UNITED COCONUT PLANTERS BANK, PETITIONER, VS. ROBERTO V. ONGPIN, RESPONDENT.

United Coconut Planters Bank versus Ongpin

The Case

This is a petition for review on certiorari brought by United Coconut Planters Bank against Roberto V. Ongpin. The bank sued Ongpin in the Regional Trial Court of Makati to collect on a surety agreement he had signed in favor of Philippine Apparel, Incorporated, and it obtained a writ of preliminary attachment over his shares of stock. The central question is not the debt itself but something more fundamental: whether the trial court ever acquired jurisdiction over the person of Ongpin, and whether the bank's substituted service of summons on a secretary at a company where he served as chairman of the board was valid. The case matters because it is a clean teaching vehicle on the difference between special appearance and voluntary appearance, and on the strict requirements of substituted service of summons.

Procedural History

The bank filed its complaint for enforcement of the surety obligation in the Regional Trial Court of Makati, which granted the writ of preliminary attachment and later issued a writ of attachment and notice of garnishment. Ongpin made a special appearance and moved to dismiss and to quash the writ on the ground that the court had no jurisdiction over his person, the summons having been unserved. The trial court denied the motion, and denied reconsideration.

Ongpin then went to the Court of Appeals on certiorari. The Court of Appeals validated the issuance of the writ of attachment and notice of garnishment but prohibited their implementation until the trial court acquired jurisdiction over Ongpin's person, either by voluntary appearance or by service of summons. The bank's motion for reconsideration was denied, and its later petition to the Supreme Court was dismissed for failure to comply with procedural requirements.

After summons was eventually served on Anne V. Morallo at the Philippine Apparel, Incorporated office, Ongpin filed an urgent omnibus motion to dismiss, to prohibit implementation of the writ, to quash the notice of garnishment, and to release the attached properties. The trial court denied it, and denied reconsideration. Ongpin again went to the Court of Appeals, which annulled and set aside the trial court's orders. The bank then filed this petition for review under Rule 45.

Facts

On November 17, 1994, Philippine Apparel, Incorporated entered into a credit agreement with the bank for a case-to-case credit line of 500,000 dollars. Ongpin, then the controlling stockholder of the corporation, signed as surety, binding himself jointly and severally liable with it. The corporation drew on the credit line and opened letters of credit, and its obligations reached 650,986 dollars and 34 cents, or 16,526,653 pesos. When the corporation failed to pay, the bank sued Ongpin as surety and sought a writ of preliminary attachment, alleging among other grounds that he had transferred residence to Hongkong in fraud of creditors.

The trial court granted the writ, and shares of stock belonging to Ongpin were garnished. Ongpin made a special appearance to move to dismiss and to quash, insisting the court had no jurisdiction over him because summons had not been served. Over the years the bank tried various modes of service, including publication, which it later abandoned.

On November 27, 1997, a deputy sheriff and the bank's representative went to the office of a telecommunications company where Ongpin was chairman of the board, expecting him at a board meeting. He did not attend. The sheriff learned that Ongpin was not holding office there, and that his secretary had to call Ongpin's office at another building to ask whether he would attend. Later that afternoon, the sheriff served the summons on Anne V. Morallo, the executive secretary of the president of that company, who said she was authorized to receive court processes for Ongpin. When she tried to forward the summons to him, his lawyer refused to receive it. The sheriff then implemented the writ of attachment through notices of garnishment.

Issues

• Whether or not Ongpin's repeated special appearances before the trial court over five years amounted to voluntary appearance, thereby giving the court jurisdiction over his person.
• Whether or not the substituted service of summons on Anne V. Morallo, executive secretary of the president of the company where Ongpin was chairman of the board, was valid.

Applicable Provisions

Section 7 of Rule 14 of the 1997 Revised Rules of Civil Procedure provides:

If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant's office or regular place of business with some competent person in charge thereof.

This is the provision the Court construes, and it bears on the case because the validity of the substituted service on Morallo turns on whether the place of service was Ongpin's office or regular place of business and whether she was a competent person in charge thereof.

Section 14 of Rule 14 of the same Rules provides:

If the whereabouts of the defendant 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 and in such places and for such time as the court may order.

This bears on the case because the Court notes that the bank was not without a remedy, and could have served summons by publication upon a proper showing.

Ruling

On the first issue, the Court held that a party who makes a special appearance to challenge the court's jurisdiction, on the ground for instance of invalid service of summons, cannot be considered to have submitted himself to that jurisdiction. Even the assertion of affirmative defenses other than lack of jurisdiction over the person does not waive that defense. Although Ongpin had filed numerous pleadings, they were precisely for the purpose of contesting jurisdiction over his person, and it would be absurd to hold that by such appearance he submitted himself to the court. The Court distinguished the Macapagal case, where summons had been validly served on counsel and the defendant's claim of unawareness was feigned. Here, summons was served on the executive secretary of the president of a company that was not even a party to the action. Jurisdiction cannot be acquired over the person of a defendant even if he knows of the case against him, unless he is validly served with summons.

On the second issue, the Court found no error in the Court of Appeals' ruling. The word office, or the phrase regular place of business, refers to the office or place of business of the defendant at the time of service. It does not necessarily follow that the regular place of business of a chairman of the board is the same as the address of the corporation, since he may hold office elsewhere. Here the corporation was not a party, and Ongpin was sued in his personal capacity as surety. The sheriff already knew from his initial inquiries that Ongpin was not holding office at that company. Since that office was not his regular place of business, Morallo could not be regarded as authorized to receive service of process for him.

The Court added that if Ongpin was a non-resident whose property had been attached, or if his whereabouts were unknown and could not be ascertained by diligent inquiry, the bank could, by leave of court, serve summons by publication. The bank could not rely on Ongpin's alleged knowledge of the case to avoid complying with the standards set by the Rules.

Doctrine

A special appearance made to challenge the court's jurisdiction over the person, such as by moving to dismiss or to quash on the ground of invalid service of summons, is not voluntary appearance and does not confer jurisdiction over the defendant. Knowledge of the case is not equivalent to valid service of summons.

Substituted service of summons under Section 7 of Rule 14 is valid only if the copies are left at the defendant's residence with a person of suitable age and discretion residing therein, or at the defendant's office or regular place of business with a competent person in charge thereof. The office or regular place of business means that of the defendant at the time of service, not that of a corporation that is not a party to the action, even if the defendant is its chairman of the board.

Where the defendant is a non-resident whose property has been attached, or where his whereabouts are unknown and cannot be ascertained by diligent inquiry, service may be effected by publication upon leave of court.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals, with no pronouncement as to costs, leaving the trial court's orders annulled and set aside for want of valid service of summons on Ongpin.

Remember This

Memorize this line: a special appearance to question jurisdiction is not voluntary appearance, and jurisdiction over the person is never acquired by mere knowledge of the case. Examiners use this case to test the requisites of substituted service under Rule 14 and the distinction between special and voluntary appearance.