FIRST DIVISIONGUILLERMA S. SABLAS, G.R. No. 144568

joined by her husband,PASCUAL LUMANAS, Petitioners, Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,* - v e r s u s - CORONA,

AZCUNA and

GARCIA, JJ.ESTERLITA S. SABLAS andRODULFO S. SABLAS, Respondents. Promulgated:

July 3, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O NCORONA, J.:This case traces its roots to a complaint for judicial partition, inventory and accounting filed by respondents Esterlita S. Sablas and Rodulfo S. Sablas against petitioner spouses Pascual Lumanas and Guillerma S. Sablas in the Regional Trial Court of Baybay, Leyte, Branch 14[1] on October 1, 1999.[2] Petitioner spouses were served with summons and a copy of the complaint on October 6, 1999. On October 21, 1999, they filed a motion for extension of time requesting an additional period of 15 days, or until November 5, 1999, to file their answer. However, they were able to file it only on November 8, 1999. While the trial court observed that the answer was filed out of time, it admitted the pleading because no motion to declare petitioner spouses in default was filed.[3]The following day, November 9, 1999, respondents filed a motion to declare petitioner spouses in default.[4] It was denied by the trial court in an order dated December 6, 1999.[5] Respondents moved for reconsideration but it was also denied.[6] Thereafter, they challenged the December 6, 1999 order in the Court of Appeals in a petition for certiorari[7] alleging that the admission of the answer by the trial court was contrary to the rules of procedure and constituted grave abuse of discretion amounting to lack of jurisdiction.

In a decision dated July 17, 2000,[8] the appellate court ruled that the trial court committed grave abuse of discretion because, pursuant to Section 3, Rule 9 of the Rules of Court, the trial court had no recourse but to declare petitioner spouses in default when they failed to file their answer on or before November 5, 1999. Thus, the Court of Appeals granted the petition, vacated the December 6, 1999 order and remanded the case to the trial court for reception of plaintiffs evidence.

Aggrieved, petitioner spouses (defendants in the trial court) now assail the July 17, 2000 decision of the Court of Appeals in this petition for review on certiorari.[9] Petitioner spouses contend that the Court of Appeals decision was not in accord with the rules of procedure as it misconstrued Section 3, Rule 9 of the Rules of Court and was in contravention of jurisprudence.

We agree.

WHERE THERE IS NO MOTION, THERECAN BE NO DECLARATION OF DEFAULTThe elements of a valid declaration of default are:

1. the court has validly acquired jurisdiction over the person of the defending party either by service of summons or voluntary appearance;[10]2. the defending party failed to file the answer within the time allowed therefor and

3. a motion to declare the defending party in default has been filed by the claiming party with notice to the defending party.

An order of default can be made only upon motion of the claiming party.[11] It can be properly issued against the defending party who failed to file the answer within the prescribed period only if the claiming party files a motion to that effect with notice to the defending party.

In this connection, Section 3, Rule 9 of the Rules of Court provides:

SEC. 3. Default: Declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. x x x. (emphasis supplied)

Three requirements must be complied with before the court can declare the defending party in default: (1) the claiming party must file a motion asking the court to declare the defending party in default; (2) the defending party must be notified of the motion to declare him in default and (3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rules of Court.[12]The rule on default requires the filing of a motion and notice of such motion to the defending party. It is not enough that the defendant fails to answer the complaint within the reglementary period.[13] The trial court cannot motu proprio declare a defendant in default[14] as the rules leave it up to the claiming party to protect his or its interests. The trial court should not under any circumstances act as counsel of the claiming party.

WHERE THERE IS NO DECLARATION OF DEFAULT, ANSWER MAY BE ADMITTED EVEN IF FILED OUT OF TIMEIt is within the sound discretion of the trial court to permit the defendant to file his answer and to be heard on the merits even after the reglementary period for filing the answer expires.[15] The Rules of Court provides for discretion on the part of the trial court not only to extend the time for filing an answer but also to allow an answer to be filed after the reglementary period.[16]Thus, the appellate court erred when it ruled that the trial court had no recourse but to declare petitioner spouses in default when they failed to file their answer on or before November 5, 1999.

The rule is that the defendants answer should be admitted where it is filed before a declaration of default and no prejudice is caused to the plaintiff.[17] Where the answer is filed beyond the reglementary period but before the defendant is declared in default and there is no showing that defendant intends to delay the case, the answer should be admitted.[18]Therefore, the trial court correctly admitted the answer of petitioner spouses even if it was filed out of time because, at the time of its filing, they were not yet declared in default nor was a motion to declare them in default ever filed. Neither was there a showing that petitioner spouses intended to delay the case.

WHERE ANSWER HAS BEEN FILED, THERE CAN BE NO DECLARATION OF DEFAULT ANYMORESince the trial court already admitted the answer, it was correct in denying the subsequent motion of respondents to declare petitioner spouses in default.

In Cathay Pacific Airways, Ltd. v. Hon. Romillo, Jr.,[19] the Court ruled that it was error to declare the defending party in default after the answer was filed. The Court was in fact even more emphatic in Indiana Aerospace University v. Commission on Higher Education:[20] it was grave abuse of discretion to declare a defending party in default despite the latters filing of an answer.

The policy of the law is to have every litigants case tried on the merits as much as possible. Hence, judgments by default are frowned upon.[21] A case is best decided when all contending parties are able to ventilate their respective claims, present their arguments and adduce evidence in support thereof. The parties are thus given the chance to be heard fully and the demands of due process are subserved. Moreover, it is only amidst such an atmosphere that accurate factual findings and correct legal conclusions can be reached by the courts.

Accordingly, the petition is hereby GRANTED. The July 17, 2000 decision of the Court of Appeals in CA-G.R. SP No. 57397 is REVERSED and SET ASIDE and the December 6, 1999 order of the Regional Trial Court of Baybay, Leyte, Branch 14 is REINSTATED. The case is REMANDED to the trial court for further proceedings.

SO ORDERED.

THIRD DIVISIONTHE HEIRS OF THE LATE RUBEN REINOSO, SR., represented by Ruben Reinoso Jr., Petitioners,

- versus -

COURT OF APPEALS, PONCIANO TAPALES, JOSE GUBALLA, and FILWRITERS GUARANTY ASSURANCE CORPORATION,* * Respondent. G.R. No. 116121Present:

CARPIO,* J.VELASCO, JR., Chairperson,

PERALTA,

ABAD, and

MENDOZA, JJ.Promulgated:

July 18, 2011

x -------------------------------------------------------------------------------------x

DECISIONMENDOZA, J.:Before the Court is a petition for review assailing the May 20, 1994 Decision[1] and June 30, 1994 Resolution[2] of the Court of Appeals (CA), in CA-G.R. CV No. 19395, which set aside the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila (RTC) for non-payment of docket fees. The dispositive portion of the CA decision reads:

IN VIEW OF ALL THE FOREGOING, the decision appealed from is SET ASIDE and REVERSED and the complaint in this case is ordered DISMISSED.

No costs pronouncement.

SO ORDERED.

The complaint for damages arose from the collision of a passenger jeepney and a truck at around 7:00 oclock in the evening of June 14, 1979 along

E. Rodriguez Avenue,Quezon City

. As a result, a passenger of the jeepney, Ruben Reinoso, Sr. (Reinoso), was killed. The passenger jeepney was owned by Ponciano Tapales (Tapales) and driven by Alejandro Santos (Santos), while the truck was owned by Jose Guballa (Guballa) and driven by Mariano Geronimo (Geronimo).

On November 7, 1979, the heirs of Reinoso (petitioners) filed a complaint for damages against Tapales and Guballa. In turn, Guballa filed a third party complaint against Filwriters Guaranty Assurance Corporation (FGAC) under Policy Number OV-09527.

On March 22, 1988, the RTC rendered a decision in favor of the petitioners and against Guballa. The decision in part, reads:

In favor of herein plaintiffs and against defendant Jose Guballa:

1. For the death of Ruben Reinoso, Sr.30,000.00

2. Loss of earnings (monthly income at the time of death (2,000.00 Court used 1,000.00 only per month (or 12,000.00 only per year) & victim then being 55 at death had ten (10) years life expectancy

120,000.00

3. Mortuary, Medical & funeral expenses and all incidental expenses in the wake in serving those who condoled.. 15,000.00

4. Moral damages .. 50,000.00

5. Exemplary damages 25,000.00

6. Litigation expenses . 15,000.00

7. Attorneys fees 25,000.00

Or a total of 250,000.00

For damages to property:

In favor of defendant Ponciano Tapales and against defendant Jose Guballa:

1. Actual damages for repair is already awarded to defendant-cross-claimant Ponciano Tapales by Br. 9, RTC-Malolos, Bulacan (Vide: Exh. 1-G-Tapales); hence, cannot recover twice.

2. Compensatory damages (earnings at 150.00 per day) and for two (2) months jeepney stayed at the repair shop. 9,000.00

3. Moral damages ...10,000.00

4. Exemplary damages .10,000.00

5. Attorneys fees15,000.00

or a total of 44,000.00

Under the 3rd party complaint against 3rd party defendant Filwriters Guaranty Assurance Corporation, the Court hereby renders judgment in favor of said 3rd party plaintiff by way of 3rd party liability under policy No. OV-09527 in the amount of 50,000.00 undertaking plus 10,000.00 as and for attorneys fees.

For all the foregoing, it is the well considered view of the Court that plaintiffs, defendant Ponciano Tapales and 3rd Party plaintiff Jose Guballa established their claims as specified above, respectively. Totality of evidence preponderance in their favor.

J U D G M E N T

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

In favor of plaintiffs for the death of Ruben Reinoso, Sr.250,000.00;

In favor of defendant Ponciano Tapales due to damage of his passenger jeepney.44,000.00;

In favor of defendant Jose Guballa under Policy No. OV-09527....60,000.00;

All the specified accounts with 6% legal rate of interest per annum from date of complaint until fully paid (Reformina vs. Tomol, 139 SCRA 260; and finally;

Costs of suit.

SO ORDERED.[3] On appeal, the CA, in its Decision dated May 20, 1994, set aside and reversed the RTC decision and dismissed the complaint on the ground of non-payment of docket fees pursuant to the doctrine laid down in Manchester v. CA.[4] In addition, the CA ruled that since prescription had set in, petitioners could no longer pay the required docket fees.[5] Petitioners filed a motion for reconsideration of the CA decision but it was denied in a resolution dated June 30, 1994.[6] Hence, this appeal, anchored on the following

GROUNDS:A. The Court of Appeals MISAPPLIED THE RULING of the Supreme Court in the case of Manchester Corporation vs. Court of Appeals to this case.B. The issue on the specification of the damages appearing in the prayer of the Complaint was NEVER PLACED IN ISSUE BY ANY OF THE PARTIES IN THE COURT OF ORIGIN (REGIONAL TRIAL COURT) NOR IN THE COURT OF APPEALS.C. The issues of the case revolve around the more substantial issue as to the negligence of the private respondents and their culpability to petitioners.[7] The petitioners argue that the ruling in Manchester should not have been applied retroactively in this case, since it was filed prior to the promulgation of the Manchesterdecision in 1987. They plead that though this Court stated that failure to state the correct amount of damages would lead to the dismissal of the complaint, said doctrine should be applied prospectively.

Moreover, the petitioners assert that at the time of the filing of the complaint in 1979, they were not certain of the amount of damages they were entitled to, because the amount of the lost income would still be finally determined in the course of the trial of the case. They claim that the jurisdiction of the trial court remains even if there was failure to pay the correct filing fee as long as the correct amount would be paid subsequently.

Finally, the petitioners stress that the alleged defect was never put in issue either in the RTC or in the CA.

The Court finds merit in the petition.

The rule is that payment in full of the docket fees within the prescribed period is mandatory.[8] In Manchester v. Court of Appeals,[9] it was held that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. The strict application of this rule was, however, relaxed two (2) years after in the case of Sun Insurance Office, Ltd. v. Asuncion,[10] wherein the Court decreed that where the initiatory pleading is not accompanied by the payment of the docket fee, the court may allow payment of the fee within a reasonable period of time, but in no case beyond the applicable prescriptive or reglementary period. This ruling was made on the premise that the plaintiff had demonstrated his willingness to abide by the rules by paying the additional docket fees required.[11] Thus, in the more recent case of United Overseas Bank v. Ros,[12] the Court explained that where the party does not deliberately intend to defraud the court in payment of docket fees, and manifests its willingness to abide by the rules by paying additional docket fees when required by the court, the liberal doctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in Manchester, will apply. It has been on record that the Court, in several instances, allowed the relaxation of the rule on non-payment of docket fees in order to afford the parties the opportunity to fully ventilate their cases on the merits. In the case of La Salette College v. Pilotin,[13] the Court stated:

Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize that its strict application is qualified by the following:first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances.[14]

While there is a crying need to unclog court dockets on the one hand, there is, on the other, a greater demand for resolving genuine disputes fairly and equitably,[15] for it is far better to dispose of a case on the merit which is a primordial end, rather than on a technicality that may result in injustice.

In this case, it cannot be denied that the case was litigated before the RTC and said trial court had already rendered a decision. While it was at that level, the matter of non-payment of docket fees was never an issue. It was only the CA which motu propio dismissed the case for said reason.

Considering the foregoing, there is a need to suspend the strict application of the rules so that the petitioners would be able to fully and finally prosecute their claim on the merits at the appellate level rather than fail to secure justice on a technicality, for, indeed, the general objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder but to promote the administration of justice.[16]The Court also takes into account the fact that the case was filed before the Manchester ruling came out. Even if said ruling could be applied retroactively, liberality should be accorded to the petitioners in view of the recency then of the ruling. Leniency because of recency was applied to the cases of Far Eastern Shipping Company v. Court of Appeals[17] and Spouses Jimmy and Patri Chan v. RTC of Zamboanga.[18] In the case of Mactan Cebu International Airport Authority v. Mangubat (Mactan),[19] it was stated that the intent of the Court is clear to afford litigants full opportunity to comply with the new rules and to temper enforcement of sanctions in view of the recency of the changes introduced by the new rules. In Mactan, the Office of the Solicitor General (OSG) also failed to pay the correct docket fees on time.

We held in another case:

x x x It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that, on the balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the Rules, or except a particular case from its operation.[20]The petitioners, however, are liable for the difference between the actual fees paid and the correct payable docket fees to be assessed by the clerk of court which shall constitute a lien on the judgment pursuant to Section 2 of Rule 141 which provides:

SEC. 2. Fees in lien. Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees.

As the Court has taken the position that it would be grossly unjust if petitioners claim would be dismissed on a strict application of the Manchester doctrine, the appropriate action, under ordinary circumstances, would be for the Court to remand the case to the CA. Considering, however, that the case at bench has been pending for more than 30 years and the records thereof are already before this Court, a remand of the case to the CA would only unnecessarily prolong its resolution. In the higher interest of substantial justice and to spare the parties from further delay, the Court will resolve the case on the merits.

The facts are beyond dispute. Reinoso, the jeepney passenger, died as a result of the collision of a jeepney and a truck on June 14, 1979 at around 7:00 oclock in the evening along

E. Rodriguez Avenue, Quezon City

. It was established that the primary cause of the injury or damage was the negligence of the truck driver who was driving it at a very fast pace. Based on the sketch and spot report of the police authorities and the narration of the jeepney driver and his passengers, the collision was brought about because the truck driver suddenly swerved to, and encroached on, the left side portion of the road in an attempt to avoid a wooden barricade, hitting the passenger jeepney as a consequence. The analysis of the RTC appears in its decision as follows:

Perusal and careful analysis of evidence adduced as well as proper consideration of all the circumstances and factors bearing on the issue as to who is responsible for the instant vehicular mishap convince and persuade this Court that preponderance of proof is in favor of plaintiffs and defendant Ponciano Tapales. The greater mass of evidence spread on the records and its influence support plaintiffs plaint including that of defendant Tapales.

The Land Transportation and Traffic Rule (R.A. No. 4136), reads as follows:

Sec. 37. Driving on right side of highway. Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance therewith, every person operating a motor vehicle or an animal drawn vehicle on highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway.

Having in mind the foregoing provision of law, this Court is convinced of the veracity of the version of the passenger jeepney driver Alejandro Santos, (plaintiffs and Tapales witness) that while running on lane No. 4 westward bound towards Ortigas Avenue at between 30-40 kms. per hour (63-64 tsn, Jan. 6, 1984) the sand & gravel truck from the opposite direction driven by Mariano Geronimo, the headlights of which the former had seen while still at a distance of about 30-40 meters from the wooden barricade astride lanes 1 and 2, upon reaching said wooden block suddenly swerved to the left into lanes 3 and 4 at high speed napakabilis po ng dating ng truck. (29 tsn, Sept. 26, 1985) in the process hitting them (Jeepney passenger) at the left side up to where the reserve tire was in an oblique manner pahilis (57 tsn, Sept. 26, 1985). The jeepney after it was bumped by the truck due to the strong impact was thrown resting on its right side while the left side was on top of the Bangketa (side walk). The passengers of the jeepney and its driver were injured including two passengers who died. The left side of the jeepney suffered considerable damage as seen in the picture (Exhs. 4 & 5-Tapales, pages 331-332, records) taken while at the repair shop.

The Court is convinced of the narration of Santos to the effect that the gravel & sand truck was running in high speed on the good portion of E. Rodriguez Avenue (lane 1 & 2) before the wooden barricade and (having in mind that it had just delivered its load at the Corinthian Gardens) so that when suddenly confronted with the wooden obstacle before it had to avoid the same in a manner of a reflex reaction or knee-jerk response by forthwith swerving to his left into the right lanes (lanes 3 & 4). At the time of the bumping, the jeepney was running on its right lane No. 4 and even during the moments before said bumping, moving at moderate speed thereon since lane No. 3 was then somewhat rough because being repaired also according to Mondalia who has no reason to prevaricate being herself one of those seriously injured. The narration of Santos and Mondalia are convincing and consistent in depicting the true facts of the case untainted by vacillation and therefore, worthy to be relied upon. Their story is forfeited and confirmed by the sketch drawn by the investigating officer Pfc. F. Amaba, Traffic Division, NPD, Quezon City who rushed to the scene of the mishap (Vide: Resolution of Asst fiscal Elizabeth B. Reyes marked as Exhs. 7, 7-A, 7-B-Tapales, pp. 166-168, records; the Certified Copy found on pages 598-600, ibid, with the attached police sketch of Pfc. Amaba, marked as Exh. 8-Tapales on page 169, ibid; certified copy of which is on page 594, ibid) indicating the fact that the bumping indeed occurred at lane No. 4 and showing how the gavel & sand truck is positioned in relation to the jeepney. The said police sketch having been made right after the accident is a piece of evidence worthy to be relied upon showing the true facts of the bumping-occurrence. The rule that official duty had been performed (Sec.5(m), R-131, and also Sec. 38, R-a30, Rev. Rules of Court) there being no evidence adduced and made of record to the contrary is that said circumstance involving the two vehicles had been the result of an official investigation and must be taken as true by this Court.[21]While ending up on the opposite lane is not conclusive proof of fault in automobile collisions,[22] the position of the two vehicles, as depicted in the sketch of the police officers, clearly shows that it was the truck that hit the jeepney. The evidentiary records disclosed that the truck was speeding along E. Rodriguez, heading towards Santolan Street

, while the passenger jeepney was coming from the opposite direction. When the truck reached a certain point near the Meralco Post No. J9-450, the front portion of the truck hit the left middle side portion of the passenger jeepney, causing damage to both vehicles and injuries to the driver and passengers of the jeepney. The truck driver should have been more careful, because, at that time, a portion of E. Rodriguez Avenue

was under repair and a wooden barricade was placed in the middle thereof.

The Court likewise sustains the finding of the RTC that the truck owner, Guballa, failed to rebut the presumption of negligence in the hiring and supervision of his employee.Article 2176, in relation to Article 2180 of the Civil Code, provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

xxxx

Art. 2180. The obligation imposed by Art. 2176 is demandable not only for ones own acts or omissions but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

Whenever an employees negligence causes damage or injury to another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection or supervision of his employee.[23] Thus, in the selection of prospective employees, employers are required to examine them as to their qualification, experience and service record. With respect to the supervision of employees, employers must formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. These facts must be shown by concrete proof, including documentary evidence.[24] Thus, the RTC committed no error in finding that the evidence presented by respondent Guballa was wanting. It ruled:

x x x. As expected, defendant Jose Guballa, attempted to overthrow this presumption of negligence by showing that he had exercised the due diligence required of him by seeing to it that the driver must check the vital parts of the vehicle he is assigned to before he leaves the compound like the oil, water, brakes, gasoline, horn (9 tsn, July 17, 1986); and that Geronimo had been driving for him sometime in 1976 until the collision in litigation came about (5-6 tsn, ibid); that whenever his trucks gets out of the compound to make deliveries, it is always accompanied with two (2) helpers (16-17 tsn, ibid). This was all which he considered as selection and supervision in compliance with the law to free himself from any responsibility. This Court then cannot consider the foregoing as equivalent to an exercise of all the care of a good father of a family in the selection and supervision of his driver Mariano Geronimo.[25]

HYPERLINK "http://sc.judiciary.gov.ph/jurisprudence/2005/dec2005/146635.htm#_ftn45"WHEREFORE, the petition is GRANTED. The May 20, 1994 Decision and June 30, 1994 Resolution of the Court of Appeals are REVERSED and SET ASIDE and the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila, is REINSTATED.

SO ORDERED.

SECOND DIVISION[G.R. Nos. 121576-78. June 16, 2000]BANCO DO BRASIL, petitioner, vs. THE COURT OF APPEALS, HON. ARSENIO M. GONONG, and CESAR S. URBINO, SR., respondents.D E C I S I O N

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 [Penned by Associate Justice Jainal D. Rasul and concurred in by Associate Justices Segundino G. Chua and Consuelo Ynares-Santiago, now Associate Justice of the Supreme Court, in CA-G.R. S.P. Nos. 24669, 28387 & 29317, Rollo, pp. 33-47.] and the Resolution2 [Id., pp. 49-53.] of the Court of Appeals3 [Former Special Eighth Division.] dated July 19, 1993 and August 15, 1995, respectively, which reinstated the entire Decision4 [Penned by Judge Arsenio M. Gonong, Civil Case No. 89-51451, Records, Vol. 2, pp. 517-528.] dated February 18, 1991 of the Regional Trial Court of Manila, Branch 8, holding, among others, petitioner Banco do Brasil liable to private respondent Cesar Urbino, Sr. for damages amounting to $300,000.00.5 [The Appellate Court erroneously declared in its decision that the amount of P300,000.00 was awarded by the trial court, Rollo, p. 36.]At the outset, let us state that this case should have been consolidated with the recently decided case of Vlason Enterprises Corporation v. Court of Appeals and Duraproof Services, represented by its General Manager, Cesar Urbino Sr.6 [G.R. Nos. 121662-64, July 6, 1999, Third Division, penned by Associate Justice Artemio V. Panganiban and concurred in by Associate Justices Jose C. Vitug, Fidel P. Purisima, and Minerva P. Gonzaga-Reyes.], for these two (2) cases involved the same material antecedents, though the main issue proffered in the present petition vary with the Vlason case.

The material antecedents, as quoted from the Vlason7 [Decision in G.R. Nos. 121662-64, pp. 3-13.] case, are:

Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport Company of Honduras & Panama, a Panamanian Company (hereafter referred to as Omega), requested permission for its vessel M/V Star Ace, which had engine trouble, to unload its cargo and to store it at the Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting transhipment to Hongkong. The request was approved by the Bureau of Customs.8 [Records, Vol. 1, pp. 27-31.] Despite the approval, the customs personnel boarded the vessel when it docked on January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line Philippines Co., and that its cargo would be smuggled into the country.9 [Records, Vol. 1, p. 32.] The district customs collector seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code. A notice of hearing of SFLU Seizure Identification No. 3-89 was served on its consignee, Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand.

While seizure proceedings were ongoing, La Union was hit by three typhoons, and the vessel ran aground and was abandoned. On June 8, 1989, its authorized representative, Frank Cadacio, entered into salvage agreement with private respondent to secure and repair the vessel at the agreed consideration of $1 million and "fifty percent (50%) [of] the cargo after all expenses, cost and taxes."10 [Records, Vol. 1, pp. 36-39.]Finding that no fraud was committed, the District Collector of Customs, Aurelio M. Quiray, lifted the warrant of seizure on July 1989.11 [Decision dated July 17, 1989, in SFLU Seizure Identification No. 3-89; Records, Vol. 1, pp. 54-68.] However, in a Second Indorsement dated November 11, 1989, then Customs Commissioner Salvador M. Mison declined to issue a clearance for Quirays Decision; instead, he forfeited the vessel and its cargo in accordance with Section 2530 of the Tariff and Customs Code.12 [2nd Indorsement dated November 1989; Records, Vol. 1, pp. 70-71.] Accordingly, acting District Collector of Customs John S. Sy issued a Decision decreeing the forfeiture and the sale of the cargo in favor of the government.13 [Decision dated November 17, 1989, Records, Vol. 1, pp. 74-86.]To enforce its preferred salvors lien, herein Private Respondent Duraproof Services filed with the Regional Trial Court of Manila a Petition for Certiorari, Prohibition and Mandamus14 [Docketed as Civil Case No. 89-51451 and raffled to Branch 8; Records, Vol. 1, pp. 1-26.] assailing the actions of Commissioner Mison and District Collector Sy. Also impleaded as respondents were PPA Representative Silverio Mangaoang and Med Line Philippines, Inc.

On January 10, 1989, private respondent amended its Petition15 [Ibid., pp. 122-145.] to include former District Collector Quiray; PPA Port Manager Adolfo Ll. Amor, Jr.; x Vlason Enterprises as represented by its president, Vicente Angliongto; Singkong Trading Company as represented by Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co.; Thai-Nan Enterprises Ltd., and Thai-United Trading Co., Ltd.16 [Amended Petition, id., pp. 122 & 128-129.] x x x

Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med Line Philippines: Anglionto (through his secretary, Betty Bebero), Atty. Tamondong and Commissioner Mison.17 [Sheriffs Return, id., pp. 160-164 & 171.] Upon motion of the private respondent, the trial court allowed summons by publication to be served upon defendants who were not residents and had no direct representative in the country.18 [Id., pp. 153-156.]On January 29, 1990, private respondent moved to declare respondents in default, but the trial court denied the motion in its February 23, 1990 Order19 [Id., pp. 214-215.], because Mangaoang and Amor had jointly filed a Motion to Dismiss, while Mison and Med Line had moved separately for an extension to file a similar motion.20 [Eventually, both separately filed their motions to dismiss.] Later it rendered an Order dated July 2, 1990, giving due course to the motions to dismiss filed by Mangaoang and Amor on the ground of litis pendentia, and by the commissioner and district collector of customs on the ground of lack of jurisdiction.21 [Records, Vol. 1, pp. 325-326.] In another Order, the trial court dismissed the action against Med Line Philippines on the ground of litis pendentia.22 [Order dated September 10, 1990; Records, Vol. 2, p. 359.]On two other occasions, private respondent again moved to declare the following in default: [Vlason], Quiray, Sy and Mison on March 26, 1990;23 [Records, Vol. 1, pp. 237-238.] and Banco [do] Bra[s]il, Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24, 1990.24 [Ibid., pp. 351-352.] There is no record, however, that the trial court acted upon the motions. On September 18, 1990, [private respondent] filed another Motion for leave to amend the petition,25 [Records, Vol. 2, pp. 370-371.] alleging that its counsel failed to include "necessary and/or indispensable parties": Omega represented by Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain. Aside from impleading these additional respondents, private respondent also alleged in the Second (actually, third) Amended Petition26 [Motion for Leave to Admit Second Amended Petition and Supplemental Petition, ibid., p. 370; Second Amended Petition with Supplemental Petition, ibid., pp. 372-398.] that the owners of the vessel intended to transfer and alienate their rights and interest over the vessel and its cargo, to the detriment of the private respondent.

The trial court granted leave to private respondent to amend its Petition, but only to exclude the customs commissioner and the district collector.27 [Order dated September 28, 1990, Records, Vol. 2, p. 407.] Instead, private respondent filed the "Second Amended Petition with Supplemental Petition" against Singkong Trading Company; and Omega and M/V Star Ace,28 [Records, Vol. 2, pp. 414-415.] to which Cadacio and Rada filed a Joint Answer.29 [Ibid., pp. 425-288.]Declared in default in an Order issued by the trial court on January 23, 1991, were the following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega.30 [Id., p. 506.] Private respondent filed, and the trial court granted, an ex parte Motion to present evidence against the defaulting respondents.31 [Order dated December 10, 1990, id., p. 492.] Only private respondent, Atty. Tamondong, Commissioner Mison, Omega and M/V Star Ace appeared in the next pretrial hearing; thus, the trial court declared the other respondents in default and allowed private respondent to present evidence against them.32 [Order dated January 23, 1991, Records, Vol. 2, p. 506. The records (pp. 493-495), however, show that only Duraproof Service, Singkong Trading and M/V Star Ace were served summons.] Cesar Urbino, general manager of private respondent, testified and adduced evidence against the other respondents, x x x.33 [RTC Decision, p. 7; Rollo, p. 92; penned by Judge Arsenio M. Gonong.]On December 29, 1990, private respondent and Rada, representing Omega, entered into a Memorandum of Agreement stipulating that Rada would write and notify Omega regarding the demand for salvage fees of private respondent; and that if Rada did not receive any instruction from his principal, he would assign the vessel in favor of the salvor.34 [Memorandum of Agreement, id., pp. 511-512.]On February 18, 1991, the trial court disposed as follows:

"WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and evidence adduced, both testimonial and documentary, the Court is convinced, that, indeed, defendants/respondents are liable to [private respondent] in the amount as prayed for in the petition for which it renders judgment as follows:

1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the vessel and Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is ordered to refrain from alienating or [transferring] the vessel M/V Star Ace to any third parties;

2. Singkong Trading Company to pay the following:

a. Taxes due the government;

b. Salvage fees on the vessel in the amount of $1,000,000.00 based on xxx Lloyds Standard Form of Salvage Agreement;

c. Preservation, securing and guarding fees on the vessel in the amount of $225,000.00;

d. Maintenance fees in the amount of P2,685,000.00;

e. Salaries of the crew from August 16, 1989 to December 1989 in the amount of $43,000.00 and unpaid salaries from January 1990 up to the present;

f. Attorneys fees in the amount of P656,000.00;

3. [Vlason] Enterprises to pay [private respondent] in the amount of P3,000,000.00 for damages;

4. Banco [Du] Brasil to pay [private respondent] in the amount of $300,000.00 in damages;35 [Italics supplied.] and finally,

5. Costs of [s]uit."

Subsequently, upon the motion of Omega, Singkong Trading Co., and private respondent, the trial court approved a Compromise Agreement36 [Records, Vol. 2, pp. 535-538.] among the movants, reducing by 20 percent the amounts adjudged. For their part, respondents-movants agreed not to appeal the Decision.37 [Order dated March 6, 1991, ibid., pp. 539-541. Private respondent entered into two separate compromise agreements with Singkong Trading Co. (id., pp. 535-536) and another with Omega (id., pp. 537-538). Both agreements were dated March 4, 1991.] On March 8, 1991, private respondent moved for the execution of judgment, claiming that the trial court Decision had already become final and executory. The Motion was granted and a Writ of Execution was issued. To satisfy the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio Camagon were deputized on March 13, 1991 to levy and to sell on execution the defendants vessel and personal property.

x x x

On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall the execution, and to quash the notice of levy and the sale on execution. Despite this Motion, the auction sale was conducted on March 21, 1991 by Sheriff Camagon, with private respondent submitting the winning bid. The trial court ordered the deputy sheriffs to cease and desist from implementing the Writ of Execution and from levying on the personal property of the defendants. Nevertheless, Sheriff Camagon issued the corresponding Certificate of Sale on March 27, 1991.

On April 10, 1991, petitioner Banco do Brasil filed, by special appearance, an Urgent Motion to Vacate Judgement and to Dismiss Case38 [Rollo, pp. 67-73.] on the ground that the February 18, 1991 Decision of the trial court is void with respect to it for having been rendered without validly acquiring jurisdiction over the person of Banco do Brasil. Petitioner subsequently amended its petition39 [Rollo, pp. 74-80.] to specifically aver that its special appearance is solely for the purpose of questioning the Courts exercise of personal jurisdiction.

On May 20, 1991, the trial court issued an Order40 [Rollo, pp. 81-82.] acting favorably on petitioners motion and set aside as against petitioner the decision dated February 18, 1991 for having been rendered without jurisdiction over Banco do Brasils person. Private respondent sought reconsideration41 [Records, Vol. 3, pp. 103-105.] of the Order dated May 20, 1991. However, the trial court in an Order42 [Rollo, p. 83.] dated June 21, 1991 denied said motion.

Meanwhile, a certiorari petition43 [Docketed as CA-G.R. SP No. 24669.] was filed by private respondent before public respondent Court of Appeals seeking to nullify the cease and desist Order dated April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2) more separate petitions for certiorari were subsequently filed by private respondent. The second petition44 [Docketed as CA-G.R. SP No. 28387.] sought to nullify the Order45 [Penned by Judge Bernardo P. Pardo, then Executive Judge, and now Associate Justice of the Supreme Court.] dated June 26, 1992 setting aside the Deputy Sheriffs return dated April 1, 1991 as well as the certificate of sale issued by Deputy Sheriff Camagon. The third petition46 [Docketed as CA-G.R. SP No. 29317.] sought to nullify the Order dated October 5, 1992 of the Court of Tax Appeals directing the Commissioner of Customs to place Bureau of Customs and PNP officers and guards to secure the M/V Star Ace and its cargoes, make inventory of the goods stored in the premises as indicated to belong to the private respondent. Likewise challenged was the Order dated August 17, 1992 authorizing the sale of M/V Star Ace and its cargoes.

These three (3) petitions were consolidated and on July 19, 1993, the appellate court rendered its Decision47 [See Note 1, supra.] granting private respondents petitions, thereby nullifying and setting aside the disputed orders and effectively "giving way to the entire [decision dated February 18, 1991 of the x x x Regional Trial Court of Manila, Branch 8, in Civil Case No. 89-51451 which remains valid, final and executory, if not yet wholly executed."48 [Rollo, p. 46.]Private respondent Urbino, Vlason Enterprises and petitioner Banco do Brasil filed separate motions for reconsideration. For its part, petitioner Banco do Brasil sought reconsideration, insofar as its liability for damages, on the ground that there was no valid service of summons as service was on the wrong party the ambassador of Brazil. Hence, it argued, the trial court did not acquire jurisdiction over petitioner Banco do Brasil.49 [Rollo, pp. 107.] Nonetheless, the appellate court denied the motions for reconsideration in its Resolution50 [See Note 2, supra.] dated August 15, 1995.

Hence, the instant petition.

Petitioner Banco do Brasil takes exception to the appellate courts declaration that the suit below is in rem, not in personam,51 [Rollo, pp. 19-21.] thus, service of summons by publication was sufficient for the court to acquire jurisdiction over the person of petitioner Banco do Brasil, and thereby liable to private respondent Cesar Urbino for damages claimed, amounting to $300,000.00. Petitioner further challenges the finding that the February 18, 1991 decision of the trial court was already final and thus, cannot be modified or assailed.52 [Rollo, p. 22-23.]Petitioner avers that the action filed against it is an action for damages, as such it is an action in personam which requires personal service of summons be made upon it for the court to acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil is a non-resident foreign corporation, not engaged in business in the Philippines, unless it has property located in the Philippines which may be attached to convert the action into an action in rem, the court cannot acquire jurisdiction over it in respect of an action in personam.

The petition bears merit, thus the same should be as it is hereby granted.

First. When the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance with Rule 14, Section 1753 [Section 17. Extraterritorial service When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which, is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached in the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.] of the Rules of Court. Under this provision, there are only four (4) instances when extraterritorial service of summons is proper, namely: "(1) when the action affects the personal status of the plaintiffs; (2) when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-residents property has been attached within the Philippines."54 [Ibid., now Sec. 15 of the 1997 Rules of Civil Procedure.] In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.55 [Ibid..]Clear from the foregoing, extrajudicial service of summons apply only where the action is in rem, an action against the thing itself instead of against the person, or in an action quasi in rem, where an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or loan burdening the property. This is so inasmuch as, in in rem and quasi in rem actions, 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.56 [Asiavest Limited v. Court of Appeals, 296 SCRA 539, 552-554 [1998]; Valmonte v. Court of Appeals, 252 SCRA 92, 99-102 [1996].]However, where the action is in personam, one brought 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. When the defendant is a non-resident, personal service of summons within the state is essential to the acquisition of jurisdiction over the person.57 [The Dial Corporation v. Soriano, 161 SCRA 737, 743 [1988] citing Boudard v. Tait, 67 Phil 170, 174 [1939].] This cannot be done, however, if the defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him.58 [Asiavest Limited v. Court of Appeals, supra. at 554.]In the instant case, private respondents suit against petitioner is premised on petitioners being one of the claimants of the subject vessel M/V Star Ace.59 [Records, Vol. 1, pp. 128-129.] Thus, it can be said that private respondent initially sought only to exclude petitioner from claiming interest over the subject vessel M/V Star Ace. However, private respondent testified during the presentation of evidence that, for being a nuisance defendant, petitioner caused irreparable damage to private respondent in the amount of $300,000.00.60 [Records, Vol. 2, p. 567.] Therefore, while the action is in rem, by claiming damages, the relief demanded went beyond theres and sought a relief totally alien to the action.

It must be stressed that any relief granted in rem or quasi in rem actions must be confined to the res, and the court cannot lawfully render a personal judgment against the defendant.61 [Villareal v. Court of Appeals, 295 SCRA 511, 525 [1998].] Clearly, the publication of summons effected by private respondent is invalid and ineffective for the trial court to acquire jurisdiction over the person of petitioner, since by seeking to recover damages from petitioner for the alleged commission of an injury to his person or property62 [The Dial Corporation v. Soriano, supra. at 742 citing Hernandez v. Development Bank of the Phil., 71 SCRA 290, 292-293 [1976].] caused by petitioners being a nuisance defendant, private respondents action became in personam. Bearing in mind the in personam nature of the action, personal or, if not possible, substituted service of summons on petitioner, and not extraterritorial service, is necessary to confer jurisdiction over the person of petitioner and validly hold it liable to private respondent for damages. Thus, the trial court had no jurisdiction to award damages amounting to $300,000.00 in favor of private respondent and as against herein petitioner.

Second. We settled the issue of finality of the trial courts decision dated February 18, 1991 in the Vlason case, wherein we stated that, considering the admiralty case involved multiple defendants, "each defendant had a different period within which to appeal, depending on the date of receipt of decision."63 [Decision in G.R. Nos. 121662-64, p. 27.] Only upon the lapse of the reglementary period to appeal, with no appeal perfected within such period, does the decision become final and executory.64 [Ibid.]In the case of petitioner, its Motion to Vacate Judgment and to Dismiss Case was filed on April 10, 1991, only six (6) days after it learned of the existence of the case upon being informed by the Embassy of the Federative Republic of Brazil in the Philippines, on April 4, 1991, of the February 18, 1991 decision.65 [Rollo, pp. 67-80.] Thus, in the absence of any evidence on the date of receipt of decision, other than the alleged April 4, 1991 date when petitioner learned of the decision, the February 18, 1991 decision of the trial court cannot be said to have attained finality as regards the petitioner.

WHEREFORE, the subject petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals dated July 19, 1993 and August 15, 1995, respectively, in CA-G.R. SP Nos. 24669, 28387 and 29317 are hereby REVERSED and SET ASIDE insofar as they affect petitioner Banco do Brasil. The Order dated May 20, 1991 of the Regional Trial Court of Manila, Branch 8 in Civil Case No. 89-51451 is REINSTATED.

SO ORDERED.Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

THIRD DIVISION

PHILIPPINE COMMERCIAL G.R. No. 175587

INTERNATIONAL BANK, Petitioner, Present:

Ynares-Santiago, J. (Chairperson),

- versus - Austria-Martinez,

Chico-Nazario,

Nachura, and

Reyes, JJ.JOSEPH ANTHONY M. ALEJANDRO, Respondent. Promulgated:

September 21, 2007

x ---------------------------------------------------------------------------------------- x

DECISIONYNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision[1] of the Court of Appeals in CA-G.R. CV No. 78200 affirming the August 30, 2000 Decision[2] of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages arising from petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of respondents deposits.

On October 23, 1997, petitioner filed against respondent a complaint[3] for sum of money with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits assigned by respondent as security for the loan, petitioner requested the latter to put up additional security for the loan. Respondent, however, sought a reconsideration of said request pointing out petitioners alleged mishandling of his account due to its failure to carry out his instruction to close his account as early as April 1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50.[4] It appears that the amount of P249,828,588.90 was the consolidated amount of a series of yen loans granted by petitioner to respondent during the months of February and April 1997.[5] In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his unassigned deposits notwithstanding his verbal promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the same prior to their assignment as security for the loan; and (2) that respondent is not a resident of the Philippines. The application for the issuance of a writ was supported with the affidavit of Nepomuceno.[6] On October 24, 1997, the trial court granted the application and issued the writ ex parte[7] after petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were garnished. On October 27, 1997, respondent, through counsel, filed a manifestation informing the court that he is voluntarily submitting to its jurisdiction.[8] Subsequently, respondent filed a motion to quash[9] the writ contending that the withdrawal of his unassigned deposits was not fraudulent as it was approved by petitioner. He also alleged that petitioner knew that he maintains a permanent residence at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, [10] where he is a partner. In both addresses, petitioner regularly communicated with him through its representatives. Respondent added that he is the managing partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to the Philippines.

On December 24, 1997, the trial court issued an order quashing the writ and holding that the withdrawal of respondents unassigned deposits was not intended to defraud petitioner. It also found that the representatives of petitioner personally transacted with respondent through his home address in Quezon City and/or his office in Makati City. It thus concluded that petitioner misrepresented and suppressed the facts regarding respondents residence considering that it has personal and official knowledge that for purposes of service of summons, respondents residence and office addresses are located in the Philippines. The dispositive portion of the courts decision is as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED.

SO ORDERED.[11] With the denial[12] of petitioners motion for reconsideration, it elevated the case to the Court of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition was dismissed for failure to prove that the trial court abused its discretion in issuing the aforesaid order.[13] Petitioner filed a motion for reconsideration but was denied on October 28, 1999.[14] On petition with this Court, the case was dismissed for late filing in a minute resolution (G.R. No. 140605) dated January 19, 2000.[15] Petitioner filed a motion for reconsideration but was likewise denied with finality on March 6, 2000.[16] Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25 Million[17] on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his deposits. He presented evidence showing that his P150,000.00 RCBC check payable to his counsel as attorneys fees, was dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of the Ateneo de Manila University in 1982 with a double degree of Economics and Management Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove that he is a well known lawyer in the business community both in the Philippines and in Hong Kong.[18] For its part, the lone witness presented by petitioner was Nepomuceno who claimed that she acted in good faith in alleging that respondent is a resident of Hong Kong.[19] On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his claim in the amount of P25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And, considering that the amount of the bond is insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant the amount ofP6,201,265.31.

SO ORDERED.[20] The trial court denied petitioners motion for reconsideration on October 24, 2000.[21]Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial court. It held that in claiming that respondent was not a resident of the Philippines, petitioner cannot be said to have been in good faith considering that its knowledge of respondents Philippine residence and office address goes into the very issue of the trial courts jurisdiction which would have been defective had respondent not voluntarily appeared before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner and specified their basis. The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted. In lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with appellant [herein petitioner], is ORDERED to pay appellee [herein respondent] P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages; and P1,000,000.00 as attorneys fees, to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.[22] Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioners motion for reconsideration but granted that of respondents by ordering petitioner to pay additional P5Million as exemplary damages.[23] Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a writ of attachment because respondent is a resident of the Philippines and that his act of withdrawing his deposits with petitioner was without intent to defraud, can no longer be passed upon by this Court. More importantly, the conclusions of the court that petitioner bank misrepresented that respondent was residing out of the Philippines and suppressed the fact that respondent has a permanent residence in Metro Manila where he may be served with summons, are now beyond the power of this Court to review having been the subject of a final and executory order. Said findings were sustained by the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness of judgment, which obtains under the premises, precludes the relitigation of a particular fact or issue in another action between the same parties even if based on a different claim or cause of action. The judgment in the prior action operates as estoppel as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. The previous judgment is conclusive in the second case, as to those matters actually and directly controverted and determined.[24] Hence, the issues of misrepresentation by petitioner and the residence of respondent for purposes of service of summons can no longer be questioned by petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the improper issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and suppression of a material fact, the latter contends that it acted in good faith. Petitioner also contends that even if respondent is considered a resident of the Philippines, attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he (respondent) is a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication.

Petitioners contentions are without merit.

While the final order of the trial court which quashed the writ did not categorically use the word bad faith in characterizing the representations of petitioner, the tenor of said order evidently considers the latter to have acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus

In the hearings of the motion, and oral arguments of counsels before the Court, it appears that plaintiff BANK through its contracting officers Vice President CORAZON B. NEPOMUCENO and Executive Vice President JOSE RAMON F. REVILLA, personally transacted with defendant mainly through defendants permanent residence in METRO-MANILA, either in defendants home address in Quezon City or his main business address at the ROMULO MABANTA BUENAVENTURA SAYOC & DELOS ANGELES in MAKATI and while at times follow ups were made through defendants temporary home and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge that defendants permanent and official residence for purposes of service of summons is in the Philippines. In fact, this finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK, in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm was addressed to the ROMULO LAW FIRM in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn was not part of defendants peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendants permanent residence is in METRO MANILA where he could be served with summons.

On the above findings, and mainly on the misrepresentations made by plaintiff on the grounds for the issuance of the attachment in the verified complaint, the Court concludes that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled to the attachment.[25]Petitioner is therefore barred by the principle of conclusiveness of judgment from again invoking good faith in the application for the issuance of the writ. Similarly, in the case of Hanil Development Co., Ltd. v. Court of Appeals,[26] the Court debunked the claim of good faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of said party having been previously determined in a final decision which voided the assailed writ. Thus

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the award of attorneys fees and injunction bond premium in favor of Hanil is [contrary] to law and jurisprudence. It contends that no malice or bad faith may be imputed to it in procuring the writ.

Escobars protestation is now too late in the day. The question of the illegality of the attachment and Escobars bad faith in obtaining it has long been settled in one of the earlier incidents of this case. The Court of Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with grave abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its Petition for the Issuance of Preliminary Attachment made such damning allegations that: Hanil was already able to secure a complete release of its final collection from the MPWH; it has moved out some of its heavy equipments for unknown destination, and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that after personal verification by (Escobar) of (Hanils) equipment in Cagayan de Oro City, it appears that the equipments were no longer existing from their compound. All these allegations of Escobar were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of misrepresentation and suppression of material facts on the part of petitioner, the factual backdrop of this case does not support petitioners claim of good faith. The facts and circumstances omitted are highly material and relevant to the grant or denial of writ of attachment applied for.

Finally, there is no merit in petitioners contention that respondent can be considered a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication, and therefore qualifies as among those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court which provides:

(f) In an action against a party x x x on whom summons may be served by publication.In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of attachment.

The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person;

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication.The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same provision.[27]Corollarily, in actions in personam, such as the instant case for collection of sum of money,[28] summons must be served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.[29] Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendants property. The service of summons in this case (which may be by publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant), is no longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process.[30]

However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section.

The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service (a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant; or (c) in any other manner which the court may deem sufficient.

In Montalban v. Maximo,[31] however, the Court held that substituted service of summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over the person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a) leaving copies of the summons at the defendants residence with some person of suitable discretion residing therein, or (b) by leaving copies at the defendants office or regular place of business with some competent person in charge thereof.[32] Hence, the court may acquire jurisdiction over an action in personam by mere substituted service without need of attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for residents temporarily out of the Philippines, was expounded in Montalban v. Maximo,[33] in this wise:

A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one who may be reasonably expected to act in his place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in the event a question that affects him crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the court need not always attach the defendants property in order to have authority to try the case. Where the plaintiff seeks to attach the defendants property and to resort to the concomitant service of summons by publication, the same must be with prior leave, precisely because, if the sole purpose of the attachment is for the court to acquire jurisdiction, the latter must determine whether from the allegations in the complaint, substituted service (to persons of suitable discretion at the defendants residence or to a competent person in charge of his office or regular place of business) will suffice, or whether there is a need to attach the property of the defendant and resort to service of summons by publication in order for the court to acquire jurisdiction over the case and to comply with the requirements of due process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly on the representation of petitioner that respondent is not a resident of the Philippines.[34] Obviously, the trial courts issuance of the writ was for the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to humiliation and annoyance.[35] It should be resorted to only when necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire jurisdiction over the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting in the present case.[36]

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are damages in name only and not in fact.[37] They are recoverable where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus subject to the discretion of the court according to the circumstances of the case.[38]In this case, the award of nominal damages is proper considering that the right of respondent to use his money has been violated by its garnishment. The amount of nominal damages must, however, be reduced from P2 million to P50,000.00 considering the short period of 2 months during which the writ was in effect as well as the lack of evidence as to the amount garnished.

Likewise, the award of attorneys fees is proper when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is also the amount of money garnished, and the length of time respondents have been deprived of the use of their money by reason of the wrongful attachment.[39] It may also be based upon (1) the amount and the character of the services rendered; (2) the labor, time and trouble involved; (3) the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the employment; (6) the skill and the experience called for in the performance of the services; (7) the professional character and the social standing of the attorney; (8) the results secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is contingent than when it is not.[40]

All the aforementioned weighed, and considering the short period of time it took to have the writ lifted, the favorable decisions of the courts below, the absence of evidence as to the professional character and the social standing of the attorney handling the case and the amount garnished, the award of attorneys fees should be fixed not at P1 Million, but only at P200,000.00.

The courts below correctly awarded moral damages on account of petitioners misrepresentation and bad faith; however, we find the award in the amount of P5 Million excessive. Moral damages are to be fixed upon the discretion of the court taking into consideration the educational, social and financial standing of the parties.[41] Moral damages are not intended to enrich a complainant at the expense of a defendant.[42] They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of petitioners culpable action. Moral damages must be commensurate with the loss or injury suffered. Hence, the award of moral damages is reduced to P500,000.00.

Considering petitioners bad faith in securing the writ of attachment, we sustain the award of exemplary damages by way of example or correction for public good. This should deter parties in litigations from resorting to baseless and preposterous allegations to obtain writs of attachments. While as a general rule, the liability on the attachment bond is limited to actual (or in some cases, temperate or nominal) damages, exemplary damages may be recovered where the attachment was established to be maliciously sued out.[43] Nevertheless, the award of exemplary damages in this case should be reduced from P5M to P500,000.00.

Finally, contrary to the claim of petitioner, the instant case for damages by reason of the invalid issuance of the writ, survives the dismissal of the main case for sum of money. Suffice it to state that the claim for damages arising from such wrongful attachment may arise and be decided separately from the merits of the main action.[44]WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED withMODIFICATIONS. As modified, petitioner Philippine Commercial International Bank is ordered to pay respondent Joseph Anthony M. Alejandro the following amounts:P50,000.00 as nominal damages, P200,000.00 as attorneys fees; and P500,000.00 as moral damages, and P500,000.00 as exemplary damages, to be satisfied against the attachment bond issued by Prudential Guarantee & Assurance Inc.,[45] under JCL (4) No. 01081, Bond No. HO-46764-97.

No pronouncement as to costs.

SO ORDERED.FIRST DIVISION

[G.R. No. 150656. April 29, 2003]

MARGARITA ROMUALDEZ-LICAROS, petitioner, vs. ABELARDO B. LICAROS, respondent.

D E C I S I O N

CARPIO, J.:

The CaseThis is a petition for review on certiorari[1] to annul the Decision[2] dated 9 August 2001 of the Court of Appeals in CA-G.R. SP No. 58487, as well as the Resolution dated 23 October 2001 denying the motion for reconsideration. The Court of Appeals dismissed the petition to annul the following decisions[3] rendered by Branch 143 of the Regional Trial Court of Makati:

(1) The Decision dated 27 December 1990[4] granting the dissolution of the conjugal partnership of gains of the spouses Abelardo B. Licaros and Margarita Romualdez-Licaros;

(2) The Decision dated 8 November 1991[5] declaring the marriage between the same spouses null and void.

The FactsThe antecedent facts as found by the Court of Appeals are as follows:

x x x Abelardo Licaros (Abelardo, for short) and Margarita Romualdez-Licaros (Margarita, hereafter) were lawfully married on December 15, 1968. Out of this marital union were born Maria Concepcion and Abelardo, Jr. Ironically, marital differences, squabbles and irreconcilable conflicts transpired between the spouses, such that sometime in 1979, they agreed to separate from bed and board.

In 1982, Margarita left for the United States and there, to settle down with her two (2) children. In the United States, on April 26, 1989, Margarita applied for divorce before the Superior Court of California, County of San Mateo (Annex 1, Rejoinder, pp. 164-165) where she manifested that she does not desire counseling at that time (Quotation, p. 166, Rollo). On August 6, 1990, Margarita was granted the decree of divorce(Annex 2, Answer, p. 108, Rollo) together with a distribution of properties between her and Abelardo (pp. 167-168, Rollo).

Not long after, on August 17, 1990, Abelardo and Margarita executed an Agreement of Separation of Properties (pp. 60-64, Rollo). This was followed-up by a petition filed on August 21, 1990 before the Regional Trial Court of Makati for the dissolution of the conjugal partnership of gains of the spouses and for the approval of the agreement of separation of their properties. This was docketed as Special Proceeding No. 2551. On December 27, 1990, a decision was issued granting the petition and approving the separation of property agreement.

For his part, on June 24, 1991, Abelardo commenced Civil Case No. 91-1757, for the declaration of nullity of his marriage with Margarita, based on psychological incapacity under the New Family Code. As Margarita was then residing at 96 Mulberry Lane, Atherton, California, U.S.A., Abelardo initially moved that summons be served through the International Express Courier Service. The court a quo denied the motion. Instead, it ordered that summons be served by publication in a newspaper of general circulation once a week for three (3) consecutive weeks, at the same time furnishing respondent a copy of the order, as well as the corresponding summons and a copy of the petition at the given address in the United States through the Department of Foreign Affairs, all at the expense of Abelardo. Respondent was given sixty (60) days after publication to file a responsive pleading.

On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted his Officers Return quoted hereunder:

OFFICERS RETURNTHIS IS TO CERTIFY that on July 3, 1991, I have served a copy of summons and complaint with annexes together with order dated June 28, 1991 issued by the Court in the above-entitled case upon defendant Margarita Romualdez-Licaros c/o DFA. (sent by Mail) thru Pat G. Martines receiving Clerk of Department of Foreign Affairs a person authorized to receive this kind of process who acknowledged the receipt thereof at ADB Bldg., Roxas Blvd., Pasay City, Metro Manila. (p. 40, Rollo)As required by law, the case was referred to Trial Prosecutor Bruselas, Jr. to find out any possible collusion between the parties in the case. Thereafter, with the negative report of collusion, Abelardo was allowed to present his evidence ex-parte. On November 8, 1991, the Decision (Annex A, Petition) was handed down in Civil Case No. 91-1757 declaring the marriage between Abelardo and Margarita null and void.

Almost nine (9) years late