LEONORA OBANA, PETITIONER, VS. COURT OF APPEALS, RAFAEL G. SUNTAY, REGISTER OF DEEDS OF QUEZON CITY, AND THE EX-OFICIO SHERIFF OF QUEZON CITY, RESPONDENTS.

This is a petition to review on certiorari the decision of
the Court of Appeals which set aside the trial court’s decision, dismissed
herein petitioner Leonora Obaña’s complaint and
ordered her to pay Rafael G. Suntay the amount of P5,000.00 as attorney’s fees with costs against her.

The facts of the case as stated in the Court of Appeals’ decision
are as follows:

“Records show that defendant-appellant (Rafael G. Suntay) was the former counsel of Liberty H. Dizon and her minor children, Nicolas and Noel Patrick,
both surnamed Torio, in an intestate proceeding
docketed as No. 142 and in the petition for guardianship over said minors in
Sp. Proc. No. C – 00565.  On April 28, 1972, said
defendant-appellant as such counsel in Sp. Proc. No.
C-00565, filed an “Explanation and Motion” for the approval of
attorney’s fees.  The defunct JDRC of Quezon City, acting on said motion, issued an order dated May 9, 1972, the pertinent portion of
which reads:

“‘Considering the foregoing, the Court believe that P10,000.00 attorney’s fees is too burdensome the wards to
shoulder alone and that the guardian should be able to be responsible for half
of it.

“‘WHEREFORE, further to order dated April 11, 1972, counsel is
hereby authorized to collect P5,000.00, from the ward’s guardianship
estate.'” (p. 3, Appellant’s Brief).

“On August 24, 1972,
appellant filed in the same proceedings a ‘Motion to Order the Guardian To Pay
The Attorney’s Fees,’ with prayer that the guardian be ordered to pay
immediately the amount of P5,000.00 out of the ward’s
guardianship estate (Exh. W).  Acting upon said motion, the JDRC of Quezon City issued an order dated September 14, 1972,
requiring Liberty B. Dizon to show proof of payment
of attorney’s fees in accordance with Order of May 9, 1972 and to submit a new
guardian’s bond releasing her former counsel as surety; failing which, she
shall be declared in contempt of court (Exh. X).

“It would appear that the above order was not complied with by
Liberty H. Dizon because on November 9, 1972,
defendant-appellant Atty. Suntay, filed with the
defunct CFI of Bulacan an action for a sum of money
(Civil Case No. 4238-M) against said Liberty M. Dizon,
Nicolas Torio, Jr. and Noel Patrick Torio (pp. 28, Record). 
In his complaint, defendant?appellant averred among others: that
his attorney’s fees in Sp. Proceedings Nos. C-412 and QC-00565 was (sic) not
paid by his former clients, despite repeated demands.  In connection with said complaint, appellant
moved for the issuance of an order of attachment upon a certain parcel of land
covered by TCT No. 173792 together with the improvements belonging to Liberty
H. Dizon and her wards, located at 48 Damar Village,
Balintawak, Quezon
City.  On
December 1, 1972, by virtue of the Writ of Attachment issued in Civil Case No.
4238-M, a levy was made on said property, which levy was annotated at the back
of TCT No. 173792 of the Register of Deeds of Quezon
City, to wit:

“‘PE-5839/T173792 —- NOTICE OF LEVY
—- Affecting the rights, interests and participation of the registered owners
hereof, the same having been levied by the Sheriff of Q. City by virtue of an
order of attachment issued by the CFI of Bulacan in
Civil Case No. 4238-M, entitled ‘Rafael G. Suntay, Pltf. v. Liberty H. Dizon,
Nicolas Torio, Jr. and Joel Patrick Torio, defs.’ to the amount of
P10,000.00.

“Date of Instrument – Nov. 29, 1972.

“Date of
Inscription – Dec. 1, 1972.”

(Exh. 1-A)

“Due to the failure of the sheriff to serve the summonses
issued in Civil Case 4238 for the reason that Mrs. Dizon
and her wards no longer resided at their last known address at 34-H Kaingin Road, Cypress Village, Quezon
City, and that their present address cannot be ascertained, appellant as
plaintiff in said civil case filed a ‘Motion for Service of Summons by
Publication (Exh. H) which
was granted by the court in its Order dated February 12, 1973 (Exh. 1).  Accordingly, summons were
served upon Mrs. Dizon and her wards through
publication.

“Meanwhile, pursuant to a Deed of Absolute Sale dated May 16, 1973 executed by and between
Liberty H. Dizon, et al., and appellee
Leonora Obaña involving the attached property (Exh. S), the Register of Deeds of Quezon
City cancelled TCT No. 173792 in the name of Liberty H. Dizon
and her wards, and, in lieu thereof, executed in favor of Leonora Obaña a new TCT No. 191059 necessarily transferring in the
process the encumbrance consisting of notice of levy in favor of appellant.

“On August 10, 1973, after summons by publication had been
effected in Civil Case No. 4238-M, upon motion of appellant Atty. Suntay, the court declared the defendants therein, Liberty
H. Dizon and her wards, in default and allowed
plaintiff’s evidence to be presented ex-parte.  Consequently, a decision was rendered on September 28, 1973, awarding to
appellant Atty Suntay the
amount of P10,000.00 representing his claim for
attorney’s fees relative to the prosecution of said case.  (Exhibit K).  Pursuant to said decision, a writ of
execution was issued per order of the court, and then followed by a Notice of
Levy on Execution dated August 7, 1974,
issued by the sheriff of Quezon
City.  Thereafter, a certificate of sale (Exh.
M) over the subject properly (now covered by TCT
191059 in the name of Leonora Obaña) was issued in
favor of the appellant, being the highest bidder.  For failure of Mrs. Dizon and her wards or by appellee
Leonora Obaña to redeem the property on or before October 15, 1975, a ‘Sheriff’s Final Deed of Sale’ (Exh.
N) was issued in favor of appellant.  Both certificates of sale were registered in
the Register of Deeds of Quezon City and was annotated at the back of TCT No. 191059 (Exh. A).

“Appellant then filed a petition in the then CFI of Rizal, Quezon City, for the
cancellation of TCT No. 191059 which was opposed by appellee
Leonora Obaña. 
On April 28, 1977,
said CFI of Quezon City in LRC-750 issued an order cancelling TCT No. 191059 and directing the Register of
Deeds of Quezon to issue a new title covering the
subject land in the name of Rafael G. Suntay married
to Victoria J. Suntay.

“To stop the registration of the subject land in the name of
appellant, appellee filed an action on August 28,
1978 before the court a quo for annulment of judgment rendered in
Civil Case No. 4238-M.  In her complaint,
appellee as plaintiff,
contended that the decision rendered in Civil Case No. 4238-M by the then CFI
of Bulacan is null and void for the reason that said
court did not acquire jurisdiction over Liberty H. Dizon
and her wards, since they were not properly served with summons.  Appellee also
claimed that the proceedings before the sheriff were defective in that the
sheriff failed to comply with the jurisdictional requirements on the manner of
service of notice in the New Rules of Court thus rendering the proceedings void
ab initio.

“The defendant-appellant, on the other hand, countered in his
answer that LRC-750 granting the petition for the cancellation of TCT No.
191059 in favor of said appellant is res judicata to the instant case; that plaintiff’s
recourse under Rule 38 has long prescribed; that insofar as the plaintiff is
concerned, when she bought the property in question and title was transferred
to her on July 2, 1973, she is charged with knowledge of the pendency of Civil Case No. 4238-M thru the annotation at
the back of TCT No. 173792 of the Registry of Deeds of Quezon
City; and that there was no extrinsic fraud committed by defendant-appellant
that may constitute a ground to nullify the judgment in Civil Case No. 4238-M.

“The court a quo in nullifying the judgment in
Civil Case No. 4238 held that no jurisdiction was acquired over the persons of
defendants therein, the action on being strictly in personam
and summons by publication is insufficient; and that no valid attachment and
levy were made by the sheriff as no personal service of the copy of the notice
to the occupant of the property was made.” 
(Rollo, pp. 37-40).

There are, therefore, three cases which eventually led to this
petition.  First was SP-C-00565, the
guardianship case before the Juvenile and Domestic Relations Court of Quezon City where the attorney’s fees for Suntay were initially awarded.  Second was CC 4238-M before Branch VII of the
Bulacan Court of First Instance where Atty. Suntay filed his action or sum of money to collect his fees
and where a default judgment against Liberty Dizon
and the Torio children was rendered.  The third is the case now before us from the
Court of Appeals – Civil Case No. 5418-M, the annulment of judgment case filed
in Branch VIII of the Regional Trial Court of Bulacan
to set aside as null and void the CFI decision in Civil Case No. 4238-M.

There is actually a fourth case, No. LRC
750, a petition for cancellation of the petitioner’s TCT No. 191059 filed by
respondent Suntay with the Court of First Instance of
Quezon City.

On appeal in Civil Case No. 5418 – M, the Court of Appeals
dismissed petitioner Obaña’s complaint on the grounds
of lack of cause of action and res judicata.

Hence, this present petition.

Petitioner raises the following assignment of errors, namely:

“(T)hat the public respondent Court of Appeals committed a grave
abuse of discretion amounting to a lack of or in excess of jurisdiction, in
REVERSING and SETTING ASIDE, the appealed decision of the Trial Court a quo,
despite the clear merits thereof, and these errors of public respondent are
manifest in the following :

“1.     THAT PETITIONER HAS NO
CAUSE OF ACTION, SINCE SHE WAS NOT A DEFENDANT NOR A PARTY IN INTEREST IN CC
NO. 4238-M (BRANCH VII, CFI, BULACAN):

“2.     THAT THE COMPLAINT FOR
ANNULMENT OF DECISION IS BARRED FOR REASON OF RES JUDICATA, SINCE BETWEEN LRC-750
AND CC 5418-M, THERE IS AN IDENTITY OF PARTIES AND SUBJECT MATTER, AND CAUSES
OF ACTIONS.” (Rollo, pp. 10-11)

There are certain facts overlooked by the Court of Appeals which
call for the setting aside of its decision.

Civil Case No. 4238 – M was an action for sum of money filed by
Atty. Suntay against Liberty Dizon
and her minor children in an effort to collect attorney’s fees in the
guardianship case he handled for them. 
The guardianship court authorized the payment of P5,000.00.  According to the Court of Appeals, the
collection case was between Suntay on one hand and Dizon and her children on the other.  It ruIed that
petitioner Obana, the buyer of the lot, is not a
party in interest and had neither personality nor cause of action to ask for
the annulment of the judgment in that case.

This may be so, if the facts end there.  However, the judgment in Civil Case No.
4238-M, while against Dizon and her children was
executed against property belonging to petitioner Obana.

The house and lot in Quezon City which Dizon sold to Obana for
P150,000.00 was executed upon by the Sheriff to satisfy the P10,000.00
attorney’s fees in the Dizon guardianship case and
another P5,000.00 awarded to  Suntay for his fees in prosecuting his own collection
case.  The house and lot were sold for
P17,402.90 to respondent Suntay.  According to the petitioner, the property she
purchased for P150,000.00 on May 16, 1973 is now worth over P1,000,000.00.

The sheriff’s sale was effected without
any personal notice to Liberty H. Dizon on the ground
that she had moved out of her old address and her “present address”
was unknown.  No notice was served on Obana because she was not a party in the collection
case.  All notices and summonses in the
collection case filed on November 9, 1972 including the copy of the complaint,
the original summons, the alias summons, the notice of levy on attachment of
the disputed property, the notice of levy on execution and the notice of
sheriff’s sale were served through mail to defendant Dizon
at 34-H Caingin Road, Cypress Village, Quezon City.  As
earlier stated, because the Sheriff could not serve the complaint and the
summons on Dizon who had moved out of the above
address, service by publication upon Dizon was
authorized by the court in the collection case.

In the annulment of judgment case which led to this petition, the
trial court ruled:

“On the question as to whether the Bulacan
Court of First Instance had acquired jurisdiction over the defendants in the
civil case in question thru summons by publication, the latest case law on the
matter is to the effect that in an action strictly in personam personal service of summons within the
forum is essential to the acquisition of jurisdiction over the person of the
defendant who does not voluntarily submit himself to the authority of the
court.  In other words, summons by
publication cannot — consistently with the due process clause in the Bill of
Rights — confer upon the court jurisdiction over said defendants (Magdalena
Estate, Inc. v. Nieto, et al. G R. No. 54242, November 25, 1983, citing
Citizens Surety & Insurance, Inc. v. Judge Melencio
Herrera, et al. 38 SCRA 369 [1971]; see also Pantaleon
v. Asuncion, 105 Phil, 761 [1059]; contra Fontanillal
v. Dominguez, 73 Phil. 579 [1042]). 
There is no question that Civil Case No. 4238-M filed before the Court
of First Instance of Bulacan was a personal action
being one for the recovery of a sum of money as it prayed for judgment
‘ordering the defendants jointly and severally to pay plaintiff the sum of
P10,000.00 with legal interest thereon from the date of the filing of this
complaint; the sum of P5,000.00 as attorney’s fees plus actual, moral and
exemplary damages in such amounts as this Honorable Court may deem just and
equitable and the costs of suit.’ The creditor, however, in an action in
personam can take the recourse to locate
properties, real or personal of the resident defendant-debtor with unknown
address and causing said properties to be attached under Rule 57 of Section
1(f) in which case the attachment converts the action into a professional
proceeding in rem or quasi-in-rem and the summons by publication may then be deemed
valid and effective.  (Ibid) In the case
at bar, it appears on record that the plaintiff who is supposed to be the
creditor availed of this remedy of attachment. 
This would have converted the action into a proceeding in rem and this rendered as proper the summons by
publication.  But validity of the
attachment is now contested by the herein plaintiff on the ground that the
proceedings before the sheriff in connection with Civil Case No. 4238-M
especially the notice of levy of attachment of the property subject matter of
the action were defective and invalid not having been in accordance with the
provisions of Rule 57 of the Rules of Court on attachment.” (pp. 27-29, Rollo)

In Venturanza v. Court
of Appeals (156 SCRA 305, 312 [1987]), this Court ruled:

“There is no question that the case at bar which is an action
for collection of a sum of money is an action in personam
thereby requiring personal service of summons on the defendants.”

It should be noted that Section 7 of Rule 57 requires that in
attaching real property a copy of the order, description, and notice must
be served on the occupant, in this case the
occupant at 48 Damortiz
Street, Damar Village,
Quezon
City.  The trial
court in the annulment case ruled that the attachment was void from the
beginning.  The action in personam which required personal service was never
converted into an action in rem where
service by publication would have been valid.

In Baltazar v. Court
of Appeals (G. R No. 78728, December 8, 1988) we stated that the
property of service of summons by publications is not dependent upon the
technical characterization of the action as one in rem
or quasi in rem but upon
compliance with the requirements for the situations found in Sections 16, 17,
and 18 of Rule 14 of the Rules of Court. 
We declared the service of summons by publication as “legally and
constitutionally vitiated.” In the present date, however, the action was
one in personam.  The service was equally void and of no
effect.

The Court of Appeals reversed the trial court principally on the
ground that Leonora Obana was neither a defendant nor
a party-in-interest in the collection case. 
It ignored the fact that property already sold to her was attached and
then bidded out to Atty. Suntay
without any notice to her.  And because
the notice of lis pendens
in the collection case was secured ex-parte without
the defendant Dizon and petitioner Obana, who were never brought to court, having any inkling
about it, the notice was not annotated on the owner’s duplicate copy of
Transfer Certificate of Title No. 173792.

Respondent Suntay cannot claim
ignorance of the sale to petitioner Obana as a ground
for not bringing her into the picture. 
As stressed by the petitioner, Liberty Dizon
filed her motion for the approval of the sale of the disputed house and lot in
the guardianship case SP-C-00565 through her counsel, herein private
respondent Suntay (Exh.
Q, original records). 
He could not have been unaware that the house and lot he was attaching
had been sold to Obana because the sale of the Dalmar property was authorized by the guardianship court in
the case where he was counsel for the guardian.

Considering all the foregoing circumstances, the order in LRC 750
which is based on irregular proceedings in the prior case and which directed
the cancellation of Obana’s transfer certificate of
title cannot assume finality.  The
respondent court committed reversible error in using it as a basis for res judicata.  There is the added factor that a land
registration court in a cancellation of title case could not possibly inquire
into the controversial matters raised in the annulment of judgment case.  (See Register of Deeds of
Iloilo v. Hodges, 7 SCRA 149 [1963]; Sunpongco v.
Heirs of Nicolas Ronquillo, 36 SCRA 395 [1970] and
Development Bank of the Philippines v. Jimenez, 36 SCRA 426 [1976]).

The respondent court ruled that Liberty H. Dizon
and her wards should have been joined as plaintiffs by petitioner Obana in the action to annul the judgment in the collection
case.  This ruling ignores the fact that Dizon could not even be summoned in the collection case;
her whereabouts are unknown; the judgment against her was a default judgment;
she has apparently no more interest whatsoever in the house and lot she sold to
Obana; and she still owes Atty. Suntay
P10,000.00.

And finally, in our capacity as a court of equity in addition to
being a court of law, we cannot close our eyes to the rank injustice whereby
the owner of a million peso house and lot is compelled to give up her property
to answer for a P10,000.00 attorney’s fee incurred by
its former owner and which the lawyer cannot apparently collect from his own
client.

WHEREFORE, the petition is hereby GRANTED.  The questioned decision of the Court of
Appeals is REVERSED and SET ASIDE.  The
decision of the trial court in Civil Case No. 5418-M which reads:

“Premises considered, the judgment issued in Civil Case No.
4238-OM as well as the proceedings, orders and notices issued therein including
the writ of attachment, levy and execution sale are hereby declared null and
void.  Register of Deeds is therefore
permanently restrained from effecting the cancellation of title in the name of herein
plaintiff.  For moral damages, the said
plaintiff is hereby awarded the amount of P10,000.00,
and for attorney’s fees, the amount of P15,00000.  Costs against the
defendant.” (p. 35, Rollo) is REINSTATED.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin, and Cortes, JJ., concur.