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PHILIPPINE JURISPRUDENCE - FULL TEXT G.R. No. L-78252 April 12, 1 8 PALU!AGAN NG "A#AN SA$INGS "AN% &'.

ANGEL( %ING Republic of the Philippines SUPRE)E C(URT Manila FIRST DIVISION G.R. No. 78252 April 12, 1 8 PALU!AGAN NG "A#AN SA$INGS "AN%, petitioner, vs. ANGEL( %ING, %EN SU# !AT J(SE FERRER, JR., *UINTIN CALDER(N, FE SARIN( +,- D()ING( %. LI, respondents. Cruz, Durian, Agabin, Atienza, Alday and Tuason for petitioner. Simeon C. Sato for respondent Domingo K Li. Syquia Law Offi es for respondents King, Ken Suy !at, Calderon and "errer, #r.

GANCA#C(, J.: The rule on service of su ons in this !urisdiction is too "ell#$no"n. In civil cases, the service of su ons on a defendant is ade b% handin& a cop% thereof to the defendant in person, or if he refuses to receive it, b% tenderin& it to hi . 1 Such service of su ons a% be ade at the defendant's d"ellin& house or residence or at his office or re&ular place of business. The essence of personal service is the handin& or tenderin& of a cop% of the su ons to the defendant hi self. (o"ever, "hen the defendant cannot be served personall% "ithin a reasonable ti e, substituted service a% be effected )a* b% leavin& copies of the su ons at the defendant's d"ellin& house or residence "ith so e person of suitable a&e and discretion then residin& therein, or )b* b% leavin& the copies at defendant's office or re&ular place of business "ith so e co petent person in char&e thereof. 2 It is onl% "hen the defendant cannot be served personall% "ithin a reasonable ti e that substituted service a%be resorted to. The i possibilit% of pro pt service should be sho"n b% statin& the efforts ade to find the defendant personall% and the fact that such efforts failed. This state ent should be ade in the proof of service. This is necessar% because substituted service is in dero&ation of the usual ethod of service. It has been held that this ethod of service is +in dero&ation of the co on la", it is a ethod e-traordinar% in character, and hence a% be used onl% as prescribed and in the circu stances authori.ed b% statute.+ Thus, under the controllin& decisions, the statutor% re/uire ents of substituted service ust be follo"ed strictl%, faithfull% and full%, and an% substituted service other than that authori.ed b% the statute is considered ineffective. . The application of the fore&oin& rules is the issue in this petition for revie" b% certiorari of a decision of the 0ourt of 1ppeals in 2.R. 0V No. 34456 entitled +Palu"a&an n& 7a%an Savin&s 7an$ vs. Mercantile Financin& 0orporation, et al.+ dated 8anuar% 9:, ;<5:, and

its resolution dated 1pril 99, ;<5:. / The facts are undisputed. Petitioner sued Mercantile Financin& 0orporation MF0, and private respondents, as directors and officers of MF0, for the recover% of one% ar$et place ents throu&h certain pro issor% notes. The% "ere char&ed !ointl% and solidaril% in accordance "ith Section 4; of the 0orporation 0ode 5 "hich provides as follo"s= Section 4;. Liability of Dire tors, Trustees, Offi ers.#Directors or trustees "ho "illfull% and $no"in&l% vote for or assent to patentl% unla"ful acts of the corporation or "ho are &uilt% of &ross ne&li&ence or bad faith in directin& the affairs of the corporation shall be liable !ointl% and severall% for all da a&es resultin& therefro suffered b% the corporation, its stoc$holders or e bers and other persons. Su ons and copies of the co plaints "ere served upon MF0 and private respondents at the >th Floor, ?T1 7uildin&, No. ;;5 Perea Street, Ma$ati, Metro Manila, "hich is the stated office address of MF0 in the co plaint, throu&h its 1ssistant Mana&er Mr. Nasario S. Na!o ot 8r. "ho ac$no"led&ed receipt thereof for and in behalf of MF0 and the private respondents. This is so recited in the certification of deput% sheriff 7ernardo San 8uan dated Ma% ;;, ;<54. On Ma% 9>, ;<54, the la" fir of 2uiller o @. 1ra&ones and 1ssociates filed a otion for e-tension of ti e to file a responsible pleadin& andAor otion to dis iss. The said otion "as si&ned b% 1tt%. 2uiller o @. 1ra&ones as counsel for the defendants. The otion "as &ranted in an order dated Ma% 96, ;<54 &ivin& the defendants an e-tension of t"ent% )93* da%s fro the e-piration of the re&le entar% period "ithin "hich to file the responsive pleadin& andAor otion to dis iss. On 8une ;4, ;<54, said counsel for defendants filed a otion as$in& for a suspension of the action for a period of si-t% )63* da%s on the &round that there "as an on#&oin& ne&otiation for an a icable settle ent of the case bet"een the parties. The otion "as denied. On 8une 9:, ;<54, counsel for plaintiff filed a otion to declare defendants in default for failure to file an ans"er. This otion "as &ranted in an order dated 8une 9<, ;<54. On 8ul% ;>, ;<54, the parties, assisted b% their counsel, sub itted a co pro ise 1&ree ent for the approval of the court. It reads as follo"s= ;. The defendants propose to pa%, !ointl% and severall%, then account "ith the plaintiff as of 8une ;B, ;<54, in the su of P:3:,B33.3; "ith 93C interest per annu as follo"s= P;33,333.33#on or before 8ul% ;5, ;<54 ;33,333.33#on or before 1u&ust 43, ;<54 ;33,333.33#on or before Septe ber 43, ;<54 ;33,333.33#on or before October 43, ;<54 ;33,333.33#on or before Nove ber 43, ;<54 ;33,333.33##on or before Dece ber 43, ;<54 ;33,333.33#on or before 8anuar% 43, ;<5>. 9. @-cept those entioned above, the plaintiff has no ore clai a&ainst

the defendants. 4. The plaintiff a&rees to the proposal of settle ent offered b% the defendants provided that in case the latter fail to pa%, !ointl% and severall%, t"o or ore successive onthl% install ents, the plaintiff is entitled to secure fro the 0ourt a "rit of e-ecution for the collection of the unpaid account of the defendants. 0 On 8ul% ;5, ;<54, a decision "as rendered b% the trial court approvin& the said 0o pro ise 1&ree ent and en!oinin& the parties to co pl% "ith the ter s and conditions e bodied therein. Partial pa% ents "ere ade under the co pro ise !ud& ent. Dpon failure of private respondent to a$e the other pa% ents, petitioner filed a otion for the issuance of a "rit of e-ecution of !ud& ent. The trial court &ranted the otion on Dece ber ;6, ;<54. On 8anuar% ;6,;<5>, counsel for defendants filed a pleadin& entitled +0larification+ thereb% see$in& a correction of the co pro ise !ud& ent on the &round that he erroneousl% filed the 0o pro ise 1&ree ent in behalf of all the defendants "hen in fact he "as the counsel for MF0 onl%. On 8anuar% ;:, ;<5>, said counsel filed a +Motion To 0orrect 0o pro ise 1&ree ent+ attachin& thereto a cop% of the resolution of the 7oard of Directors of MF0 of 8ul% 6,;<54 sho"in& that he "as the attorne%#in#fact of MF0 onl%, and pra%in& for the correction of the !ud& ent, accordin&l%. The otion for clarification "as denied on 8anuar% 93,;<5>. On 8anuar% 9>, ;<5>, the S%/uia ?a" Offices, in behalf of private respondents 1n&elo Ein&, Een& Su% Fat, Guintin 0alderon and 8ose 8. Ferrer, 8r., filed a otion to set aside the decision dated 8ul% ;5,;<54, the 0o pro ise 1&ree ent and the "rit of e-ecution dated Dece ber 9;, ;<54 on the &round that there "as no service of su ons upon each of the as the corporate address of the corporation "as not their address as the% "ere no lon&er connected there"ith, that 1tt%. 1ra&ones had no authorit% to represent the in the action and co pro ise a&ree ent, that the% "ere not served copies of the decision of the court, that the% learned about the sa e onl% "hen it "as bein& e-ecuted, and that the% did not participate as directors or officers of MF0 in the sub!ect transaction. On 8anuar% 96,;<5>, private respondent Do in&o F. ?i filed a petition for relief fro !ud& ent "ith a pra%er for the issuance of a "rit of preli inar% in!unction alle&in& therein that there "as no service of su ons upon hi and that 1tt%. 1ra&ones "as not authori.ed to represent hi or to enter into the 0o pro ise 1&ree ent. 1fter an opposition to said otion "as filed b% the petitioner, the lo"er court denied the sa e in its order dated 1pril 6, ;<5>. Separate otions for reconsideration filed b% the private respondents "ere also denied on Ma% >,;<5>. Thus, private respondents appealed to the respondent 0ourt of 1ppeals, reiteratin& that there "as no service of su ons upon each of the as service of su ons "as ade at the address of the fir "ith "hich the% had severed connections, that the counsel of record of MF0 has no authorit% to represent the in the case and in the 0o pro ise 1&ree ent, that the% have not ratified the sa e b% a partial pa% ent of the co pro ise !ud& ent, and that the% "ere no lon&er connected "ith MF0 at the ti e the% "ere sued. In due ti e, a decision "as rendered b% the appellate court on 8anuar% 9:, ;<5:, the dispositive part of "hich reads as follo"s= In vie" of the fore&oin&, the other errors assi&ned b% the appellants need

not be resolved= Fherefore= );* the decision dated 8ul% ;5, ;<54 approvin& the co pro ise a&ree ent rendered b% the lo"er court as "ell as the "rit of e-ecution issued pursuant thereto as a&ainst appellants 1n&elo Ein&, Een& Su% Fat, Guintin 0alderon, 8ose Ferrer, 8r., and Do in&o ?i are hereb% S@T 1SID@, and )9* the case is re anded to the court of ori&in "hich is hereb% ordered to direct proper service of su ons on the aforesaid individual appellants at their respective correct addresses and thereafter to proceed in accordance "ith la". SO ORD@R@D. 7 1 otion for reconsideration of the said decision filed b% petitioner "as denied b% the appellate court on 1pril 99, ;<5:. (ence, the instant petition predicated on the follo"in& &rounds= )1* T(1T T(@ 01S@ 1T 71R )a* P@RT1INS TO )1N* 1PP@1? FROM ORD@R OF TRI1? 0ODRT D1T@D 1PRI? 6,;<5>, D@NHIN2 )i* PRIV1T@ R@SPOND@NT DOMIN2O E ?I'S 'P@TITION FOR R@?I@F FROM 8DD2M@NT' FI?@D 81ND1RH 9B, ;<5>, 1ND )ii* MOTION TO S@T 1SID@ D@0ISION, 0OMPROMIS@ 12R@@M@NT 1ND GD1S( @I@0DTION FI?@D 81ND1RH ;>,;<5> 7H PRIV1T@ R@SPOND@NTS 1N2@?O EIN2, EIN2 SDH F1T, GDINTIN 01?D@RON and 8OS@ F@RR@R, 8R. and )b* DO@S NOT INVO?V@ 1NH 1PP@1? FROM TRI1? 0ODRT'S D@0ISION D1T@D 8D?H ;<,;<54 1PPROVIN2 T(@ 0OMPROMIS@ 12R@@M@NT F(I0( (1S ?ON2 7@0OM@ FIN1? 1ND @I@0DTORH. )7* T(1T R@SPOND@NT 0ODRT OF 1PP@1?S 0OMP?@T@?H I2NOR@D T(@ 71SI0 GD@STION OF F(@T(@R )a* PRIV1T@ R@SPOND@NT DOMIN2O E. ?I'S 'P@TITION FOR R@?I@F FROM 8DD2M@NT FI?@D 81ND1RH 9B,;<5>, and )b*'T(@ MOTION TO S@T 1SID@ D@0ISION, 0OMPROMIS@ 12R@@M@NT 1ND GD1S( @I@0DTION' FI?@D 81ND1RH ;>,;<5> 7H PRIV1T@ R@SPOND@NTS 1N2@?O EIN2, E@N2 SDH F1T, GDINTIN 01?D@RON 1ND 8OS@ F@RR@R, 8R., F@R@ FI?@D ODT OF TIM@. )0* T(1T PRIV1T@ R@SPOND@NTS F(O F@R@ SD@D 1S DIR@0TORS 1ND OFFI0@RS OF MF0 F@R@ PROP@R?H S@RV@D FIT( SDMMONS. The petition is devoid of erit.

1lthou&h private respondents "ere sued in their capacit% as directors and officers of MF0, the% are, nevertheless, bein& held personall% liable for the obli&ation sub!ect of the liti&ation under the co plaint filed b% petitioner. (ence, the rule on personal service of su ons ust be observed in that su ons ust be served personall% on private respondents or, if the% refuse to receive the sa e, b% tenderin& it to the . The proof of service prepared b% the sheriff does not sho" that such personal service of su ons "as effected. The office address of the corporation as indicated in the co plaint

does not appear to be the office address of private respondents as the% "ere no lon&er connected "ith the corporation then. Personal service of su ons should have been ade on the at their residences as sho"n in the records of the Securities and @-chan&e 0o ission and the 0entral 7an$. Instead, the sheriff effected substituted service b% leavin& copies of the su ons "ith the 1ssistant Mana&er of MF0 at the place of business of said corporation "ith "hich as above stated private respondents "ere no lon&er connected. Such substituted service is not valid. There "as no co pliance "ith the re/uire ents of the rule that there ust be a previous personal service and a failure to effect the sa e before substituted service could be resorted to. 1s the private respondents have not been dul% served "ith su ons, the trial court never ac/uired !urisdiction over their persons. It is true that 1tt%. 1ra&ones, "ho entered his appearance in behalf of MF0 and private respondents, sou&ht an e-tension of ti e to file an ans"er or a responsive pleadin&, and a suspension of the proceedin&s pendin& a possible settle ent of the case, that thereafter, he si&ned a 0o pro ise 1&ree ent in behalf of MF0 and private respondents "hich "as sub itted to the court on the basis of "hich a co pro ise !ud& ent "as rendered, that said !ud& ent "as partiall% co plied "ith but upon default in the pa% ent of the balance, a "rit of e-ecution "as sou&ht fro and &ranted b% the trial court, and that it "as onl% then that 1tt%. 1ra&ones infor ed the court that he co itted an oversi&ht in havin& filed the 0o pro ise 1&ree ent in behalf of private respondents "hen it "as onl% MF0 "hich hired his services. If 1tt%. 1ra&ones "as dul% authori.ed to appear in behalf of the defendants, his voluntar% appearance in their behalf b% the filin& of the afore entioned pleadin&s and the 0o pro ise 1&ree ent "ould constitute a "aiver of the defect in the service of su ons. (o"ever, the lac$ of authorit% of 1tt%. 1ra&ones "as revealed "hen he produced the resolution of the 7oard of Directors of MF0 to the effect that the authorit% of said counsel "as in behalf of said corporation onl% and not in behalf of the private respondents. Since the 0o pro ise 1&ree ent "as si&ned b% 1tt%. 1ra&ones in behalf of the private respondents "ithout their authorit%, the sa e is null and void in so far as the% are concerned. 7% the sa e to$en, the co pro ise !ud& ent is also null and void as to private respondents. The rulin& of the lo"er court that the otion to set aside the !ud& ent and the petition for relief fro !ud& ent "ere filed be%ond the re&le entar% period is untenable. 1n action to declare the nullit% of a void !ud& ent does not prescribe. 8 One last "ord, 1tt%. 1ra&ones' appears to be re iss in his duties and rec$less in the perfor ance of his responsibilit% as counsel of record in said case. (e represented hi self to be the counsel for the defendants includin& the private respondents not onl% in the otions he filed but also in the 0o pro ise 1&ree ent he sub itted. It "as onl% after the "rit of e-ecution of the co pro ise !ud& ent "as bein& enforced that he per$ed up b% sa%in& that he co itted an oversi&ht and that he "as not authori.ed b% the private respondents to represent the as counsel, uch less in the 0o pro ise 1&ree ent. 0andor to"ards the courts is a cardinal re/uire ent of the practicin& la"%er. To sa% one thin& toda% and another to orro" is a trans&ression of this i perative. 0ounsel should be ade to account before his peers. F(@R@FOR@, the petition is D@NI@D. ?et a cop% of this decision be furnished the Inte&rated 7ar of the Philippines for an appropriate ad inistrative investi&ation, report and reco endation on 1tt%. 2uiller o @. 1ra&ones "ho holds office at the <th Floor of the Finasia 7uildin&, 6::> 1%ala 1venue, Ma$ati, Metro Manila. No costs. This decision is i ediatel% e-ecutor%.

SO ORD@R@D. $ar%asa, Cruz, &ri'o(Aquino and )edialdea, ##., on ur.

Foo1,o12' ; Section :, Rule ;>, Rules of 0ourt, Matan&uihan vs. Ten&co, <B S0R1 >:5 );<53*. 9 Section 5, Rule ;>, Rules of 0ourt. 4 Eeister vs. Navarro, :: S0R1 93<, at 9;B );<::* and 1revalo vs. Guilatan, ;;6 S0R1 :33 );<59*. > Decided b% the ;;th Division of the 0ourt of 1ppeals "ith Mada e 8ustice 2loria 0. Paras as ponente, and concurred in b% 8ustices ?orna S. ?o bos de la Fuente and 8or&e S. I perial. B 7atas Pa bansa 7l&. 65, as a ended. 6 Pa&es 9: and 95, Rollo. : Pa&es >9 and >4, Rollo. 5 1n& ?a vs. Rosillosa and Santia&o, 56 Phil. >>:, >B9 );<B3*.