WORLD PRECISION GAS CORPORATION, NELSON ANG, MARIA LUISA ANG, NENA C. ANG, GUILLERMO SY, ALLISON ANG-SY, RENATO C. ANG, MELINDA ANG AND RICKY ANG, PETITIONERS, VS. HON. EDWIN SO…

World Precision Gas Corporation versus Sorongon

The Case

This is a petition for certiorari and prohibition filed by World Precision Gas Corporation and its directors, officers, and sureties against Judge Edwin Sorongon of the Regional Trial Court of Mandaluyong City. The petitioners ask the Supreme Court to annul the trial court's decision ordering them to pay Banco de Oro Universal Bank actual damages of 149,181,700 pesos plus interest and liquidated damages, exemplary damages of 100,000 pesos, attorney's fees of 1,000,000 pesos, and costs, on the ground that the court never validly acquired jurisdiction over their persons because summons was served by publication. The case matters because it is the Court's cleanest recent statement on when summons by publication is proper, on how diligently a sheriff must try personal service before publication is allowed, and on the narrow scope of certiorari as a remedy.

Procedural History

Banco de Oro filed a complaint for damages against the petitioners in the Regional Trial Court of Mandaluyong City, and the trial court issued the writ of attachment prayed for. Personal service of summons failed, so upon the bank's motion the trial court allowed service by publication. After more than sixty days from publication and with no answers filed, the trial court declared the petitioners in default and allowed the bank to present evidence ex parte. On 16 March 2009 the trial court rendered the assailed decision. The petitioners then went directly to the Supreme Court by a petition for certiorari and prohibition with a prayer for a temporary restraining order or preliminary injunction, alleging grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

World Precision Gas Corporation, formerly Nation Petroleum Gas, was engaged in trading and retailing petroleum and liquefied petroleum gas. To expand its business by building an oil depot in Sariaya, Quezon, it applied for a credit line with Banco de Oro in 2003. In 2004 the bank and the corporation executed a Facility Agreement for 150,000,000 pesos, followed by a Conforme Letter signed by Allison Sy and Renato Ang, a Continuing Suretyship Agreement signed by the corporation's directors and officers, all surnamed Ang, and by three of their spouses, including Maria Luisa Ang and Guillermo Sy, and several irrevocable letters of credit and trust receipts.

The corporation's suppliers delivered the goods covered by the trust receipts, and the bank paid upon presentment of the proofs of delivery. The corporation obligated itself to hold the goods in trust for the bank, with permission to sell them and remit the proceeds, or to return the goods. When three trust receipts fell due, the bank demanded the proceeds or the goods, but the corporation failed to comply because of financial difficulties, and it even resorted to rehabilitation proceedings before the Regional Trial Court of Lucena City, which issued a stay order on 18 December 2006.

The bank then sued for damages in Mandaluyong City, seeking 149,181,700 pesos representing the proceeds of the sale or the value of the unsold goods held in trust under the matured trust receipts. The trial court issued the writ of attachment and directed service of summons, but personal service failed because the court personnel could not locate the petitioners, who had reportedly moved without leaving forwarding addresses. On the bank's motion, the trial court allowed service by publication. The bank published the summons in a newspaper of general circulation and mailed copies by registered mail to the last known addresses. When no answers came after more than sixty days, the trial court declared the petitioners in default and received the bank's evidence ex parte, then rendered the decision now challenged.

Issues

• Whether or not the petitioners were validly served with summons by publication when their whereabouts were unknown and could not be ascertained by diligent inquiry.
• Whether or not the trial court gravely abused its discretion in declaring the petitioners in default and receiving evidence ex parte despite the alleged lack of proper service of summons.
• Whether or not the trial court gravely abused its discretion in rendering its decision despite the alleged lack of proper service of summons.
• Whether or not the stay order issued by the Regional Trial Court of Lucena City barred the proceedings against the petitioner corporation.

Applicable Provisions

Section 14, Rule 14 of the Rules of Court provides:

Whenever the defendant's whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation.

This is the provision the Court applied in holding that publication was the correct mode of service once personal service became impossible.

The same Section 14, Rule 14 also provides:

Any application to the court to effect service in any manner for which leave of court is necessary shall be made by motion in writing, supported by affidavit of the plaintiff or some person on his behalf, setting forth the grounds for the application.

This is the procedural requirement the petitioners claimed the bank violated, and which the Court held was substantially satisfied by the sheriff's report attached to the motion.

Section 3 of the Continuing Suretyship Agreement, quoted in the decision, provides:

The liability of the Surety is solidary and is not contingent upon the pursuit by the Bank of whatever remedies it may have against the Debtor or the collaterals or liens it may possess. If any of the secured obligations is not paid or performed on due date, at stated maturity or by acceleration, the Surety shall, without need for any notice, demand or any other act or deed, immediately be liable therefore and the Surety shall pay and perform the same.

This is why the bank could proceed against the individual sureties notwithstanding the stay order affecting the corporation.

Ruling

On the first issue, the Court held that the petitioners were validly served by publication. Personal service is the rule and must be rigidly enforced, but the sheriffs attempted personal service at the given addresses and failed because nobody was there to accept, the premises were leased to a tenant, or the area was used commercially. The sheriffs talked to the occupants, asked the village security for help, and even waited at the creditors' meeting where Nelson Ang and Renato Ang were expected. The Court held that these circumstances warranted the conclusion that further attempts would be pointless, and that the reasons defeating personal service also rendered substituted service futile.

On the second issue, the Court held that the absence of a separate affidavit did not invalidate the motion, because the sheriff's report attached to it sufficiently established the ground, narrating in detail the unsuccessful efforts at personal service and the anonymity of the petitioners' whereabouts despite diligent inquiry.

On the third issue, the Court held that the trial court committed no grave abuse of discretion, and that its decision binds the petitioners even without their participation below.

On the fourth issue, the Court held that the stay order did not affect the proceedings, because the bank was enforcing its claim not against World Precision but against the individual petitioners who bound themselves solidarily under the suretyship agreement. The Court added that the inadvertent inclusion of the corporation was a reversible error not proper for certiorari, since certiorari corrects grave abuse of discretion, not erroneous findings or conclusions of law and fact.

Doctrine

First, service of summons by publication is proper only when the defendant's whereabouts are unknown and cannot be ascertained by diligent inquiry, and the sheriff's failure to effect personal service after genuine effort satisfies that condition. Second, the motion for leave to serve by publication must be in writing and supported by affidavit, but a detailed sheriff's report attached to the motion substantially complies. Third, certiorari under Rule 65 lies only for grave abuse of discretion amounting to lack or excess of jurisdiction, not to correct reversible error. Fourth, a surety's solidary liability is not contingent on the creditor's pursuit of the debtor, so a stay order against the principal does not bar the action against the sureties.

Disposition

The petition was denied and the decision of the Regional Trial Court dated 16 March 2009 was affirmed.

Remember This

Memorize this line: publication is the exception allowed only when the defendant's whereabouts are unknown and cannot be ascertained by diligent inquiry, and the sheriff's detailed report of failed personal service is the proof of that diligence. Examiners use this case to test the requisites of summons by publication, the sufficiency of a sheriff's return in lieu of an affidavit, and the limits of certiorari against erroneous judgments.