATIO DECIDENDI

    Issue Ratio
    W/N trial court has YES.
    jurisdiction 1. The judicial foreclosure proceeding instituted by the bank vested the
    trial court with jurisdiction over the res. A judicial foreclosure
    proceeding is an action quasi in rem. As such, jurisdiction over the
    person of petitioner is not required, it being sufficient that the trial
    court is vested with jurisdiction over the subject matter.
    a. The rules on service of summons under Rule 14 of the Rules
    University of the Philippines College of Law
    2D

    of Court likewise apply according to the nature of the action.


    b. In an action in personam (against a person on the basis of his
    personal liability), jurisdiction over the person of the
    defendant is necessary for the court to validly try and decide
    the case. In a proceeding in rem or quasi in rem (against the
    thing itself instead of against the person), jurisdiction over
    the person of the defendant is not a prerequisite to confer
    jurisdiction on the court provided that the court acquires
    jurisdiction over the res. Jurisdiction over the res is acquired
    either (1) by the seizure of the property under legal process,
    whereby it is brought into actual custody of the law; or (2) as
    a result of the institution of legal proceedings, in which the
    power of the court is recognized and made effective

    But, TC exceeded its jurisdiction in granting the execution of other


    properties
    2. TC’s order of execution against other properties of the Biacos went
    beyond its jurisdiction over the res and rendered a personal judgment
    against the spouses Biaco. In doing so without first having acquired
    jurisdiction over the person of petitioner, as it did, the trial court
    violated her constitutional right to due process, warranting the
    annulment of the judgment rendered in the case.
    3. Petitioner’s right to due process was violated when she was not
    personally served the summons and was unable to participate in the
    proceedings. Such warrants the annulment of the judgment.
    W/N the judgment may be NO Extrinsic Fraud
    annulled on the ground of
    extrinsic fraud 1. The overriding consideration is that the fraudulent scheme of the
    prevailing litigant prevented a party from having his day in court. No
    fraud was perpetrated by the bank upon petitioner, noting that the
    Sps Biaco were codefendants in the case and shared the same
    interest. Whatever fact or circumstance concealed by the husband
    from the wife cannot be attributed to the bank.
    2. It is well-settled that the use of forged instruments during trial is not
    extrinsic fraud because such evidence does not preclude the
    participation of any party in the proceedings

    RULING

    WHEREFORE, the instant petition is GRANTED. The Decision dated August 27, 2003 and the Resolution dated
    December 15, 2003 of the Court of Appeals in CAG.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11,
    2000 and Order dated February 9, 2001 of the Regional Trial Court of Cagayan de Oro City, Branch 20, are
    likewise SET ASIDE.

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