Republic Vs Ker & Company

8/5/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 018
VOL. 18, SEPTEMBER 29, 1966 207

Republic vs. Ker ,& Company, Ltd.
No. L-21609. September 29, 1966.
REPUBLIC OF THE PHILIPPINES, plaintiff and

appellant. vs. KER & COMPANY, LTD., defendant and
appellant.
208
208 SUPREME COURT REPORTS ANNOTATED

Republic vs. Ker & Company, Ltd.
Summons; Service upon counsel of a domestic corporation is

valid.—Section 13, Rule 7, (now Section 13, Rule 14) of the. Rules
of Court provides that service of summons upon a domestic
corporation may be made on its agent. In the case at bar, when
defendant corporation's counsel in the administrative stage of the
present tax case received the summons, they were still acting for
and in behalf of defendant in connection with its tax liability
involved in the case. Perforce, they were the taxpayer's agent, and
under the aforecited rule service upon them is sufficient.
Same; Pleading and practice; Jurisdiction; Effect of voluntary
submission to jurisdiction of court.—In interposing, in its motion
to dismiss, prescription of plaintiff's cause of action, defendant
availed of an affirmative defense on the basis of which it prayed
the court to resolve the controversy in its favor. For the court to
validly decide the said plea, it necessarily had to acquire
jurisdiction upon the latter's person, which, being the proponent
of the affirmative defense, should be deemed to have abandoned
its special appearance and voluntarily submitted itself to the
jurisdiction of the court. (Flores vs. Zurbito, 37 Phil. 746;
Menghra vs. Tarachand and Rewachand, 67 Phil. 286).
Same: When defects of summons were cured by filing of
answer.—Defects of summons are cured by voluntary appearance
and by the filing of an answer to the complaint. (Ramos vs.
Mañalac, 89 Phil. 270). A defendant can not be permitted to
speculate upon the judgment of the court by objecting to the
http://www.central.com.ph/sfsreader/session/00000165092897f0b07a5038003600fb002c009e/p/AQN060/?username=Guest 1/17
court's jurisdiction over its person if the judgment is adverse to it,

and acceding to jurisdiction over its person if and when the
judgment sustains its defenses.
Taxation; Deficiency income tax; Prescription of actions;
Degree of proof required to establish fraud.—Fraud is a question
of fact (Gutierrez vs. Court of Tax Appeals, 101 Phil. 713) which
must be alleged and proved (Section 12, Rule 15 [now Section 5,
Rule 8], Rules of Court). It is a serious charge and, to be
sustained, it must be supported by clear and convincing proof
(Collector of Internal Revenue vs. Benipayo, L-13656, January 31,
1962). In the instant case the filing by the taxpayer of a false
return was neither alleged in the complaint nor proved in court.
Hence, the lower court correctly resolved the issue of prescription
without touching upon fraudulence of the return.
Same; Failure to object to the setting up of defense of
prescription.—The assessment for deficiency income tax for 1947
has become final and executory, and, therefore, defendant may
not anymore raise defenses which go into the merits of the
assessment, i.e., prescription of the Commissioner's right to
assess the tax. (Republic of the Philippines vs. Albert, L-12996,
209
VOL. 18, SEPTEMBER 29, 1966 209
December 28, 1961; Republic of the Philippines vs. Lim Tian Teng
Sons ,& Co., Inc., L-21731, March 31, 1966). However, defendant
raised the defense of prescription in the proceedings below, and
the Republic of the Philippines, instead of questioning the right of
the defendant to raise such defense, litigated on it and submitted
the issue for resolution of the court. By its actuation, the
government should be considered to have waived its right to
object to the setting up of such defense.
Same; Suspension of prescriptive period; Effect of pendency of
appeal.—Under Section 333 of the Tax Code the running of the
prescriptive period to collect deficiency taxes shall be suspended
for the period during which the Commissioner of Internal
Revenue is prohibited from beginning a distraint and levy or
instituting a proceeding in court, and for sixty days thereafter. In
the case at bar, the pendency of the taxpayer's appeal in the Court
of Tax Appeals and in the Supreme Court had the effect of
temporarily staying the hands of the said Commissioner. If the
taxpayer's stand that the pendency of the appeal did not stop the
running of the period because the Court of Tax Appeals did not
have jurisdiction over the case is upheld, taxpayers would be

encouraged to delay the payment of taxes in the hope of
ultimately avoiding the same. Under the circumstances, the
running of the prescriptive period was suspended.
Same; Accrual of delinquency interest.—Where the letter of
assessment shows that the deficiency income tax for 1948 and
1949 became due on March 15, 1953 and that for 1950 accrued on
February 15, 1954 and the tax in question remained unpaid, the
delinquency interest accrued and became due starting from said
due dates.
APPEAL from a judgment of the Court of First Instance of

Manila. Reyes, J.
The facts are stated in the opinion of the Court.
Solicitor General for plaintiff and appellant.
Leido, Andrada, Perez ,& Associates for defendant
and appellant.
BENGZON, J.P., J.:
Ker ,& Co., Ltd., a domestic corporation, filed its income

tax returns for the years 1947, 1948, 1949 and 1950 on the
following dates:
Year Date Filed

1947 April 12, 1948
1948 April 30, 1949
210

1949 May 15, 1950

1950 May 9, 1951
It amended its income tax returns for 1948 and 1949 on

May 11, 1949 and June 30, 1950, respectively.
In 1953 the Bureau of Internal Revenue examined and
audited Ker ,& Co., Ltd.'s returns and books of accounts
and subsequently issued the following assessments for
deficiency income tax:
Year Amount Date Assessed

1947 P42,342.30 July 25, 1953
1948 18,651.87 Feb. 16, 1953
Year Amount Date Assessed

1949 139.67 Feb. 16, 1953
1950 12,813.00 Feb. 16, 1953
due and. payable on dates indicated in the accompanying

notices of assessment. The assessments for 1948 and 1950
carried the surcharge of 50% authorized under Section 72
of the Tax Code for the filing of fraudulent returns,
Upon request of Ker vs Co., Ltd., through Atty. Jose
Leido, its counsel, the Bureau of Internal Revenue reduced
the assessments for the year 1947 from P42,342.30 to
P27,026.28 and for the year 1950 from P12,813.00 to
P8,542.00, imposed the 50% surcharge for the year 1947
and eliminated the same surcharge from the assessment
for the year 1950. The assessments 'for years 1948 and
1949 remained the same.
On March 1, 1956 Ker ,& Co., Ltd. filed with the Court
of Tax Appeals a petition for review with preliminary
injunction. No preliminary injunction was issued, for said
court dismissed the appeal for having been instituted
beyond the 30-day period provided for in Section 11 of
Republic
1
Act 1125. We affirmed the order of dismissal in L-
12396.
On March 15, 1962, the Bureau of Internal Revenue
demanded payment of the aforesaid assessments together
with a surcharge of 5% for late payment 'and interest at
the rate of 1% monthly. Ker ,& Co., Ltd. refused to
_______________
1 Ker & Company, Ltd. v. The Court of Tax Appeals and The Collector
of Internal Revenue, promulgated on January 31, 1962.
211
VOL. 18, SEPTEMBER 29, 1966 211

Republic vs, Ker & Company, Ltd.
pay, instead in its letters dated March 28, 1962 and April
10, 1962 it set up the defense of prescription of the
Commissioner's right to collect the tax. Subsequently, the
Republic of the Philippines 'f iled on March 27, 1962 a
complaint with the Court of First Instance of Manila
seeking collection of the aforesaid deficiency income tax for
the years 1947, 1948, 1949 and 1950. The complaint did not
allege fraud in the filing of any of the income tax returns
for the years involved, nor did it pray for the payment of
the corresponding 50% surcharge, but it prayed for the

payment of 5% surcharge for late payment and interest of
1% per month without however specifying from what date
interest started to accrue.
Summons was served not on the defendant taxpayer but
upon Messrs. Leido and. Associates, its counsel in the
proceedings before the Bureau of Internal Revenue and the
Court of Tax Appeals.
On April 14, 1962 Ker & Co., Ltd. through its counsel,
Leido, Andrada, Perez ,& Associates, moved for the
dismissal of the complaint on the ground that the court did
not acquire jurisdiction over the person of the defendant
and that plaintiff's cause of action has prescribed. This
motion was denied and defendant filed a motion for
reconsideration. Resolution on said motion, however, was
deferred until trial of the case on the merits.
On May 18, 1962, Ker ,& Co., Ltd. filed its answer to the
complaint interposing therein the defense set up in its
motion to dismiss of April 14, 1962,
On September 18, 1962 the Republic of the Philippines
amended its' complaint, in answer to which Ker ,& Co.,
Ltd. adopted the same answer which it had filed on May
18, 1962.
On January 30, 1963 the Court of First Instance
rendered judgment, the dispositive portion of which states:
"WHEREFORE, this Court dismisses the claim for the collection

of deficiency income taxes for 1947, but orders defendant taxpayer
to pay the deficiency income taxes for 1948, 1949 and 1950, in the
amounts of P18,651.87, P139.67 and P8,542.00, respectively, plus
5% surcharge thereon on each amount and interest of 1% a month
computed from March 27, 1962 and until full payment thereof is
made, plus the costs of suit"
212

On February 20, 1963 the Republic of the Philippines filed

a motion for reconsideration contending that the right of
the Commissioner of Internal Revenue to collect the
deficiency assessment for 1947 has not prescribed by a
lapse of merely five years and three months, because the
taxpayer's income tax return was fraudulent in which case
prescription sets in ten years from October 31, 1951, the
date of discovery of the fraud, pursuant to Section 332 (a) of
the Tax Code; and that the payment of delinquency interest
of 1% per month should commence from the date it fell due

as indicated in the assessment notices instead of on the
date the complaint was filed.
On March 6, 1963 Ker ,& Co., Ltd. also filed a motion for
reconsideration reiterating its assertion that the Court of
First Instance did not acquire jurisdiction over its person,
and maintaining that since the complaint was filed nine
years, one month and eleven days after the deficiency
assessments for 1948, 1949 and 1950 were made and since
the filing of its petition for review in the Court of Tax
Appeals did not stop the running of the period of
limitations, the right of the Commissioner of Internal
Revenue to collect the tax in question has prescribed.
The two motions for reconsideration having been denied,
both parties appealed directly to this Court.
The issues in this case are:
1. Did the Court of First Instance acquire jurisdiction

over the person of defendant Ker ,& Co., Ltd.?
2. Did the right of the Commissioner of Internal
Revenue to assess deficiency income tax for the
year 1947 prescribe?
3. Did the filing of a petition for review by the
taxpayer in the Court of Tax Appeals suspend the
running of the statute of limitations to collect the
deficiency income for the years 1948, 1949 and
1950?
4. When did the delinquency interest on the deficiency
income tax for the years 1948, 1949 and 1950
accrue?
First Issue
Ker & Co., Ltd. maintains that the court a quo did not
acquire jurisdiction over its person inasmuch as sum-
213
VOL. 18, SEPTEMBER 29, 1966 213

mons was not served upon it but upon Messrs. Leido and
Associates who do not come under any of the class of
persons upon whom summons should be served as2
enumerated in Section 13, Rule 7, of the Rules of Court,
which reads:
"SEC. 13. Service upon private domestic corporation or

partnership.—If the defendant is a corporation formed under the
laws of the Philippines or a partnership duly registered, service
may be made on the president, manager, secretary, cashier,
agent, or any of its directors."
Messrs, Leido and Associates acted as counsel for Ker &

Co., Ltd. when this tax case was in its administrative
stage. The same counsel represented Ker ,& Co., Ltd.,
when it appealed said case to the Court of Tax Appeals and
later to this Court. Subsequently, when the Deputy
Commissioner of Internal Revenue, by letter dated March
15, 1962, demanded the payment of the deficiency income
tax in question, it was Messrs. Leido, Andrada, Perez ,&
Associates who replied in behalf of Ker ,& Co., Ltd. in two
letters, dated March 28, 1962 and April 10, 1962, both after
the complaint in this case was filed. At least therefore on
April 2. 1962 when Messrs. Leido and Associates received
the summons, they were still acting for and in behalf of Ker
,& Co., Ltd. in connection with Its tax liability involved in
this case. Perforce, they were the taxpayer's agent when
summons was served. Under Section 13 of Rule 7,
aforequoted, service upon the agent of a corporation is
sufficient.
We observe that the motion to dismiss filed on April 14,
1962, aside from disputing the lower court's juris-diction
over defendant's person, prayed for dismissal of the
complaint on the ground that plaintiff's cause of action has
prescribed. By interposing such second ground in its motion
to dismiss. Ker ,& Co., Ltd. availed of an affirmative
defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the
said plea of defendant Ker ,& Co., Ltd., it necessarily had
to acquire jurisdiction upon the latter's person, who, being
the proponent of the affirmative defense, should be deemed
to have abandoned its special
_______________
2 Now Section 13, Rule 14.
214

appearance and voluntarily 3

submitted itself to the
jurisdiction of the court.
4
4
Voluntary appearance cures defects of summons, if any.
Such defect, if any, was further5 cured when defendant filed
its answer to the complaint. A defendant can not be
permitted to speculate upon the judgment of the court by
objecting to the court's jurisdiction over its person if the
judgment is adverse to it, and acceding to jurisdiction over
its person if and when the judgment sustains its defenses.
Second Issue
Ker 22 Co., Ltd. contends that under Section 331 of the Tax
Code the right of the Commissioner of Internal Revenue to
assess against it a deficiency income tax for the year 1947
has prescribed because the assessment was issued on July
25, 1953 after a lapse of five years, three months and
thirteen days from the date (April 12, 1948) it filed Its
income tax return. On the other hand, the Republic of the
Philippines Insists that the taxpayer's, income tax return
was fraudulent, therefore the Commissioner of Internal
Revenue may assess the tax within ten years from
discovery of the fraud on October 31, 1951 pursuant to
Section 322(a) of the Tax Code.
The stand of the Republic of the Philippines hinges on
whether or not taxpayer's income tax return for 1947 was
fraudulent
The court a quo, conf ining itself to determining whether
or not the assessment of the tax for 1947 was issued within
the five-year period provided for in Section 331 of the Tax
Code, ruled that the right of the Commissioner of Internal
Revenue to assess the tax has prescribed. Said the lower
court:
"The Court resolves the second issue in the negative, because

Section 331 of the Revenue Code explicitly provides, in mandatory
terms, that 'lnternal Revenue taxes shall be assessed within 5,
years after the return was filed, and no proceedings
_______________
3 Flores v. Zurbito, 37 Phil. 746; Menghra vs. Tarachand and Rewachand, 67

Phil. 286.
4 Infante v. Toledo and Santiong, 44 Phil. 834. 840.
5 Ramos v. Mañalac, et al., 89 Phil. 270.
215
VOL. 18, SEPT EMBER 29, 1966 215

in court without assessment, for the collection of such taxes, shall

be begun after expiration of such period. The attempt by the
Commissioner of Internal Revenue to make an assessment on
July 25, 1953, on the basis of a return filed on April 12, 1948, is
an exercise of authority against the afore-quoted explicit and
mandatory limitations of statutory law. Settled in our system is
the rule that acts committed against the provisions of mandatory
or prohibitory laws shall be void (Art. 5, New Civil Code). x x x"
Said court resolved the issue without touching upon

fraudulence of the return. The reason is that the complaint
alleged no fraud, nor did the plaintiff present evidence to
prove fraud.
In reply to the lower court's conclusion, the Republic of
the Philippines maintains in its brief that Ker ,& Co., Ltd.
filed a false return and since the fraud penalty of 50%
surcharge was imposed in the deficiency income tax
assessment, which has become final and executory, the
finding of the Commissioner of Internal Revenue as to the
existence of the fraud has also become final and need not
be proved. This contention suffers from a flaw in that it
fails to consider6 the well-settled principle that fraud
7
is a
question of fact which must be alleged and proved. Fraud
is a serious charge and, to be sustained, 8
it must be
supported by clear and convincing proof. Accordingly,
fraud should have been alleged and proved in the lower
court. On these premises We therefore sustain the ruling of
the lower court upon the point of prescription.
It would be worth mentioning that since the assessment
for deficiency income tax for 1947 has become 'f inal and
executory, Ker & Co., Ltd. may not anymore raise defenses
which go into the merits of the assessment, i.e.,
prescription of the Commissioner's right to 9assess the tax.
Such was our ruling in previous cases. In this case
however,
_______________
6 Gutierrez v. Court of Tax Appeals, L-9738, L-9771, May 31, 1957.

7 Section 12, Rule 15 (now Section 5, Rule 8), Rules of Court.
8 Collector of Internal Revenue v. Benipayo, L-13656, January 31, 1?62.
9 Republic of the Philippines v. Albert, L-12996, December 28, 1961
Republic of the Philippines v. Lim Tian Teng Sons ,& Co., Inc., L-21731,
March 31, 1966,
216
Ker ,& Co., Ltd. raised the defense of prescription in the

proceedings below and the Republic of the Philippines,
instead of questioning the right of the defendant to raise
such defense, litigated on it and submitted the issue for
resolution of the court. By its actuation, the Republic of the
Philippines should be considered to have waived its right to
object to the setting up of such defense.
Third Issue
Ker & Co., Ltd. impresses upon Us that since the Republic
of the Philippines filed the complaint for the collection of
the deficiency income tax for the years 1948, 1949 and 1950
only on March 27, 1962, or nine years, one month and
eleven days from February 16, 1953, the date the tax was
assessed, the right to collect the same has prescribed
pursuant to Section 332(c) of the Tax Code. The Republic of
the Philippines however contends that the running ,of the
prescriptive period was interrupted by the filing of the
taxpayer's petition for review in the Court of Tax Appeals
on March 1, 1956,
If the period during which the case was pending in the
Court of Tax Appeals and in the Supreme Court were not
counted in reckoning the prescriptive period, less than five
years would have elapsed, hence, the right to collect the tax
has not prescribed.
The taxpayer counters that the filing of the petition for
review in the Court of Tax Appeals could not have stopped
the running of the prescriptive period to collect because
said court did not have jurisdiction over the case, the
appeal having been interposed beyond the 30-day .period
set forth in Section 11 of Republic Act 1125. Precisely, it
adds, the Tax Court dismissed the appeal for lack of
jurisdiction and said dismissal was affirmed by the
Supreme Court in L-12396 aforementioned.
Under Section 333 of the Tax Code, quoted hereunder:
"SEC. 333. Suspension of running of statute.—The running of the

statute of limitations provided in Section 331 or three hundred
thirty-two on the making of assessments and the beginning of
distraint or levy or a proceeding in court for collection, in respect
of any deficiency, shall be suspended for the period during which
the Collector of Internal Revenue is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court,
and for sixty days thereafter."
217
VOL. 18, SEPTEMBER 29, 1966 217

the running of the prescriptive period to collect the tax

shall be suspended 'f or the period during which the
Commissioner of Internal .Revenue is prohibited from
beginning a distraint and levy or instituting a proceeding
in court, and for. sixty days thereafter.
Did the pendency of the taxpayer's appeal in the Court
of Tax Appeals and in the Supreme Court have the effect of
legally preventing the Commissioner of Internal Revenue
from instituting an action in the Court of First Instance for
the collection of the tax? Our view is that it did.
From March 1, 1956 when Ker ,& Co., Ltd. filed a
petition for review in the Court of Tax Appeals contesting
the legality of the assessments in question, until the
termination of its appeal in the Supreme Court, the
Commissioner of Internal Revenue was prevented, as
recognized in this
10
Court's ruling in Ledesma, et al. v. Court
of Tax Appeals, from filing an ordinary action in the Court
of First Instance to collect the tax. Besides, to do so would
be to violate the judicial policy of avoiding multiplicity of
suits and the rule on lis pendens.11
It would be interesting to note that when the
Commissioner of Internal Revenue issued the final
deficiency assessments on January 5, 1954, he had already
lost, by prescription, the right to collect the tax (except that
for 1950) by the summary method of warrant of distraint
and levy. Ker ,& Co., Ltd. immediately thereafter requested
suspension of the collection of the tax without penalty
incident to late payment pending the filing of a
memorandum in support of its views. As requested, no tax
was collected. On May 22, 1954 the projected memorandum
was filed, but as of that date the Commissioner's right to
collect by warrant of distraint and levy the deficiency tax
for 1950 had already prescribed. So much so, that on March
1, 1956 when Ker ,& Co., Ltd. filed a petition for review in
the Court of Tax Appeals, the Commissioner of Internal
Revenue had but 12one remedy left to collect the tax, that is,
by judicial action. However, as stated, an independent
_______________
10 L-11343, January 29, 1958.
11 Par. (d), Section 1, Rule 8, now Par. (g), Section 1, Rule 16, Rules of
Court.
12 See Sec. 316, Tax Code.
218

ordinary action in the Court of First Instance was not

available to the Commissioner pursuant to Our ruling in
Ledesma, et al. v. Court of Tax Appeals, supra, in view of
the pendency of the taxpayer's petition for review in the
Court of Tax Appeals. Precisely he urgently filed a motion
to dismiss the taxpayer's petition for review with a view to
terminating therein the proceedings in the shortest
possible time in order that he could file a collection case in
the Court of First Instance before his right to do so is cut
off by the passage of time. As moved, the Tax Court
dismissed the case and Ker & Co., Ltd. appealed to the
Supreme Court. By the time the Supreme Court affirmed
the order of dismissal of the Court of Tax Appeals in L-
12396 on January 31, 1962 more than five years had
elapsed since the final assessments were made on January
5, 1954. Thereafter, the. Commissioner of Internal Revenue
demanded extra-judicially the payment of the deficiency
tax in question and in reply the taxpayer, by its letter
dated March 28, 1962, advised the Commissioner of
Internal Revenue \that the right to collect the tax has
prescribed pursuant to Section 332 (c) of the Tax Code.
Thus, did the taxpayer produce the effect of temporarily
staying the hands of the Commissioner of Internal Revenue
simply through a choice of remedy, And, if We were to
sustain the taxpayer's stand, We would be encouraging
taxpayers to delay the payment of taxes in the hope of
ultimately avoiding the same,
Under the circumstances, the Commissioner of Internal
Revenue was in effect prohibited from collecting the tax in
question. This being so, the provisions of Section 333 of the
Tax Code will apply.
Fourth Issue
The Republic of the Philippines maintains"that 'the

delinquency interest on the deficiency income tax for 1948,
1949 and 1950 accrued and should commence from the date
of the assessments as shown in the assessment notices,
pursuant to Section 51 (e) of the Tax Code, instead of from

the date the complaint was filed as determined in the
decision appealed from.
219
VOL. 18, SEPTEMBER 29, 1966 219

Section 51 (e) of the Tax Code states:
"SEC. 51(e). Surcharge and interest in case of delinquency.—To

any sum or ,sums due and unpaid after the dates prescribed in
subsections (b), (c) and (d) for the payment of the same,. there
shall be added the sum of five per centum on the amount of tax
unpaid and interest at the rate of one per centum a month upon
said tax 'f rom the time the same became due, except from the
estates of insane, deceased, or insolvent persons." (italics
supplied)
Exhibit "F"—the letter of assessment—shows that the

deficiency income tax for 1948 and 1949 became due 011
March 15, 1953 and that for 1950 accrued on February 15,
1954 in accordance with Section 51 (d) of the Tax Code.
Since the tax in question remained unpaid, delinquency
interest accrued and became due starting from said due
dates. The decision appealed from should therefore be
modified accordingly.
WHEREFORE, the decision appealed from is affirmed
with the modification that the delinquency interest at the
rate of 1% per month shall be computed from March 15,
1953; for the deficiency income tax for 1948 and 1949 and
from February 15, 1954 for the deficiency income tax for
1950. With costs against Ker ,& Co., Ltd. So ordered,
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon,

Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ.,
concur.
Judgment modified.
ANNOTATION
SERVICE OF SUMMONS
Generally, service of summons on the lawyer is not sufficient

—The rule is that “an attorney cannot, without authority to
do so, accept service of process which commences action
against his client. Moreover, as a general rule, "an
attorney-at-law has no authority merely by virtue of his

general employment as such, to waive or admit service for
his client of original process by which the court for the first
time acquires jurisdiction of the client." (5 Am. Jur. 313;
Johnlo Trading Company vs. Flores, 88 Phil. 741).
Service of summons on attorney-in-fact or lessee—Service
upon the attorney-in-fact does not have the effect of service
220

on his principal. No rule allows service of summons upon

an agent. Service must be made on the principal himself (a
non-resident) by substituted service or by registered mail,
or by publication, if his properties are desired to be affected
by the proceedings. (Banco Español Filipino vs. Palanca, 37
Phil. 921; Idonah Slade Perkins vs. Dizon, 69 Phil. 186; Ng
Si Choc vs. Vera, 64 Phil. 1066; Brown vs. Brown, L-17953,
Oct. 31, 1961).
An order of default should be set aside when summons
was served on a lessee of the defendant, who is not in
anyway authorized to receive any paper or pleading in her
behalf and defendant was at the time residing at another
place, which is quite apart from the residence of the lessee.
(J. M. Tuason ,& Co., Inc. vs. Fernandez, L-19556, Oct. 30,
1964).
Effect of failure to serve summons validly—Courts
acquire jurisdiction over the person of a party defendant
and of the subject matter of the action by virtue of the
service of summons in the manner required by law. Hence,
when there is no service of summons or a general voluntary
appearance by the defendant the Court acquires no
jurisdiction to pronounce a judgment in the cause. (Salmon
vs. Tan Cueco, 36 Phil. 556).
The filing by the defendant of a motion praying for the
dissolution of an attachment without impugning the
jurisdiction of the trial court and the subsequent giving of a
counterbond for its dissolution could be regarded as a
voluntary appearance, equivalent to service of summons.
(Flores vs. Zurbito, 37 Phil. 746; Monteverde vs. Jaranilla,
60 Phil. 306; Lim Cay vs. Del Rosario, 55 Phil. 962; Lezama
vs. Piccio, 95 Phil. 899).
A judgment against a defendant, who was not properly
summoned, is void (Echevarria, vs. Parsons Hardware Co.,
51 Phil. 980; Reyes vs. Paz, 60 Phil. 440; Caneda, vs.
Narvasa, L-18076, August 31, 1962).
Defective service of summons may, however, be waived—

Where the appellant altogether failed to raise the question
of the defective service of summons upon him at anytime in
the justice of the peace court and it was only in the Court of
First Instance that the appellant raised the question of
defective service of summons for the first time,
221
VOL. 18, SEPTEMBER 29, 1966 221

the lower court correctly ruled that the appellant had

waived the lack of valid service of summons upon him in
the inferior court. Defects in jurisdiction arising from
defective process, or even absence of process, may be
waived by failure to make seasonable objection, (Punzalan
vs. Papica, No. L-13804, Feb. 29, 1960).
The defect in the service of summons was cured when
the petitioners voluntarily appeared and answered the
complaint through their attorney of record, who appeared
in their behalf in all the stages of the case (Ramos vs.
Mañalac, 89 Phil. 270; Jaranilla vs. Gonzales, 96 Phil. 3).
Service upon a general counsel or a lawyer likewise
acting in a representative capacity is valid.—In Johnlo
Trading Company vs. Flores, 88 Phil. 741, it was held:
"Granting', however, for the sake of argument that Balcoff merely

acted as counsel for the petitioner, still we are of the opinion that,
upon the strength of the authorities we have quoted, the service
made upon him of the summons intended for the petitioner can be
deemed sufficient in contemplation of law, or within the meaning
of Section 14, Rule 7, (now Section 14, Rule 14), of our Rules of
Court, to bind his client Johnlo Trading Company, upon the
theory that, as the only person in the Philippines charged with
the duty of settling claims against it, he must be presumed, as
was said in the Saunders case, to communicate to his client the
service made upon him of any process that may result in a
judgment and execution that may deprive it.of its property, and
the probabilities are, under such circumstances, that the
corporation will be duly informed of the pendency of the suit. And
this is a very realistic interpretation 01 the law, for it goes on the
assumption that men holding such relationship 'will be prompt to
protect their own interest, and diligent in the discharge of their
duties to those who have reposed confidence in them.' "
As explained in Saunders vs. Sioux City Nursery, 6, Utah

431, 24 Pac. 532, the principle involved is similar to that
when the law authorizes service made by a copy left at the

defendant's usual place of abode with some person of
sufficient age and capacity, or in cases of constructive
notice. The legislature doubtless thought the authority to
make such service might be necessary to meet the
contingencies which might arise in the administration of
public justice. Conceding human motives, their usual play,
such service is likely to result in actual notice to persons
whose rights may be
222

affected by such methods and modes of procedure.

Service of summons on foreign corporations.—A foreign
corporation actually doing business in this jurisdiction,
with or without license or authority to do so, is amenable to
process and the jurisdiction of local courts. If such
corporation has a license to do business, then summons will
be served on the agent designated by it for the purpose, or
otherwise in accordance with the provisions of the
Corporation Law.
Where such foreign corporation actually doing business
here has not applied for license to do so and has not
designated an agent to receive summons, then service of
summons on it will be made pursuant to the provisions of
the Rules of Court, particularly Section 14, Rule 14 of the
Revised Rules of Court. Service upon a settling agent or
adjusting agent of a foreign corporation was, held.
sufficient. (General Corporation of the Philippines vs.
Union Insurance Society of Canton, 88 Phil. 313; Salonga
vs. Warner, Barnes & Co., Ltd., 88 Phil. 125).
Doing business in the Philippines is a sine qua non in
order that summons may be effected and jurisdiction
acquired over foreign corporations.—In order that service of
processes may be effected in the manner stated in Section
14, Rule 14 of the Revised Rules of Court, said section also
requires that the foreign corporation be one which is doing
business in the Philippines. This fact must first be
established in order that summons can be made and
jurisdiction acquired. As long as a foreign private
corporation engages in business in this jurisdiction, it
should and will be amenable to the process and the
jurisdiction of the local courts. And in order that a foreign
corporation may be regarded as doing business within a
State, there must be continuity of conduct and intention to
establish a continuous business. Consequently, since

petitioner is a corporation, exclusively engaged in the
business of carrying goods and passengers by sea between
the territory of Guam and the Trust Territories of the
Pacific Islands; it has no property or office in the
Philippines and the only act it did was to secure the
services of the deceased to act as cook and chief steward,
authorizing to
223
VOL. 18, SEPTEMBER 29, 1966 223

Bautista vs. Peralta
that ef fect a domestic corporation, service of summons on

such domestic corporation did not bring the petitioner,
within the jurisdiction of our courts. (Pacific Micronisian
Line, Inc. vs. del Rosario, 96 Phil. 23).—MARIA LUISA A.
MENDOZA.
_____________
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8/5/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 018

VOL. 18, SEPTEMBER 29, 1966 207

No. L-21609. September 29, 1966.

REPUBLIC OF THE PHILIPPINES, plaintiff and

208 SUPREME COURT REPORTS ANNOTATED

Summons; Service upon counsel of a domestic corporation is

court's jurisdiction over its person if the judgment is adverse to it,

VOL. 18, SEPTEMBER 29, 1966 209

Republic vs. Ker & Company, Ltd.

have jurisdiction over the case is upheld, taxpayers would be

APPEAL from a judgment of the Court of First Instance of

BENGZON, J.P., J.:

Ker ,& Co., Ltd., a domestic corporation, filed its income

Year Date Filed

210 SUPREME COURT REPORTS ANNOTATED

1949 May 15, 1950

It amended its income tax returns for 1948 and 1949 on

Year Amount Date Assessed

Year Amount Date Assessed

due and. payable on dates indicated in the accompanying

VOL. 18, SEPTEMBER 29, 1966 211

the corresponding 50% surcharge, but it prayed for the

"WHEREFORE, this Court dismisses the claim for the collection

212 SUPREME COURT REPORTS ANNOTATED

On February 20, 1963 the Republic of the Philippines filed

of 1% per month should commence from the date it fell due

1. Did the Court of First Instance acquire jurisdiction

VOL. 18, SEPTEMBER 29, 1966 213

"SEC. 13. Service upon private domestic corporation or

Messrs, Leido and Associates acted as counsel for Ker &

2 Now Section 13, Rule 14.

214 SUPREME COURT REPORTS ANNOTATED

appearance and voluntarily 3

"The Court resolves the second issue in the negative, because

3 Flores v. Zurbito, 37 Phil. 746; Menghra vs. Tarachand and Rewachand, 67

VOL. 18, SEPT EMBER 29, 1966 215

in court without assessment, for the collection of such taxes, shall

Said court resolved the issue without touching upon

6 Gutierrez v. Court of Tax Appeals, L-9738, L-9771, May 31, 1957.

216 SUPREME COURT REPORTS ANNOTATED

Republic vs. Ker & Company, Ltd.

Ker ,& Co., Ltd. raised the defense of prescription in the

"SEC. 333. Suspension of running of statute.—The running of the

VOL. 18, SEPTEMBER 29, 1966 217

the running of the prescriptive period to collect the tax

10 L-11343, January 29, 1958.

218 SUPREME COURT REPORTS ANNOTATED

ordinary action in the Court of First Instance was not

The Republic of the Philippines maintains"that 'the

pursuant to Section 51 (e) of the Tax Code, instead of from

VOL. 18, SEPTEMBER 29, 1966 219

Section 51 (e) of the Tax Code states:

"SEC. 51(e). Surcharge and interest in case of delinquency.—To

Exhibit "F"—the letter of assessment—shows that the

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon,

Generally, service of summons on the lawyer is not sufficient

attorney-at-law has no authority merely by virtue of his

220 SUPREME COURT REPORTS ANNOTATED

on his principal. No rule allows service of summons upon

Defective service of summons may, however, be waived—

VOL. 18, SEPTEMBER 29, 1966 221

the lower court correctly ruled that the appellant had

"Granting', however, for the sake of argument that Balcoff merely