ARTICLE III SECTION 1 CASE 5 OF 23
WON the Court acquired the necessary jurisdiction to enable it to proceed with the
EL BANCO ESPANOL-FILIPINO VS. VICENTE PALANCA
IMPORTANT RULING:
Requirements in order for due process of law to be satisfied:
 There must be a court or tribunal clothed with judicial power to hear and determine
DISCUSSION AND RULING:
the matter before it;
 Jurisdiction must be lawfully acquired over the person of the defendant or over the
property which is the subject of the proceeding;
 The defendant must be given an opportunity to be heard;
 And judgment must be rendered upon lawful hearing.
FACTS:
1. March 31, 1908: Action was instituted by El Banco to foreclose a mortgage upon various
parcels of real property situated in Manila.
a. This mortgage was instituted by Engracio Palanca Tanguinyent y
Limquingco (who was the original defendant) on June 16, 1906.
2. March 31, 1906: the debt amounted to 218, 2940 drawing interest at 8% per annum
payable at each quarter.
a. At this time the parties estimated that the value of the property to be
mortgaged was at 292, 558 which is 75,000 pesos in excess of the debt.
3. Palanca went back to Amoy, China right after the execution of the instrument by the
mortgagor.
4. January 29, 1910: Engracio Palanca died.
5. Pursuant to Section 199 of the Code of Civil Procedure, since defendant/Palanca was
not a resident of the PH, it was necessary for the bank to give notice of the foreclosing
proceeding.
a. Hence, publication was made in a newspaper of the city of Manila.
b. Court also directed that the clerk of court should deposit in the post office in
a stamped envelope a copy of the summons and complaint directed to
Palanca in his last place of residence aka Amoy, China.
6. However, it doesn’t appear of record that the clerk of court did so. But there was an
affidavit from Bernardo Chan y Garcia, an employee of the attorneys for the bank, that
he had deposited a letter to Palanca containing copies of the complaint and the
summons.
7. July 2, 1908: The Court of First Instance proceeded with the case where Palanca did not
appear. Soon he was declared in default.
8. July 3, 1908: Judgment was rendered in favor of the bank.
a. It was found that the debt at the time was over 249,000.
b. Hence, Palanca was ordered to pay the debt and in his failure to do so the
mortgaged property will be subject to sale.
9. Payment by Palanca was never made.
10. July 8, 1908: Court ordered the sale of the property.
11. July 30: The property was bought by the bank for 110, 200.
12. 7 years after the confirmation of said sale, Vicente Palanca, administrator of the estate
of Engracio requested the court to set aside the order of default and vacate all the
proceedings that took place. He contented that the Court never acquired jurisdiction
over the defendant or over the subject of the action.
ISSUES:
1.
foreclosure of the mortgage
2. WON the proceedings were conducted in such manner as to constitute due process of
law
1. Jurisdiction:
a. Authority of the court to entertain a particular kind of action or to administer
a particular kind of relief, or it may refer to the power of the court over the
parties,
b. Over the property which is the subject to the litigation.
c. Jurisdiction over the person is acquired by the voluntary appearance of a
party in court and his submission to its authority, or it is acquired by the
coercive power of legal process exerted over the person.
d. Jurisdiction over the property which is the subject of litigation may result
either from a seizure of the property under legal process, whereby it is
brought into the actual custody of the law, or it may result from the institution
of legal proceedings wherein, under special provisions of law, the power of
the court over the property is recognized and made effective although the
property may not always be in the custody of the court.
e. Jurisdiction is acquired by the CFI through the statute creating it.
f. Jurisdiction over the person of the defendant, if acquired at all in such an
action, is obtained by the voluntary submission of the defendant or by the
personal service of process upon him within the territory where the process
is valid.
g. However, if the defendant is a nonresident and, remaining beyond the range
of the personal process of the court, refuses to come in voluntarily, the court
never acquires jurisdiction over the person at all. Here the property itself is
in fact the sole thing which is impleaded and is the responsible object
which is the subject of the exercise of judicial power. It follows that the
jurisdiction of the court in such case is based exclusively on the power which,
under the law, it possesses over the property
h. Conditions when the court acquires jurisdiction over property:
i. That the property is located within the district;
ii. That the purpose of the litigation is to subject the property by sale
to an obligation fixed upon it by the mortgage; and
iii. That the court at a proper stage of the proceedings takes the
property into its custody, if necessary, and exposes it to sale for the
purpose of satisfying the mortgage debt.
2. Action to foreclose mortgage is a proceeding quasi in rem. [Meaning while they are not
in actions in rem, it partakes of that nature and is substantially such.]
a. The expression "action in rem" is, in its narrow application, used only with
reference to certain proceedings in courts of admiralty wherein the property
alone is treated as responsible for the claim or obligation upon which the
proceedings are based.
b. The action quasi in rem differs from the true action in rem in the circumstance
that in the f former an individual is named as defendant, and the purpose of
the proceeding is to, subject his interest therein to the obligation or lien
burdening the property.
c. HENCE, proceedings of this character, if the defendant for whom
 publication is made appears, the action becomes as to him a personal action
and is conducted as such. This, however, does not affect the proposition that
where the defendant fails to appear the action is quasi in rem; and it should
therefore be considered with reference to the principles governing actions
in rem.
3. How an attachment proceeding works and how it is made an analogy/comparison to a
foreclosure proceeding:
a. If the defendant is not personally served, the preliminary seizure is to be
considered necessary in order to confer jurisdiction upon the court. In this
case the lien on the property is acquired by the seizure; and the purpose of
the proceedings is to subject the property to that lien.
b. If a lien already exists, whether created by mortgage, contract, or statute, the
preliminary seizure is not necessary; and the court proceeds to enforce such
lien in the manner provided by law precisely as though the property had been
seized upon attachment.
c. It results that the mere circumstance that in an attachment the property may
be seized at the inception of the proceedings, while in the foreclosure suit it
is not taken into legal custody until the time comes for the sale, does not
materially affect the fundamental principle involved in both cases, which is
that the court is here exercising a jurisdiction over the property in a
proceeding directed essentially in rem.
4. PROPOSITIONS OF THE COURT RELATIVE TO FORECLOSURE PROCEEDINGS
AGAINST THE PROPERTY OF A NONRESIDENT MORTGAGOR WHO FAILS
TO COME IN AND SUBMIT HIMSELF PERSONALLY TO THE JURISDICTION
OF THE COURT:
a. That the jurisdiction of the court is derived f from the power which it
possesses over the property;
b. That jurisdiction over the person is not acquired and is nonessential;
c. That the relief granted by the court must be limited to such as can be enforced
against the property itself.
5. From Pennoyer vs. Neff: jurisdiction over the person cannot be thus acquired by
publication and notice is no longer open to question; and it is now fully established that
a personal judgment upon constructive or substituted service against a nonresident
who does not appear is wholly invalid.
a. An action to foreclose a mortgage against a nonresident, upon whom service
has been effected exclusively by publication, no personal judgment for the
deficiency can be entered.
b. THIS PARTICULAR DOCTRINE IS WHAT IS CLAIMED BY PALANCA
TO HAVE BEEN VIOLATED BY THE CFI. [lord help]
6. RULING: COURT DOES NOT AGREE THAT IT HAS BEEN VIOLATED.
a. Based on Sec. 256 of the Code of Civil Procedure, these are the only things
necessary for the Court to do in a foreclosure proceeding:
i. Ascertain the amount due
ii. Make an order requiring the defendant to pay the money into
court.
b. HENCE, the judgment that was rendered in the proceedings at hand was
NOT a personal judgment. It was just compliance with with the requirements
stated above.
i. A personal judgment against the debtor for the deficiency is not to
be rendered until after the property has been sold and the proceeds
applied to the mortgage debt.
c. HENCE, it is also declared that if the irregularity of the clerk of court did
happen by not sending the summons, it does not in any way affect the
jurisdiction of the court.
7. Requirements in order for due process of law to be satisfied:
a. There must be a court or tribunal clothed with judicial power to hear and
determine the matter before it;
b. Jurisdiction must be lawfully acquired over the person of the defendant or
over the property which is the subject of the proceeding;
c. The defendant must be given an opportunity to be heard;
i. In relation with this, necessity for publication and mailing notice to
the defendant is essentially necessary. This allows for the owner of
the property to take steps as he sees fit to protect his property in a
foreclosure proceeding.
d. And judgment must be rendered upon lawful hearing.
8. However, as seen in the circumstances, mailing might fall short of giving this notice.
It is not guaranteed that the notice will even arrive at the hands of the owner. Hence, it
is evident that the actual notice to the defendant in cases of this kind is not an absolute
necessity.
a. Plus, property is always assumed to be in the possession of its owner, in
person or by agent; and he may be safely held, under certain conditions, to
be affected with knowledge that proceedings have been instituted for its
condemnation and sale.
b. It is the duty of the owner of real estate, who is a nonresident, to take
measures that in some way he shall be represented when his property is
called into requisition, and if he fails to do this. and fails to get notice by the
ordinary publications which have usually been required in such cases, it is
his misfortune, and he must abide the consequences.
c. Indeed, if property of a non-resident cannot be reached by legal process
through a notice to the owner, our states and courts are rendered powerless
because of the mere fact that the owner is a nonresident of the country.
9. With respect to the provisions of our own statute, relative to the sending of notice by
mail, the requirement is that the judge shall direct that the notice be deposited in the
mail by the clerk of the court, and it is not in terms declared that the notice must be
deposited in the mail.
a. MEANING: WHAT IS REQUIRED IS THAT COURTS GIVE
DIRECTION/INSTRUCTION NA MAGBIGAY NG NOTICE NOT THE
ACTUAL MAILING OF THE NOTICE ITSELF.
b. The absent owner of the mortgaged property must, so far as the due process
of law is concerned, take the risk incident to the possible failure of the clerk
to perform his duty, somewhat as he takes the risk that the mail clerk or the
mail carrier might possibly lose or destroy the parcel or envelope containing
the notice before it should reach its destination and be delivered to him.
10. RULING ON DUE PROCESS: If there was indeed irregularity or the non-sending of
the notice by the clerk of court, it does not amount to a denial of due process. Notice
was given by publication in a newspaper and this is. the only form of notice which the
law unconditionally requires. This in our opinion is all that was absolutely necessary to
sustain the proceedings.
11. An application to open or vacate a judgment because of an irregularity or defect in the
proceedings is usually required to be supported by:
 a. An affidavit showing the grounds on which the relief is sought, mistake, inadvertence, surprise, or excusable neglect; Provided, That application therefor be
b. And in addition to this showing also a meritorious defense to the action. made within a reasonable time, but in no case exceeding six months after such judgment, order,
c. The lapse of time is also a circumstance that affects this contention. or proceeding was taken."
12. There is the presumption that things happened according to the ordinary habits of life:
a. The mortgage under which the property was sold was executed far back in An additional remedy by petition to the Supreme Court is supplied by section 513 of the same
1906; and the proceedings in the foreclosure were closed by the order of court Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as
confirming the sale dated August 7, 1908. It passes the rational bounds of follows:
human credulity to suppose that a man who had placed a mortgage upon
property worth nearly P300,000 and had then gone away from the scene of "When a judgment is rendered by a Court of First Instance upon default, and a party thereto is
his life activities to end his days in the city of Amoy, China, should have long unjustly deprived of a hearing by fraud, accident, mistake or excusable negligence, and the Court
remained in ignorance of the fact that the mortgage had been foreclosed and of First Instance which rendered the judgment has finally adjourned so that no adequate remedy
the property sold, even supposing that he had no knowledge of those exists in that court, the party so deprived of a hearing may present his petition to the Supreme
proceedings while they were being conducted. It is more in keeping with the Court within sixty days after he first learns of the rendition of such judgment, and not thereafter,
ordinary course of things that he should have acquired information as to setting forth the facts and praying to have judgment set aside. "
what was transpiring in his affairs at Manila; and upon the basis of this
rational assumption we are authorized, in the absence of proof to the Because these are the only remedies given to vacate a judgment, the present action cannot prosper
contrary, to presume that he did have, or soon acquired, information as to the because it has been instituted 7 years after the sale took place.
sale of his property.
b. It is also presumed that Palanca received the notice since there is no proof
that the notice “delivered” ever returned to the postal officials as
undelivered.
c. The defendant voluntarily abandoned all thought of saving his property from
the obligation which he had placed upon it;- that knowledge of the
proceedings should be imputed to him; and that he acquiesced in the
consequences of those proceedings after they had been accomplished.
d. No disability on the part of the defendant himself existed from the time when
the foreclosure was effected until his death. It is believed that the delay in the
appointment of the administrator and institution of this action is a
circumstance which is imputable to the parties in interest whoever they may
have been.
13. It’s been contented by Palanca that they have been prejudiced since the bank bought the
property for price lesser than what has been agreed upon – instead of 286k it has been
bought for 110K. THE COURT SAYS THIS CLAUSE IN THEIR MORTGAGE DOES
NOT AFFECT THE FORECLOSURE.
14. On the assumption that the clerk of Court may not have sent the notice hence the
irregularity done – there is always the presumption that the clerk performed his duty
regularly based on sec. 334 of the Code of Civil Procedure.
a. This presumption holds even though such record of the notice is not found.
For if the whole proceeding is to be invalidated because of a piece of paper
such as a record, then the system will be vulnerable just because of said
record.
15. Times when the CFI can set aside a final judgment and permit renewal of litigation:

There is only one section of the Code of Civil Procedure which expressly recognizes the authority
of a Court of First Instance to set aside a final judgment and permit a renewal of the litigation
in the same cause. This is as f follows:

"SEC. 113. Upon such term as may be just the court may relieve a party or his legal
representative from a judgment, order, or other proceeding taken against him through his