Planters Bank v. Chandumal
REITERATIONFacts
The Antecedents: Respondent Julie Chandumal entered into a contract to sell a parcel of land with BF Homes, Inc. Petitioner Planters Development Bank (PDB) later acquired BF Homes' rights. Chandumal defaulted on her payments starting May 1994. PDB sent a Notice of Delinquency and Rescission of Contract with Demand to Vacate on July 14, 1998. Chandumal failed to settle her arrears. PDB filed an action for judicial confirmation of notarial rescission and delivery of possession. Procedural History: Summons was attempted to be personally served on Chandumal but was unavailing. Substituted service was made through her mother. Chandumal failed to file an answer, and PDB filed a motion to declare her in default, which was granted by the RTC. Chandumal filed a motion to set aside the order of default, alleging she did not receive the summons and that PDB failed to make a demand and tender the cash surrender value. The RTC denied her motion and proceeded to render judgment in favor of PDB, confirming the rescission and ordering Chandumal to pay attorney's fees, while ordering PDB to deposit ₱10,000.00 as cash surrender value. Chandumal appealed to the Court of Appeals (CA). The Petition: The CA nullified the RTC decision due to invalid substituted service of summons. PDB filed a petition for review with the Supreme Court, arguing that the RTC acquired jurisdiction through proper service of summons and Chandumal's voluntary appearance, and that the RTC did not err in confirming the notarial rescission.
Issue(s)
Whether there was a valid substituted service of summons; Whether Chandumal voluntarily submitted to the jurisdiction of the trial court; Whether there was proper rescission by notarial act of the contract to sell.
Ruling
The Supreme Court denied the petition, affirming the CA's decision regarding the invalidity of the substituted service of summons. However, it ruled that Chandumal voluntarily submitted to the jurisdiction of the RTC. Despite this, the Court declared that there was no valid rescission of the contract to sell pursuant to R.A. No. 6552 because PDB failed to pay the cash surrender value. Consequently, the RTC decision was reversed and set aside, and the case was dismissed.
Ratio Decidendi
On the issue of valid substituted service of summons: The Court affirmed the CA's ruling that the sheriff's return failed to justify a resort to substituted service. The return did not specifically show or indicate in detail the actual exertion of efforts or any positive step taken by the process server in attempting to serve the summons personally. The mere statement of the defendant's alleged whereabouts without verification and the perfunctory attempts to serve personally do not suffice to justify substituted service. The failure to comply with the requisites for substituted service renders such service ineffective, as established in cases like Manotoc v. Court of Appeals and Pascual v. Pascual. On the issue of voluntary submission to the jurisdiction of the trial court: Despite the invalidity of the substituted service, the Court found that Chandumal voluntarily submitted to the jurisdiction of the RTC. By filing an Urgent Motion to Set Aside Order of Default and to Admit Attached Answer, she sought affirmative relief, which is equivalent to service of summons under Section 20, Rule 14 of the Rules of Court. This was further evidenced by her failure to positively assert the trial court's lack of jurisdiction in her motion and her subsequent appeal of the RTC decision to the CA, demonstrating recognition of the trial court's authority. On the issue of proper rescission of the contract to sell by notarial act: The Court ruled that there was no valid rescission under R.A. No. 6552. Section 3(b) of the law mandates that actual cancellation of the contract takes place only after thirty days from receipt of the notice of cancellation or demand for rescission by a notarial act AND upon full payment of the cash surrender value to the buyer. PDB admitted its failure to pay the cash surrender value, attempting to excuse it by claiming Chandumal was unavailable. However, the law requires both the notarial act and the full payment of the cash surrender value as mandatory twin requirements for effective cancellation, as reiterated in Leaño v. Court of Appeals and Olympia Housing, Inc. v. Panasiatic Travel Corp..
Main Doctrine
While a substituted service of summons may be invalid due to procedural defects, a defendant's voluntary appearance in court, by filing a motion seeking affirmative relief, is equivalent to service of summons and confers jurisdiction over the person. However, a rescission of a contract to sell under RA 6552 is invalid if the seller fails to refund the cash surrender value to the buyer.