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FIRST DIVISION

G.R. No. 155488             December 6, 2006

ERLINDA R. VELAYO-FONG, petitioner,
vs.
SPOUSES RAYMOND and MARIA HEDY VELAYO, respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking the reversal of the Decision¹ of the Court of Appeals (CA) dated May 14, 2002 in CA-G.R. CV No. 54434 which affirmed the Decision of the Regional Trial Court, Branch 105, Quezon City (RTC) in Civil Case No. Q-93-17133; and the CA Resolution² dated October 1, 2002 which denied petitioner's motion for reconsideration.

The procedural antecedents and factual background of the case are as follows:

On August 9, 1993, Raymond Velayo (Raymond) and his wife, Maria Hedy Velayo (respondents) filed a complaint for sum of money and damages with prayer for preliminary attachment against Erlinda R. Velayo-Fong (petitioner), Rodolfo R. Velayo, Jr. (Rodolfo Jr.) and Roberto R. Velayo (Roberto).³ Raymond is the half-brother of petitioner and her co-defendants.

In their Complaint, respondents allege that petitioner, a resident of 1860 Alamoana Boulevard, Honolulu, Hawaii, USA, and her co-defendants, who are residents of the Philippines, made it appear that their common father, Rodolfo Velayo, Sr. (Rodolfo Sr.) and petitioner had filed a complaint against Raymond before the National Bureau of Investigation (NBI), accusing Raymond of the crimes of estafa and kidnapping a minor; that petitioner and her co-defendants also requested that respondents be included in the Hold Departure List of the Bureau of Immigration and Deportation (BID) which was granted, thereby preventing them from leaving the country and resulting in the cancellation of respondents' trips abroad and caused all of respondents' business transactions and operations to be paralyzed to their damage and prejudice; that petitioner and her co-defendants also filed a petition before the Securities and Exchange Commission (SEC) docketed as Case No. 4422 entitled "Rodolfo Velayo Sr. et al. v. Raymond Velayo et al." which caused respondents' funds to be frozen and paralyzed the latters' business transactions and operations to their damage and prejudice. Since petitioner was a non-resident and not found in the Philippines, respondents prayed for a writ of preliminary attachment against petitioner's properties located in the Philippines.

Before respondents' application for a writ of preliminary attachment can be acted upon by the RTC, respondents filed on September 10, 1993 an Urgent Motion praying that the summons addressed to petitioner be served to her at Suite 201, Sunset View Towers Condominium, Roxas Boulevard, Pasay City and at No. 5040 P. Burgos Street, T. Towers Condominium, Makati.⁴ In its Order dated September 13, 1993, the RTC granted the said motion.⁵

The Process Server submitted the Officer's Return, to wit:

THIS IS TO CERTIFY, that after several failed attempts to serve the copy of summons and complaint issued in the above-entitled case at the given addresses of defendant Erlinda Velayo as mentioned in the Order of this Court dated September 13, 1993, finally, on the 23^rd day of September, 1993, at the instance of herein plaintiffs through counsel, undersigned was able to SERVED (sic) personally upon defendant Erlinda Velayo the copy of summons together with the thereto attached copy of the complaint, not at her two (2) given addresses, but at the lobby of Intercontinental Hotel, Makati, Metro Manila, right in the presence of lobby counter personnel by the name of Ms. A. Zulueta, but said defendant refused to sign in receipt thereof.

I FURTHER CERTIFY, that on the 27^th day of September, 1993, copy of the same WAS SERVED personally upon the other defendant Rodolfo R. Velayo, Jr., at No. Block 57, Lots 17 and 19, G. Sanchez Street, BF Resort Village, Las Piñas, Metro Manila, but who also refused to sign in receipt thereof.

WHEREFORE, original copy of the summons is now being respectfully returned to the Honorable Court DULY SERVED.

Quezon City, Philippines, September 30, 1993.⁶

Upon ex-parte motions⁷ of respondents, the RTC in its Order dated November 23, 1993 and January 5, 1994, declared petitioner and her co-defendant in default for failure to file an answer and ordered the ex-parte presentation of respondents' evidence.⁸

On June 15, 1994, the RTC rendered its Decision in respondents' favor, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the defendants to pay the plaintiffs:

1. the amount of P65,000.00 as actual damages;

2. the amount of P200,000.00 as moral damages;

3. Attorney's fees in the amount of P5,000,00 it being a judgment by default; and

4. cost of suit.

SO ORDERED.⁹

On September 1, 1994, petitioner filed a Motion to Set Aside Order of Default claiming that she was prevented from filing a responsive pleading and defending herself against respondents' complaint because of fraud, accident or mistake; that contrary to the Officer's Return, no summons was served upon her; that she has valid and meritorious defenses to refute respondents' material allegations.¹⁰ Respondents opposed said Motion.¹¹

In its Order dated May 29, 1995, the RTC denied petitioner's Motion ruling that the presumption of regularity in the discharge of the function of the Process Server was not sufficiently overcome by petitioner's allegation to the contrary; that there was no evident reason for the Process Server to make a false narration regarding the service of summons to defaulting defendant in the Officer's Return.¹²

On September 4, 1995, respondents filed a Motion for Execution.¹³ On September 22, 1995, petitioner filed an Opposition to Motion for Execution contending that she has not yet received the Decision and it is not yet final and executory as against her.¹⁴

In its Order dated January 3, 1996, the RTC, finding that the Decision dated June 15, 1994 and the Order dated May 29, 1995 were indeed not furnished or served upon petitioner, denied respondents' motion for execution against petitioner and ordered that petitioner be furnished the said Decision and Order.¹⁵

On March 28, 1996, the RTC issued an Order directing the issuance of the writ of execution against petitioner's co-defendant.¹⁶

On May 23, 1996, petitioner, through her counsel, finally received the Decision dated June 15, 1994 and the Order dated May 29, 1995.¹⁷

Petitioner filed an appeal with the CA questioning the propriety and validity of the service of summons made upon her. Respondents opposed the appeal, arguing that the petition should be dismissed since it raised pure questions of law, which is not within the CA's jurisdiction to resolve under Section 2 (c) of Rule 41 of the Revised Rules of Court; that, in any case, petitioner's reliance on the rule of extraterritorial service is misplaced; that the judgment by default has long been final and executory since as early as August 1994 petitioner became aware of the judgment by default when she verified the status of the case; that petitioner should have filed a motion for new trial or a petition for relief from judgment and not a motion to set aside the order of default since there was already a judgment by default.

On May 14, 2002, the CA rendered its Decision affirming the Decision and Order of the RTC¹⁸ ruling that it (CA) has jurisdiction since the petition raised a question of fact, that is, whether petitioner was properly served with summons; that the judgment by default was not yet final and executory against petitioner since the records reveal and the RTC Order dated January 3, 1996 confirmed that she was not furnished or served a copy of the decision; that petitioner was validly served with summons since the complaint for damages is an action in personam and only personal, not extraterritorial service, of summons, within the forum, is essential for the acquisition of jurisdiction over her person; that petitioner's allegations that

she did not know what was being served upon her and that somebody just hurled papers at her were not substantiated by competent evidence and cannot overcome the presumption of regularity of performance of official functions in favor of the Officer's Return.

Petitioner filed a Motion for Reconsideration¹⁹ but the CA denied it in its Resolution dated October 1, 2002.²⁰

Hence, the present petition anchored on the following grounds:

I

THE COURT OF APPEALS PATENTLY ERRED IN NOT RULING THAT PETITIONER WAS NOT VALIDLY SERVED WITH SUMMONS.

II

THE COURT OF APPEALS PATENTLY ERRED IN NOT RULING THAT PETITIONER WAS PREVENTED FROM FILING RESPONSIVE PLEADING AND DEFENDING AGAINST RESPONDENTS' COMPLAINT BECAUSE OF FRAUD, ACCIDENT AND MISTAKE.²¹

Parties filed their respective Memoranda on September 8 and 9, 2005.

Petitioner argues that summons should have been served through extraterritorial service since she is a non-resident; that the RTC should have lifted the order of default since a default judgment is frowned upon and parties should be given their day in court; that she was prevented from filing a responsive pleading and defending against respondents' complaint

through fraud, accident or mistake considering that the statement in the Officer's Return that she was personally served summons is inaccurate; that

she does not remember having been served with summons during the said date but remembers that a man hurled some papers at her while she was entering the elevator and, not knowing what the papers were all about, she threw back the papers to the man before the elevator closed; that she has a valid and meritorious defense to refute the material allegations of respondents' complaint.

On the other hand, respondents contend that petitioner was validly served with summons since the rules do not require that service be made upon her at her place of residence as alleged in the complaint or stated in the summons; that extraterritorial service applies only when the defendant does not reside and is not found in the Philippines; that petitioner erred in filing a motion to set aside the order of default at the time when a default judgment was already rendered by the RTC since the proper remedy is a motion for new trial or a petition for relief from judgment under Rule 38; that the issue on summons is a pure question of law which the CA does not have jurisdiction to resolve under Section 2 (c) of Rule 41 of the 1997 Rules of Civil Procedure.²²

The Court finds it proper to resolve first whether the issue involved in the appeal filed with the CA is a question of law and therefore not within the jurisdiction of the CA to resolve.

In Murillo v. Consul,²³ which was later adopted by the 1997 Rules of Civil Procedure, the Court clarified the three modes of appeal from decisions of the RTC, namely: (a) ordinary appeal or appeal by writ of error, where judgment was rendered in a civil or criminal action by the RTC in the exercise of original jurisdiction; (b) petition for review, where judgment was

rendered by the RTC in the exercise of appellate jurisdiction; and (c) petition for review to the Supreme Court.

The first mode of appeal, governed by Rule 41, is taken to the Court of Appeals on questions of fact or mixed questions of fact and law. The second mode of appeal, covered by Rule 42, is brought to the Court of Appeals on questions of fact, of law, or mixed questions of fact and law. The third mode of appeal, provided for by Rule 45, is elevated to the Supreme Court only on questions of law.

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts.²⁴ For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them.²⁵ The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.²⁶ Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can

determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.²⁷

Respondents' claim that the issues raised by petitioner before the CA are pure legal questions is not tenable.

A scrutiny of petitioner's petition before the CA reveals that it raised two issues: (a) the propriety of the service effected on a non-resident; and (b) the validity of the service made upon her. The first is a question of law. There is indeed a question as to what and how the law should be applied. The second is a question of fact. The resolution of said issue entails a review of the factual circumstances that led the RTC to conclude that service was validly effected upon petitioner. Therefore, petitioner properly brought the case to the CA via the first mode of appeal under the aegis of Rule 41.

How may service of summons be effected on a non-resident?

Section 17,²⁸ Rule 14 of the Rules of Court provides:

Section 17. Extraterritorial service – When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which, is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached in the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.

Under this provision, when the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially. There are only four instances when extraterritorial service of summons is proper, namely: (a) when the action affects the personal status of the plaintiffs; (b) when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or contingent; (c) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (d) when the defendant's property has been attached within the Philippines. In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.

Thus, extrajudicial service of summons apply only where the action is in rem, that is, an action against the thing itself instead of against the person, or in an action quasi in rem, where an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or loan burdening the property. The rationale for this is that in in rem and quasi in rem actions, jurisdiction over the person of the defendant is

not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res.²⁹

Where the action is in personam, that is, one brought against a person on the basis of her personal liability, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. When the defendant is a non-resident, personal service of summons within the state is essential to the acquisition of jurisdiction over the person.³⁰ Summons on the defendant must be served by handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him.³¹ This cannot be done, however, if the defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him.³²

In the present case, respondents' cause of action in Civil Case No. Q-93-17133 is anchored on the claim that petitioner and her co-defendants maliciously instituted a criminal complaint before the NBI and a petition before the SEC which prevented the respondents from leaving the country and paralyzed the latters' business transactions. Respondents pray that actual and moral damages, plus attorney's fees, be awarded in their favor. The action instituted by respondents affect the parties alone, not the whole world. Any judgment therein is binding only upon the parties properly impleaded.³³ Thus, it is an action in personam. As such, personal service of summons upon the defendants is essential in order for the court to acquire jurisdiction over their persons.³⁴

The Court notes that the complaint filed with the RTC alleged that petitioner is a non-resident who is not found in the Philippines for which reason respondents initially prayed that a writ of preliminary attachment be issued against her properties within the Philippines to confer jurisdiction upon the RTC. However, respondents did not pursue its application for said writ when petitioner was subsequently found physically present in the Philippines and personal service of summons was effected on her.

Was there a valid service of summons on petitioner? The answer is in the affirmative.

Petitioner's bare allegation that the statement in the "Officer's Return that she was personally served summons is inaccurate" is not sufficient. A process server's certificate of service is prima facie evidence of the facts as set out in the certificate.³⁵ Between the claim of non-receipt of summons by a party against the assertion of an official whose duty is to send notices, the latter assertion is fortified by the presumption that official duty has been regularly performed.³⁶ To overcome the presumption of regularity of performance of official functions in favor of such Officer's Return, the evidence against it must be clear and convincing. Petitioner having been unable to come forward with the requisite quantum of proof to the contrary, the presumption of regularity of performance on the part of the process server stands.

The Court need not make a long discussion on the propriety of the remedy adopted by petitioner in the RTC of filing a motion to set aside the order of default at a time when there was already a judgment by default. As aptly held by the CA, since petitioner was not furnished or served a copy of the judgment of default, there was no notice yet of such judgment as against her. Thus, the remedy of filing a motion to set aside the order of default in the RTC was proper.

Petitioner's argument that the RTC should have set aside the order of default and applied the liberal interpretation of rules with a view of affording parties their day in court is not tenable. While indeed default orders are not viewed with favor, the party seeking to have the order of default lifted must

first show that her failure to file an answer or any other responsive pleading was due to fraud, accident, mistake, or excusable neglect and then she must show that she has a valid and meritorious defense.³⁷

In this case, petitioner failed to show that her failure to file an answer was due to fraud, accident, mistake or excusable neglect. Except for her bare unsupported allegation that the summons were only thrown to her at the elevator, petitioner did not present any competent evidence to justify the setting aside of the order of default.

Moreover, when a party files a motion to lift order of default, she must also show that she has a meritorious defense or that something would be gained by having the order of default set aside.³⁸ The term meritorious defense implies that the applicant has the burden of proving such a defense in order to have the judgment set aside. The cases usually do not require such a strong showing. The test employed appears to be essentially the same as used in considering summary judgment, that is, whether there is enough evidence to present an issue for submission to the trier of fact, or a showing that on the undisputed facts it is not clear that the judgment is warranted as a matter of law. ³⁹ The defendant must show that she has a meritorious defense otherwise the grant of her motion will prove to be a useless exercise. Thus, her motion must be accompanied by a statement of the evidence which she intends to present if the motion is granted and which is such as to warrant a reasonable belief that the result of the case would probably be otherwise if a new trial is granted.⁴⁰

In the present case, petitioner contented herself with stating in her affidavit of merit that the cases against respondent Raymond were filed at the instance of her father.⁴¹ Such allegation is a conclusion rather than a statement of facts showing a meritorious defense. The affidavit failed to controvert the facts alleged by the respondents. Petitioner has not shown

that she has a meritorious defense.

Thus, since petitioner failed to show that her failure file an answer was not due to fraud, accident, mistake, or excusable neglect; and that she had a valid and meritorious defense, there is no merit to her prayer for a liberal interpretation of procedural rules.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED.

Costs against petitioner.

SO ORDERED.

Panganiban, C.J. (Chairperson), Ynares-Santiago, Callejo, Sr., and Chico-Nazario, JJ., concur.

Footnotes

¹ Penned by Associate Justice Perlita J. Tria Tirona (now retired) and concurred in by Associate Justices Buenaventura J. Guerrero (now retired) and Rodrigo V. Cosico; CA rollo, p. 95.

² CA rollo, p. 125.

³ Original Records, p. 1.

⁴ Id. at 28.

⁵ Id. at 30.

⁶ Id. at 32; the Officer's Return on service of summons on defendant Roberto R. Velayo is found on p. 32.

⁷ Id. at 35 and 38.

⁸ Id. at 37 and 41.

⁹ Id. at 124.

¹⁰ Id. at 173.

¹¹ Id. at 193.

¹² Id. at 201.

¹³ Id. at 206.

¹⁴ Id. at 212.

¹⁵ Id. at 222.

¹⁶ Id. at 231.

¹⁷ Id.

¹⁸ CA rollo, p. 95.

¹⁹ CA rollo, p. 109.

²⁰ Supra, note 2.

²¹ Rollo, p. 159.

²² Section 2. – Modes of Appeal.

x x x

c) Appeal by certiorari. – In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

²³ Resolution of the Court En Banc in UDK-9748, March 1, 1990.

²⁴ Olave v. Mistas, G.R. No. 155193, November 26, 2004, 444 SCRA 479, 490; Western Shipyard Services, Inc. v. Court of Appeals, G.R. No. 110340, May 28, 2001, 358 SCRA 257, 264.

²⁵ Land Bank of the Philippines v. Monet's Export and Manufacturing Corporation, G.R. No. 161865, March 10, 2005, 453 SCRA 173, 184; Skippers Pacific, Inc. v. Mira, 440 Phil. 906, 920 (2002).

²⁶ Cucueco v. Court of Appeals, G.R. No. 139278, October 25, 2004, 441 SCRA 290, 299; Microsoft Corporation and Lotus Development Corp. v. Maxicorp, Inc., G.R. No. 140946, September 13, 2004, 438 SCRA 224, 231.

²⁷ Crisologo v. Globe Telecom, Inc., G.R. No. 167631, December 16, 2005, 478 SCRA 433, 441; Central Bank of the Philippines v. Castro, G.R. No. 156311, December 16, 2005, 478 SCRA 235, 244.

²⁸ Now Sec. 15, Rule 14 of the 1997 Rules of Civil Procedure.

²⁹ Asiavest Limited v. Court of Appeals, 357 Phil. 536, 554 (1998); Valmonte v. Court of Appeals, 322 Phil. 96, 106 (1996).

³⁰ Banco Do Brasil v. Court of Appeals, 389 Phil. 87, 100 (2000); The Dial Corporation v. Soriano, G.R. No. L-82330, May 31, 1988, 161 SCRA 737, 743.

³¹ Section 7, Rule 14 of the Revised Rules of Court, now Sec. 15 of Rule 14 the 1997 Rules of Civil Procedure.

³² Asiavest Limited v. Court of Appeals, supra. at 554.

³³ Paderanga v. Buissan, G.R. No. 49475, September 28, 1993, 226 SCRA 786, 790.

³⁴ Arcenas v. Court of Appeals, 360 Phil. 122, 130 (1998)).

³⁵ Romualdez-Licaros v. Licaros, 449 Phil. 824, 836 (2003); Spouses Madrigal v. Court of Appeals, 377 Phil. 345, 352 (1999).

³⁶ Section 3(m), Rule 131 of the Revised Rules on Evidence.

³⁷ Section 3 of Rule 18 of the Revised Rules of Court, now Section 3(b) of Rule 9 of the 1997 Rules of Civil Procedure.

³⁸ Villareal v. Court of Appeals, 356 Phil. 826, 846 (1998); Carandang v. Hon. Cabatuando, 153 Phil. 138, 153 (1973).

³⁹ Villareal v. Court of Appeals, supra; RESTATEMENT OF THE LAW, 2d, ON JUDGMENTS, §67, Comment.

⁴⁰ Villareal v. Court of Appeals, supra; Group Developers and Financiers v. Policarpio, G.R. No. L-73421, November 29, 1988, 168 SCRA 154, 160.

⁴¹ Original Records, p. 178.

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