Paluwagan ng Bayan Savings Bank v. King
REITERATIONFacts
The Antecedents: Paluwagan ng Bayan Savings Bank (petitioner) filed a case against Mercantile Financing Corporation (MFC) and its directors/officers (private respondents) for recovery of money market placements. Summons and complaints were served at MFC's stated office address via its Assistant Manager, who acknowledged receipt for MFC and the private respondents. Procedural History: A law firm entered its appearance for the defendants, sought extensions, and later filed a motion to suspend proceedings due to settlement negotiations. The motion was denied, and defendants were declared in default. Subsequently, a Compromise Agreement was submitted and approved by the trial court, with a judgment rendered based on it. Partial payments were made, but upon default, petitioner moved for execution, which was granted. The Petition: Counsel for the defendants later claimed he erroneously filed the Compromise Agreement for the private respondents when he was only counsel for MFC. Private respondents Angelo King, et al., through new counsel, moved to set aside the decision, compromise agreement, and writ of execution, alleging lack of personal service of summons, lack of authority of Atty. Aragones to represent them, and lack of knowledge of the decision. Private respondent Domingo Li filed a similar petition for relief. The trial court denied these motions. The Court of Appeals set aside the decision and writ of execution against the private respondents and ordered proper service of summons. Petitioner filed the instant petition for review.
Issue(s)
Whether the Court of Appeals erred in setting aside the decision and writ of execution against the private respondents based on improper service of summons and lack of jurisdiction. Whether the counsel for MFC had the authority to represent the private respondents in the filing of the Compromise Agreement, and the validity of the agreement. Whether the motion to set aside the judgment and petition for relief were filed out of time, considering the judgment's validity. Whether Atty. Aragones was remiss in his duties as counsel.
Ruling
The petition is denied. The Court of Appeals did not err in setting aside the decision and writ of execution against the private respondents. The Court held that the private respondents were not duly served with summons, and thus the trial court never acquired jurisdiction over their persons. Consequently, the Compromise Agreement and the compromise judgment were void as to them. An action to declare the nullity of a void judgment does not prescribe.
Ratio Decidendi
On the issue of proper service of summons and jurisdiction: The Court reiterated that personal service of summons is the rule, and substituted service is an exception that requires strict compliance. The sheriff's proof of service did not indicate personal service on the private respondents. The corporate address used was not their address, as they were no longer connected with MFC. Substituted service by leaving copies with MFC's Assistant Manager was invalid because there was no prior personal service and failure to effect it. As summons was not duly served, the trial court never acquired jurisdiction over the persons of the private respondents. On the authority of counsel and the validity of the Compromise Agreement: While Atty. Aragones entered an appearance and filed pleadings for the defendants, including the private respondents, his authority was limited to representing MFC only, as evidenced by a Board Resolution. His representation of the private respondents in the Compromise Agreement was unauthorized. Therefore, the Compromise Agreement was null and void concerning them, and consequently, the compromise judgment was also void as to them. On the timeliness of the motions to set aside and petition for relief: The Court held that 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. Since the judgment was void for lack of jurisdiction, the private respondents could assail it at any time. On the duties of counsel: The Court noted that Atty. Aragones was remiss in his duties and reckless. He represented himself as counsel for the private respondents in various pleadings and the Compromise Agreement, only to later claim an oversight and lack of authority. The Court emphasized the cardinal requirement of candor towards the courts and recommended administrative investigation.
Main Doctrine
Substituted service of summons is in derogation of the usual method and must be strictly complied with. Failure to effect proper service of summons means the court never acquired jurisdiction over the person of the defendant, rendering subsequent judgments and agreements void as to them. An action to declare the nullity of a void judgment does not prescribe.