El Banco Espanol-Filipino vs.

Palanca
G.R. No. L-11390, March 26, 1918

* JURISDICTION, HOW ACQUIRED: Jurisdiction over the property which is the subject of the
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.
* The action to foreclose a mortgage is said to be a proceeding quasi in rem, by which is
expressed the idea that while it is not strictly speaking an action in rem yet it partakes of
that nature and is substantially such.
* DUE PROCESS IN FORECLOSURE PROCEEDINGS: 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.

FACTS:

Engracio Palanca Tanquinyeng y Limquingco mortgaged various parcels of real property in

Manila to El Banco Espanol-Filipino. Afterwards, Engracio returned to China and there he
died on January 29, 1810 without returning again to the Philippines. The mortgagor then
instituted foreclosure proceeding but since defendant is a non-resident, it was necessary to
give notice by publication. The Clerk of Court was also directed to send copy of the
summons to the defendant’s last known address, which is in Amoy, China. It is not shown
whether the Clerk complied with this requirement. Nevertheless, after publication in a
newspaper of the City of Manila, the cause proceeded and judgment by default was
rendered. The decision was likewise published and afterwards sale by public auction was
held with the bank as the highest bidder. On August 7, 1908, this sale was confirmed by the
court. However, about seven years after the confirmation of this sale, a motion was made by
Vicente Palanca, as administrator of the estate of the original defendant, wherein the
applicant requested the court to set aside the order of default and the judgment, and to
vacate all the proceedings subsequent thereto. The basis of this application was that the
order of default and the judgment rendered thereon were void because the court had never
acquired jurisdiction over the defendant or over the subject of the action.

ISSUE:

* Whether or not the lower court acquired jurisdiction over the defendant and the subject
matter of the action
* Whether or not due process of law was observed

RULING:

On Jurisdiction

The word “jurisdiction” is used in several different, though related, senses since it may have
reference (1) to the 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, or (2) over the property which is the subject to the litigation.

The sovereign authority which organizes a court determines the nature and extent of its
powers in general and thus fixes its competency or jurisdiction with reference to the actions
which it may entertain and the relief it may grant.

How Jurisdiction is Acquired

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.

Jurisdiction over the property which is the subject of the 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.
In the latter case the property, though at all times within the potential power of the court,
may never be taken into actual custody at all. An illustration of the jurisdiction acquired by
actual seizure is found in attachment proceedings, where the property is seized at the
beginning of the action, or some subsequent stage of its progress, and held to abide the
final event of the litigation. An illustration of what we term potential jurisdiction over the res,
is found in the proceeding to register the title of land under our system for the registration
of land. Here the court, without taking actual physical control over the property assumes, at
the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the
property and to adjudicate the title in favor of the petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be a

proceeding quasi in rem, by which is expressed the idea that while it is not strictly speaking
an action in rem yet it partakes of that nature and is substantially such. 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. The action quasi rem differs from the true
action in rem in the circumstance that in the 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. All proceedings having for their sole object the sale or other
disposition of the property of the defendant, whether by attachment, foreclosure, or other
form of remedy, are in a general way thus designated. The judgment entered in these
proceedings is conclusive only between the parties.