Borlongan v. Banco de Oro
REITERATIONFacts
The Antecedents: Eliseo and Carmelita Borlongan acquired a property in Pasig City. In 2012, while preparing to sell it, they discovered an annotation on their title indicating the property was subject to an execution sale stemming from Civil Case No. 03-0713 before the Regional Trial Court (RTC) of Makati City. This case involved a complaint for sum of money filed by Banco de Oro (BDO), formerly Equitable PCI Bank, against Tancho Corporation, a principal debtor, and several guarantors, including Carmelita, who allegedly signed security agreements totaling P13,500,000. Procedural History: The Makati RTC issued an order for service of summons to the defendants at Tancho Corporation's business address, which BDO had previously foreclosed and acquired. The process server reported that summons could not be served as the defendants were no longer at that address. BDO then moved for and was granted leave to serve summons by publication. Subsequently, BDO obtained a Writ of Attachment against the defendants, including Carmelita, and attached the subject property. After further attempts at service at the subject property failed, BDO proceeded ex-parte, leading to a default judgment against the defendants and an order for the execution sale of the property to BDO. Upon discovering the sale, Eliseo filed a Complaint for Annulment of Surety Agreements, Notice of Levy on Attachment, Auction Sale, and Other Documents with the Pasig RTC, alleging lack of jurisdiction and improper service of summons. The Pasig RTC initially dismissed the case for lack of jurisdiction but later reinstated it, clarifying it could not annul the surety agreements. Both Eliseo and BDO appealed to the Court of Appeals (CA). The CA granted BDO's petition, ordering the Pasig RTC to cease hearing the case, ruling that Eliseo was not a stranger who could file an independent action. Eliseo filed a Petition for Review on Certiorari under Rule 45 with the Supreme Court (SC), docketed as G.R. No. 218540. Separately, Carmelita filed a Petition for Annulment of Judgment with the CA, arguing the Makati RTC never acquired jurisdiction over her person due to defective service of summons. The CA denied her prayer for a TRO and/or WPI, and later denied her motion for reconsideration. Carmelita then filed a Petition for Review with the SC, docketed as G.R. No. 217617. The two cases were consolidated. The Petition: In G.R. No. 217617, Carmelita Borlongan petitions this Court for review of the CA's denial of her prayer for a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI) to stop the consolidation of BDO's ownership over the subject property. She argues that the CA erred in refusing the provisional remedy, asserting her constitutional right to due process was violated due to defective service of summons, and that the property was not foreclosed but attached and sold through execution. In G.R. No. 218540, Eliseo Borlongan petitions this Court for review of the CA's ruling that the Pasig RTC lacked jurisdiction to hear his independent action to annul the attachment and execution sale of their conjugal property. He contends that as a non-debtor spouse whose conjugal property was levied upon due to the other spouse's alleged personal obligation, he is considered a stranger to the original case and is entitled to file a separate action to vindicate his claim, especially since the obligation did not redound to the benefit of the family and the validity of the levy and sale is questioned.
Issue(s)
Whether the Court of Appeals erred in refusing to issue a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI) stopping the consolidation of BDO's ownership over the subject property. Whether the Pasig Regional Trial Court has jurisdiction to hear and decide a case filed by the non-debtor husband to annul the levy and execution sale of the subject property ordered by the Makati Regional Trial Court against his wife.
Ruling
The Supreme Court granted the petitions, reversing the Court of Appeals' resolutions. It ordered the Pasig RTC to continue with the proceedings in Civil Case No. 73761 and issued a Temporary Restraining Order (TRO) enjoining BDO from possessing, selling, transferring, encumbering, or exercising acts of ownership over the subject property until further resolution.
Ratio Decidendi
On the propriety of CA's refusal to issue a TRO/WPI (G.R. No. 217617): The Court held that the CA erred in denying Carmelita's prayer for a TRO and/or WPI. The issuance of a preliminary injunction is warranted when there is a clear and unmistakable right to be protected and an urgent necessity to prevent serious damage. The Court emphasized that a TRO/WPI is not a prejudgment of the case but aims to preserve the status quo. Carmelita possessed a constitutionally protected right to due process, which requires proper notification and an opportunity to be heard before being deprived of property. The Court found that the service of summons by publication was not justified, as there was no diligent effort to personally serve Carmelita, and her whereabouts could have been ascertained through readily available public records, such as the General Information Sheet of Tancho Corporation. The Court noted that the subject property was not foreclosed by BDO but acquired through attachment and execution sale, and its validity was being questioned, making the CA's reliance on the expiration of the redemption period misplaced. On the jurisdiction of the Pasig RTC to hear Eliseo's independent action (G.R. No. 218540): The Court ruled that Eliseo, as the husband and co-owner of the conjugal property, could file a separate and independent action for the annulment of the levy and execution sale. Section 16, Rule 39 of the Rules of Court allows third-party claimants to vindicate their claims in a separate action. The Court clarified that a spouse is considered a "stranger" to the suit if the obligation contracted by the other spouse did not redound to the benefit of the conjugal partnership. In this case, the obligation arose from a surety agreement allegedly signed by Carmelita for Tancho Corporation, and BDO failed to establish that this benefited the conjugal partnership. The Court distinguished this case from Spouses Ching v. Court of Appeals (2003) by noting that Eliseo and Carmelita discovered the attachment only after the finality of the Makati RTC decision, thus having no opportunity to intervene. Denying Eliseo the opportunity to question the attachment in a separate action would violate his right to due process.
Main Doctrine
The Court reiterated that the issuance of a TRO/WPI is not a prejudgment of the main case and is intended to preserve the status quo. It also held that a husband, not being a party to the suit where his wife's debt led to the attachment of conjugal property, can file an independent action for annulment if the obligation did not redound to the benefit of the family.