Case Digest (G.R. No. 235033)
Facts:
This case involves the petitioner Paluwagan ng Bayan Savings Bank and respondents Angelo King, Ken Suy Wat, Jose Ferrer, Jr., Quintin Calderon, Fe Sarino, and Domingo K. Li. The dispute arose when the petitioner sued the Mercantile Financing Corporation (MFC) and the private respondents who were directors and officers of MFC for the recovery of money market placements made through various promissory notes. The case was predicated on the joint and solidary liability of the respondents under Section 31 of the Corporation Code, which holds directors and officers accountable for unlawful acts committed by the corporation or negligence in the performance of their duties.
Summons and the complaint were served at the MFC's office in Makati, Metro Manila, through Mr. Nasario S. Najomot, Jr., the Assistant Manager of MFC. On May 24, 1983, MFC's legal counsel, Atty. Guillermo E. Aragones, sought an extension for filing a responsive pleading, which was granted. Subsequently, couns
Case Digest (G.R. No. 235033)
Facts:
- Background and Nature of the Case
- The case involves Paluwagan ng Bayan Savings Bank (petitioner's) suit for recovery of money market placements evidenced by promissory notes.
- The suit was filed against Mercantile Financing Corporation (MFC) and certain private individuals alleged to be directors and officers of MFC, jointly and solidarily liable under Section 31 of the Corporation Code.
- The pivotal issue arose from the manner in which summons were served on the private respondents.
- Service of Summons and Procedural Developments
- The established rule requires that in civil cases, summons must be served by handing a copy personally to the defendant; if the defendant refuses, the summons may be tendered.
- When personal service cannot be effected within a reasonable time, substituted service is allowed only if:
- Copies of the summons are left at the defendant’s dwelling house or residence with a person of suitable age and discretion, or
- Copies are delivered at the defendant’s office or regular place of business with a competent person in charge.
- In this case, service was conducted at the corporate office of MFC by handing the summons to the Assistant Manager (Mr. N Asario S. Najomot, Jr.), even though the private respondents were no longer connected with that address.
- The sheriff’s proof of service did not demonstrate that the summons was personally received by the defendants, raising doubts on the validity of the service.
- Chronology of Events and Pleadings
- Procedural History
- On May 24, 1983, a motion for an extension of time to file a responsive pleading was filed by counsel for the defendants and was duly granted.
- On June 13, 1983, a motion for a 60-day suspension of the action, pending settlement negotiations, was filed and subsequently denied.
- The Compromise Agreement and Judgment
- On July 14, 1983, both parties, through their respective counsel, submitted a Compromise Agreement setting out a payment schedule amounting to P707,500.01 with monthly installments and a clause reserving the right to a writ of execution should defaults occur.
- The trial court approved the Compromise Agreement on July 18, 1983.
- Partial payments were made in accordance with the agreement; however, upon subsequent default by one of the private respondents, petitioner moved for and obtained a writ of execution.
- Discrepancies in Representation
- On January 16-17, 1984, counsel for defendants sought clarification and correction of the Compromise Agreement, alleging that he erroneously filed it on behalf of all defendants while in truth he represented only MFC.
- This oversight was later confirmed when the resolution of the Board of Directors of MFC showed that his authority did not extend to the private respondents.
- Motions by Private Respondents
- On January 24, 1984, private respondents filed a motion to set aside the decision approving the Compromise Agreement and the subsequent writ of execution, contending:
- They were not personally served as they were no longer connected with the corporate address used for service;
- Additionally, on January 26, 1984, private respondent Domingo F. Li filed a petition for relief from judgment on similar grounds.
- Appellate Court Decision
- The Court of Appeals, in a decision dated January 27, 1987, set aside the July 18, 1983 decision approving the Compromise Agreement and the writ of execution against the private respondents.
- The appellate order remanded the case to the lower court directing proper service of summons at the correct addresses of the private respondents.
- Alleged Service Defect and Counsel’s Conduct
- The fundamental allegation was that the service of summons on the private respondents was defective because personal service was not effected.
- Instead, substituted service was improperly carried out at an address no longer associated with the private respondents.
- Furthermore, Atty. Guerrero E. Aragones, who initially represented MFC and later the private respondents by filing motions and the Compromise Agreement, later acknowledged his lack of authority to act on behalf of the private respondents—casting doubt on the validity of the compromise and subsequent judgment.
- The petitioner argued that such defects in service deprived the trial court of jurisdiction over the private respondents, thereby nullifying the proceedings against them.
Issues:
- Whether proper personal service of summons was effected, and if not, whether the substituted service complied with the strict statutory requirements.
- Whether the private respondents, who were served at an address no longer affiliated with them, were properly notified and given an opportunity to participate in the proceedings.
- Whether Atty. Aragones, having represented himself as counsel for both MFC and the private respondents, was authorized to bind the private respondents to the Compromise Agreement and the subsequent judgment.
- Whether the motions to set aside the Compromise Agreement and to avail of relief from judgment were filed within the prescribed reglementary period, considering the alleged non-service.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)