PALUWAGAN NG BAYAN SAVINGS BANK, PETITIONER, VS. ANGELO KING, KEN SUY WAT, JOSE FERRER, JR., QUINTIN CALDERON, FE SARIÑO AND DOMINGO K. LI, RESPONDENTS.

The rule on service of summons in this jurisdiction is too
well-known.  In-civil cases, the service
of summons on a defendant is made by handing a copy thereof to the defendant in
person, or if he refuses to receive it, by tendering it to him.^[1]
Such service of summons maybe made at the defendant’s dwelling house or
residence or at his office or regular place of business.  The essence of personal service is the
handing or tendering of a copy of the summons to the defendant himself.

However, when the defendant cannot be served personally within a
reasonable time, substituted service may be effected (a) by leaving copies of the summons at the defendant’s dwelling
house or residence with some person of suitable age and discretion then
residing therein, or (b) by leaving the copies at defendant’s office or regular
place of business with some competent person in charge thereof.^[2]

It is only when the defendant cannot be served personally within
a reasonable time that substituted service may be resorted to.  The impossibility of prompt service should be
shown by stating the efforts made to find the defendant personally and the fact
that such efforts failed.  This statement
should be made in the proof of service. 
This is necessary because
substituted service is in derogation of the usual method of service.  It has been held that this method of service
is “in derogation of the common law; it is a method extraordinary in
character, and hence may be used only as prescribed and in the circumstances
authorized by statute.” Thus, under the controlling decisions, the
statutory requirements of substituted service must be followed strictly,
faithfully and fully, and any substituted service other than that authorized by
the statute is considered ineffective.^[3]

The application of the foregoing rules is the issue in this
petition for review by certiorari of a decision of the Court of Appeals in G.R. CV No. 03386 entitled “Paluwagan ng Bayan Savings Bank vs. Mercantile Financing Corporation, et al.” dated January 27, 1987, and its resolution dated April 22,
1987.^[4]

The facts are
undisputed.  Petitioner sued Mercantile
Financing Corporation (MFC) and private respondents, as directors and officers
of MFC, for the recovery of
money market placements through certain promissory notes.  They were charged jointly and solidarily in
accordance with Section 31 of
the Corporation Code^[5]
which provides as follows:

“Section 31.  Liability of Directors, Trustees,
Officers.  – Directors or trustees who willfully
and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty
of gross negligence or bad faith in
directing the affairs of the corporation
shall be liable jointly and severally for all damages resulting therefrom suffered by
the corporation, its stockholders
or members and other
persons.”

Summons and copies
of the complaints were served upon MFC and
private respondents at the 4th Floor, LTA
Building,  No. 118 Perea Street, Makati,
Metro Manila, which is the stated office address of MFC in the complaint,
through its Assistant Manager Mr. Nasario
S. Najomot, Jr. who acknowledged receipt thereof for and in behalf of MFC and the private respondents.  This is
so recited in the certification of
deputy sheriff Bernardo San Juan dated May
11, 1983.

On May 24, 1983,
the law firm of Guillermo E. Aragones and Associates
filed a motion for extension of time to file a responsive pleading and/or
motion to dismiss.  The said motion was
signed by Atty. Guillermo E. Aragones as counsel for the defendants.  The motion was granted in an order dated May 26, 1983 giving the defendants an
extension of twenty (20) days
from the expiration of the reglementary period within
which to file the responsive pleading and/or motion to dismiss.  On June
13, 1983, said counsel for defendants
filed a motion asking for a suspension of the action for a period of sixty (60)
days on the ground that there was an on-going negotiation for an amicable
settlement of the case between the parties. 
The motion was denied.  On June 27, 1983, counsel for plaintiff
filed a motion to declare defendants in default for failure to file an
answer.  This motion was granted in an
order dated June 29, 1983.  On July
14, 1983, the parties, assisted by their counsel, submitted a
Compromise Agreement for the approval of the court.  It reads as follows:

“1.     The defendants propose
to pay, jointly and severally, their account with the plaintiff as of June 15,
1983, in the sum of P707,500.01 with 20% interest per annum as follows:

P 100,000.00 – on or before July
18, 1983

100,000.00 – on or before
August 30, 1983

100,000.00 – on or before September 30,1983

100,000.00 – on or before
October 30, 1983

100,000.00 – on or before
November 30, 1983

100,000.00 – on or before
December 30, 1983

100,000.00 – on or before
January 30, 1984.

“2.     Except those
mentioned above, the plaintiff has no more claim against the defendants.

“3. The plaintiff agrees to the proposal of settlement offered
by the defendants provided that in case the latter fail to pay, jointly and
severally, two or more successive monthly installments, the plaintiff is
entitled to secure from the Court a writ of execution for the collection of the
unpaid account of the defendants.”^[6]

On July 18, 1983, a decision
was rendered by the trial court approving the said Compromise Agreement and
enjoining the parties to comply with
the terms and conditions embodied therein.  Partial payments were made under the
compromise judgment.  Upon failure of
private respondent to make the other payments, petitioner filed a motion for
the issuance of a writ of execution of judgment.  The trial court granted the motion on December 16, 1983.

On January 16, 1984,
counsel for defendants filed a pleading entitled “Clarification”
thereby seeking a correction of the compromise judgment on the ground that he erroneously
filed the Compromise Agreement in behalf of all the defendants when in fact he
was the counsel for MFC only.  On January 17, 1984, said counsel filed
a “Motion To Correct Compromise Agreement” attaching thereto a copy
of the resolution of the Board
of Directors of MFC of July 6, 1983
showing that he was the attorney-in-fact of MFC only, and praying for the
correction of the judgment, accordingly. 
The motion for clarification was denied on January 20, 1984.

On January 24, 1984, the Syquia Law Offices,
in behalf of private respondents
Angelo King, Keng Suy Wat, Quintin Calderon and Jose J.
Ferrer, Jr., filed a motion to set aside the decision
dated July 18, 1983, the Compromise Agreement and the writ of execution dated
December 21, 1983 on the ground that there was no service of summons upon each
of them as the corporate address of the corporation was not their address as
they were no longer connected therewith; that Atty. Aragones
had no authority to represent them in the action and compromise agreement; that
they were not served copies of the decision of the court; that they learned
about the same only when it was being executed; and that they did not
participate as directors or officers of MFC in the subject transaction.

On January 26, 1984,
private respondent Domingo F. Li filed a petition for relief from judgment with
a prayer for the issuance of a writ
of preliminary injunction alleging therein that there was no service of summons
upon him and that Atty. Aragones was not authorized
to represent him or to enter into the Compromise Agreement.  After an opposition to said motion was filed by the petitioner, the
lower court denied the same in its order dated April 6, 1984. 
Separate motions for reconsideration filed by the private respondents
were also denied on May 4, 1984.

Thus, private respondents appealed to the respondent Court of
Appeals, reiterating that there was no service of summons upon each of them as service of summon was made at the
address of the firm with which they had severed connections; that the counsel
of record of MFC has no authority to represent them in the case and in the
Compromise Agreement; that they have not ratified the same by a partial payment
of the compromise judgment; and
that they were no longer connected with MFC at the time they were sued.  In due time, a decision was rendered by the
appellate court on January, 27, 1987, the dispositive
part of which reads as follows:

“In view of the foregoing, the other errors assigned by the
appellants need not be resolved:

Wherefore:

(1)     the decision dated July 18, 1983 approving
the compromise agreement rendered by the lower court as well as the writ of
execution issued pursuant thereto as against appellants Angelo King, Keng Suy Wat,
Quintin Calderon, Jose Ferrer,
Jr., and Domingo Li are hereby SET ASIDE; and

(2)     the case is remanded to the court of origin
which is hereby ordered to direct proper service of summons on the aforesaid
individual appellants at their respective correct addresses and thereafter to
proceed in accordance with law.

SO ORDERED.”^[7]

A motion for reconsideration of the said decision filed by
petitioner was denied by the appellate court on April 22, 1987. 
Hence, the instant petition predicated on the following grounds:

(A)      THAT THE CASE AT BAR (a) PERTAINS TO (AN)
APPEAL FROM ORDER OF TRIAL COURT DATED APRIL 6, 1984, DENYING (i) PRIVATE RESPONDENT DOMINGO K. LIM’S PETITION FOR RELIEF
FROM JUDGMENT’ FILED JANUARY 25, 1984, AND (ii) MOTION TO SET ASIDE DECISION,
COMPROMISE AGREEMENT AND QUASH EXECUTION FILED JANUARY 14, 1984 BY PRIVATE
RESPONDENTS ANGELO KING, KENG SUY WAT, QUINTIN CALDERON and JOSE FERRER, JR.
and (b) DOES NOT INVOLVE ANY APPEAL FROM TRIAL COURT’S DECISION DATED JULY 19,
1983 APPROVING THE COMPROMISE AGREEMENT WHICH HAS LONG BECOME FINAL AND
EXECUTORY.

(B)      THAT RESPONDENT COURT OF APPEALS
COMPLETELY IGNORED THE BASIC QUESTION OF WHETHER (a) PRIVATE RESPONDENT DOMINGO
K. LI’S PETITION FOR RELIEF FROM JUDGMENT’ FILED JANUARY 25, 1984, and (b) ‘THE
MOTION TO SET ASIDE DECISION, COMPROMISE AGREEMENT AND QUASH EXECUTION’ FILED
JANUARY 14, 1984 BY PRIVATE RESPONDENTS ANGELO KING, KENG SUY WAT, QUINTIN
CALDERON AND JOSE FERRER, JR., WERE FILED OUT OF TIME.

(C)     THAT PRIVATE RESPONDENTS WHO WERE SUED AS
DIRECTORS AND OFFICERS OF MFC WERE PROPERLY SERVED WITH SUMMONS.

The petition is devoid of
merit.

Although private
respondents were sued in their capacity as directors and officers
of MFC, they are, nevertheless, being held personally liable for the obligation
subject of the litigation under the complaint filed by petitioner.  Hence, the rule on
personal service of summons must be observed in that summons must be served
personally on private respondents or, if they refuse to receive the
same, by tendering it to them.

The proof of service
prepared by the sheriff does not show that such personal
service of summons was effected.  The
office address of the corporation as indicated in the complaint does not appear to be the office address of private respondents as they were no longer connected
with the corporation then.  Personal service of summons should have been made
on them at their residences as shown in
the records of the Securities and Exchange Commission and the Central
Bank.  Instead, the sheriff effected
substituted service by leaving copies of the summons with the Assistant Manager
of MFC at the place of business of said corporation with which as above stated
private respondents were no longer connected. 
Such substituted service is not
valid.  There
was no compliance with the requirements of the rule that there must be a previous personal service and a
failure to effect the same before substituted service could be resorted
to.  As the private respondents have not
been duly served with summons, the trial court never acquired jurisdiction over
their persons.

It is true that Atty. Aragones, who
entered his appearance in behalf of MFC and private respondents, sought an
extension of time to file an answer or a responsive pleading, and a suspension
of the proceedings pending a possible
settlement of the case; that thereafter, he signed a Compromise Agreement in
behalf of MFC and private respondents which was submitted to the court on the
basis of which a compromise judgment was rendered; that said judgment was partially complied with but upon default in
the payment of the balance, a writ of execution was sought from and granted by
the trial court; and that it was only then that Atty. Aragones informed the court that he committed an oversight in having
filed the Compromise Agreement in behalf of private respondents when it was only MFC which hired his services.  If Atty. Aragones
was duly authorized to appear in behalf of the defendants, his voluntary
appearance in their behalf by the filing of the aforementioned pleadings and the Compromise Agreement would
constitute a waiver of the defect in the service of summons.  However, the lack of authority of Atty. Aragones was revealed when he produced the resolution of the Board of
Directors of MFC to the effect that the
authority of said counsel was in behalf of said corporation only and not in
behalf of the private respondents.

Since the Compromise Agreement was signed by Atty. Aragones in behalf of the private respondents without their
authority, the same is null and void in so far as they are concerned.  By the same token, the compromise judgment is also null and void as to private
respondents.  The ruling of the lower
court that the motion to set aside the judgment and the petition for relief
from judgment were filed beyond the reglementary
period is untenable.  An action to
declare the nullity of a void judgment does not prescribe.^[8]

One last word, Atty. Aragones appears
to be remiss in his duties and
reckless in the performance of his responsibility as counsel of record in said
case.  He represented himself to be the
counsel for the defendants including the private respondents not only in the
motions he filed but also in the Compromise Agreement he submitted.  It was only after the writ of execution of
the compromise judgment was being
enforced that he perked up by saying that he committed an oversight and that he
was not authorized by the private respondents to represent them as counsel,
much less in the Compromise Agreement. 
Candor towards the courts is a cardinal requirement of the practicing lawyer.  To say one thing today and another tomorrow
is a transgression of this imperative. 
Counsel should be made to account before his peers.

WHEREFORE, the petition is DENIED.  Let a copy of this decision be furnished the
Integrated Bar of the Philippines
for an appropriate administrative investigation, report and recommendation on
Atty. Guillermo E. Aragones who holds office at the
9th Floor of the Finasia
Building, 6774
Ayala Avenue, Makati,
Metro Manila.  No costs.  This decision is immediately executory.

SO ORDERED.

Narvasa, (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
Section 7, Rule 14, Rules of Court; Matanguihan vs.
Tengco, 95 SCRA 478 (1980).

^[2]
Section 8, Rule 14, Rules of Court.

^[3]
Keister vs. Navarro, 77 SCRA 209, at 215
(1977) and Arevalo vs. Quilatan,
116 SCRA 700 (1982).

^[4]
Decided by the 11th Division of the Court of Appeals with Madame Justice Gloria
C. Paras as ponente,
and concurred in by Justices Lorna S. Lombos de la Fuente and Jorge S. Imperial.

^[5]
Batas Pambansa
Blg. 68, as amended.

^[6]
Pages 27 and 28, Rollo.

^[7]
Pages 42 and 43, Rollo.

^[8]
Ang Lam vs. Rosillosa
and Santiago, 86 Phil. 447, 452
(1950).