G.R. No.
70661 April 9, 1987 motion was premised on the ground that the court had no jurisdiction over the defendants
FILMERCO COMMERCIAL CO., INC., SPOUSES JAIME and ANA MARIA MIGUEL, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT respondents.
GUTIERREZ, JR., J.:
The main issue in this petition is whether or not the petitioners were served valid summons
so as to bring their within the jurisdiction of the court.
Filmerco Commercial Co., Inc., (Filmerco) obtained two separate loans from the Bank of
Philippine Islands (BPI) on November 26, 1982 and December 26, 1982 respectively. As
security for the payment of the obligation stated in the promissory notes, spouses Jaime and
Ana Maria Miguel executed a deed of continuing suretyship wherein the Miguels bound
themselves jointly and solidarily with Filmerco for the payment of the latter's obligation
under the loan-accounts.
The loans remained outstanding even after they became due and demandable. Hence, on
May 5,1983, BPI filed a complaint docketed as Civil Case No. 2807 for recovery of a sum of
money against Filmerco and spouses Jaime and Ana Maria Miguel before the Regional Trial
Court of Makati, Rizal.
Upon motion of the plaintiff, the defendants were d in default for failure to file an answer
within the reglementary period. The plaintiff was then allowed to present its evidence ex-
parte after which the lower court on June 11, 1984 rendered a decision, the dispositive
portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor
of the plaintiff and against the defendants, ordering the latter to pay, jointly
and severally, the former:
a) the sum of P308,525.17 plus 10% interest per annum and 12% penalty fee
per annum from May 21, 1984 until the amount is fully paid;
b) the sum equivalent to 20% of the total amount due as and for attorney's
fees;
c) to pay the costs of suit. (p.52, Rollo)
On the ground that the period to appeal expired without any decision having been
appealed, the plaintiff filed a motion for execution of judgment before the lower court. This
motion was granted and a writ of execution was issued against Filmerco and the Miguels.
Pursuant to the writ of execution, respondent Sheriff Villapana levied on and attached
alleged properties of Filmerco and the Miguels. These properties were scheduled for sale on
September 20, 1984.
On September 25, 1984, the defendants filed a motion to set aside the decision, writ of
execution, notice of levy/attachment and to restrain the holding of the auction sale. The
because no valid summons was served on them.
On November 26, 1984, after opposition to motion, reply, rejoinder and sub-rejoinder had
been duly submitted, the lower court issued an order denying the aforesaid motion.
On December 3, 1984, while the public auction of the attached properties was in progress,
the defendants filed a motion for reconsideration of the November 26, 1984 order.
Without waiting for the resolution of the aforesaid motion for reconsideration, the
defendants filed with the Intermediate Appellate Court a petition for certiorari and
prohibition, injunction and preliminary restraining order against the lower court's decision
and orders.
The appellate court dismissed the petition. A motion for reconsideration was likewise
denied.
Hence, this petition.
The petitioners submit that no valid summons was served upon them. Therefore, they
contend that the lower court had not acquired jurisdiction over their persons thus resulting
in the nullity of its decision.
According to the sheriff's return dated September 7, 1983, summons and copy of the
complaint were not served on the petitioners at 31 Sta. Escolastica Street, Pasay City, their
given principal place of business and had to be returned to the court unserved for the
reason that the "defendants have already vacated the premises and/or addresses more than
a year ago and no definite information could be had regarding their present whereabouts."
Three separate summons for each of the defendants were addressed to 31 Sta. Scholastics
Street, Pasay City, Metro Manila.
Upon motion of the private respondent (plaintiff in the case) the lower court issued alias
summons.
According to the sheriff's return dated March 31, 1984, summons were duly served upon
"defendant-spouses Jaime and Ana Maria Miguel at No. 18, Yuchengco Drive, Pacific
Malayan Village, Alabang, Muntinlupa, Metro Manila, thru Mrs. Angle Morger, a person
residing therein of suitable age and discretion to receive service of that nature and who
received the said court processes for and in behalf of the defendants but refused to sign." It
was noted therein that the defendant spouses are "duly served" but that the other
defendant Filmerco was "not and could not be served"and the summons pertaining to it was
" returned unserved."
Petitioner spouses, Jaime and Ana Maria Miguel contend that the substituted service of
summons upon their persons thru Mrs. Angle Morger at No. 18 Yuchengco Drive, Pacific
Malayan Village, Alabang, Muntinlupa, Metro Manila was in- valid for the following reasons:
(1) at the time of the service they were not residents of the said address, and (2) Mrs. Angle
Morger was not authorized to receive papers or documents for them. They submitted
affidavits of Angle Morger to prove their point.
There can be no dispute that service of summons upon the defendant is necessary in order
that a court may acquire jurisdiction over his person. Any judgment without such service in
the absence of a valid waiver is null and void. (Keister v. Navarro, 77 SCRA 209).
Pursuant to Section 7, Rule 14 of the Revised Rules of court, summons must be served on
the defendant. However, when the defendant cannot be served personally within a
reasonable time after efforts to locate him have failed, substituted service may be made.
In the case at bar, there is no question that personal service of summons upon the
defendants could not be made because they moved out from their given address and their
whereabouts were unknown as indicated in the sheriff's return. Hence, the court resorted to
substituted service of summons provided for under Section 8, Rule 14 of the Revised Rules
of Court:
SEC. 8. Substituted service. If the defendant cannot be served within a
reasonable time as provided in the preceding section, 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.
In the case of Keister v. Navarro (supra), we construed this rule as follows:
xxx xxx xxx
... [U]nder 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. (Ibid., pp. 1053-1054).
Indeed, the constitutional requirement of due process requires that the
service be such as may be reasonably expected to give the desired notice to
the party of the claim against him. (Perkins v. Dizon, 69 Phil. 186; Dy Reyes
v. Ortega, 16 SCRA 903)
xxx xxx xxx
... The terms "dwelling house" or "residence" are generally held to refer to
the time of service, hence it is not sufficient "to leave the copy at
defendant's former dwelling house, residence, or place of abode, as the
case may be, after his removal therefrom." (72 C.J.S. 1059) They refer to the
place where the person named in the summons is living at the time when
the service is made, even though he may be temporarily out of the country
at the time. Similary, the terms "office" or "regular place of business" refer
to the office or place of business of defendant at the time of service. ... (at
p. 215)
Applying these principles to the case at bar, we find that no valid service of summons upon
the defendant spouses could be effected thru Mrs. Angle Morger. In her affidavits, Mrs.
Morger manifested that she and her husband are the bona fide residents of 18 Yuchengco
Drive, Pacific Malayan Village, Alabang, Metro Manila; that they leased the said premises
from the owner thereof as evidenced by a contract of lease dated August 8, 1983; that they
have been occupying the premises since September 1, 1983; that on March 31, 1984, Sheriff
Villapana attempted to serve the official summons and a copy of a complaint against
spouses Jaime and Ana Maria Miguel and Filmerco Commercial Inc.; that she informed the
sheriff that the Miguels do not reside in the place and that neither was said residence the
dwelling place of the Miguel spouses; that she does not know Filmerco, Inc.; that despite
the fact that she informed the sheriff that she is not authorized by the spouses and Filmerco
to receive any papers for them, the sheriff left, leaving some documents with her maid,
Daday Lopez; that she did not affix her signature on the documents being then served by the
sheriff nor did the maid affix hers; that the documents left by the sheriff with the maid were
not even ascertained nor read by the affiant. Mrs. Morger's manifestation is not refuted or
rebutted.
Obviously, the address No. 18 Yuchengco Drive, Pacific Malayan Village, Alabang,
Muntinlupa, Metro Manila was neither the "residence" nor the "dwelling house" of the
petitioners at the time summons was served upon them as contemplated by the Rules.
Moreover, Angle Morger is not a proper person with whom the copies of the summons
could be left. The sheriff 's return indicates that she refused to sign the summons and the
same was returned to the court unsigned. This fact adds credence to Angle Morger's
manifestation about her informing the sheriff that she was not authorized to receive papers
in behalf of the defendant-spouses and that she refused to receive them. We ruled in the
case earlier cited:
xxx xxx xxx
... [T]he rule designates the persons to whom copies of the process may be
left. The rule presupposes that such a relation of confidence exists between
the person with whom the copy is left and the defendant and therefore,
assumes that such person win deliver the process to defendant or in some
way give notice thereof. (Keister v. Navarro, supra)
Mrs. Morger's manifestation negates any close relationship between herself and the
defendant-spouses to qualify her as representative of the former to receive summons in
their behalf.
The private respondent merely relies on the sheriff's return that summons was duly served
on the spouses and states that to disregard the return would be disastrous as "self-serving
affidavits" would be preferred over the presumption of regularity in the discharge of official
functions. It urges that the sheriff's return should be given credence over the affidavit.
A sheriff's certification that he duly served summons on a defendant does not necessarily
mean that he validly served the summons. In this particular case, there is a strong showing
that Mr. and Mrs. Jaime Miguel are notresidents of 18 Yuchengco Drive, Pacific Malayan
Village, Alabang, Muntinlupa. The respondent, itself, states that the spouses are hiding to
escape their obligations. Sworn statements of Mrs. Angle Morger assert that she and her
husband are lessees of the premises and are the actual residents therein. The respondents
claim these statements are self-serving. Whether self-serving or not, the fact remains that
Mrs. Morger was seen by the sheriff as the then person in that house. The respondents have
absolutely no grounds, other than suspicions, for their contention that the Miguels and not
the Morgers are the actual residents at that address.
In the light of these facts, the appellate court's reliance on the sheriff's return that summons
upon defendant-spouses thru Angle Morger was "duly served" in consonance with the
principle of presumption in favor of regularity of performance of official functions of a public
officer (Section 5, Rule 13, Rules of Court) has no basis.
With regards to the petitioner corporation, the sheriff's return categorically states that the
alias summons was not served upon the corporation. Moreover, the private respondent
filed a motion to declare defendant-spouses Jaime and Ana Maria Miguel alone, in
default without including the petitioner corporation (Annex E, p. 64, Rollo)
These facts not withstanding the trial court declared all the defendants in default and
rendered a decision also against the petitioner corporation. This decision was affirmed by
the appellate court which applied the doctrine of piercing the veil of corporate fiction. The
appellate court stated:
The records disclose that petitioner-spouses are both directors of
respondent-Corporation being the majority stockholder of FILMERCO
(Annex "A," Comment). The records, also, reveal that both petitioner-
spouses and petitioner-corporation were impleaded as party defendants in
the civil case filed before the lower court. Hence, petitioner-corporation
cannot now claim to have been improperly served with summons. This
Court, therefore, finds justifiable reason for the lower court's order piercing
the veil of corporate fiction. ... (p. 56, rollo)
We have already found that there was no valid summons effected upon petitioner-spouses.
Since, the appellate court considered service of summons upon the petitioner-spouses as
constituting service of summons upon the petitioner-corporation, the inevitable conclusion
is that no valid summons could have been effected upon the petitioner-corporation.
Moreover, even if we assume that there was valid service of summons upon the petitioner-
spouses, it does not necessarily follow that there was also valid service of summons upon
the petitioner-corporation.
We have explained the doctrine of piercing the veil of corporate fiction in the following
manner:
The doctrine that a corporation is a legal entity distinct and separate from
the members and stockholders who compose it is recognized and respected
in all cases which are within reason and the law. (Borja v. Vasquez, 74 Phil.
56), When the fiction is urged as a means of perpetrating a fraud or an
illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, (Koppel Phil. v. Yatco, 77
Phil. 496; Lidell & Co. v. Collector, G.R. No. L-9687, June 30, 1961;
Commissioner v. Norton & Harrison Company, G.R. No. L- 17618, Aug. 31,
1964; and Guevarra, Phil. Corp. Law, 1961 ed., p. 7) the veil with which the
law covers and isolates the corporation from the members or stockholders
who compose it will be drifted to allow for its consideration merely as an
aggregation of individuals. (Villa Rey Transit, Inc. v. Ferrer, 25 SCRA 845-
857).
In effect, this doctrine refers to determination of liability and not to determination of
jurisdiction.
This is so because the doctrine of piercing the veil of corporate fiction comes to play only
during the trial of the case after the court has already acquired jurisdiction over the
corporation. Hence, before this doctrine can be applied, based on the evidence to be
presented, it is imperative that the court must first have jurisdiction over the corporation.
For the court to acquire jurisdiction over a domestic corporation such as the
petitionercorporation, summons must be served upon it through the officers of the
corporation enumerated in Section 13, Rule 14 of the Revised Rules of Court. There is not
even a semblance of any effort to serve summons upon an officer as such Since, the
summons intended for the petitioner-corporation was "not and could not be served" as
certified in the sheriff's return, the lower court never acquired jurisdiction over the
petitioner-corporation. It follows that the judgment against the petitioner-corporation is
null and void
The allegations that the petitioners deliberately concealed their whereabouts to escape the
payment of just and valid obligations appear to have some basis. However, allegations such
as these do not justify the appellate court's upholding a judgment wherein the trial court
has not acquired jurisdiction over the persons of the defendants.
The private respondent has chosen to employ a procedure which is strictly in personam. As
indicated in the cases of Citizens Surety and Insurance, Inc. v. Melencio-Herrera (38 SCRA
369) and Magdalena Estate, Inc. v. Nieto (125 SCRA 758) it is also possible to use
proceedings in rem or quasi in rem to achieve the same desired ends. There may be other
ways which, if utilized, would insure that the courts acquire jurisdiction over defendants in
recovery of money cases but the shortcut method approved by the respondent court is not
one of them.
WHEREFORE, the instant petition is hereby GRANTED. The lower court's decision in Civil
Case No. 2807 is SET ASIDE. The case is remanded to the trial court for proper service of
summons and trial.
SO ORDERED
UNITED COCONUT PLANTERS BANK, petitioner, vs. ROBERTO V. ONGPIN, respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, dated December 27, 2000, of
the Court of Appeals,[1] setting aside the orders, dated April 19, 1999 and October 13, 1999,
of the Regional Trial Court, Branch 133, Makati City in Civil Case No. 95-1594 entitled United
Coconut Planters Bank v. Roberto V. Ongpin.
The facts are as follows:
On November 17, 1994, Philippine Apparel, Inc. (PAI) entered into a credit agreement
with petitioner United Coconut Planters Bank for a case-to-case credit line in the amount of
US$500,000.00. Respondent Roberto V. Ongpin, then controlling stockholder of PAI, signed
as surety, binding himself jointly and severally liable with PAI for the same amount. PAI
availed of the credit line by drawing on short-term loans and opening letters of credit for the
importation of goods, which amounted to US$650,986.34 or P16,526,653.00.[2]
As PAI failed to pay its obligations, petitioner filed a complaint against respondent
Ongpin with the Regional Trial Court, Branch 133, Makati to enforce his obligation as surety
of PAI. Petitioner sought the issuance of a writ of preliminary attachment on the following
grounds: (1) respondent, in fraud of creditors, had transferred residence to Hongkong; (2)
his obligation was not covered by any collateral; and (3) PAI and its officers, including
respondent, with intent to defraud, did not disclose the fact that the Bureau of Customs had
claims against PAI for unpaid customs duties and taxes in the amount of P284,010,387.00,
which fact could have affected petitioners decision whether to grant the loan to PAI.
On November 10, 1995, the trial court issued an order granting petitioners prayer for
the issuance of a writ of preliminary attachment. On November 16, 1995, a writ of
attachment and a notice of garnishment were issued by the trial court, addressed to the
president and corporate secretary of the Dominion Asian Equities garnishing 8,315,600
shares of stock belonging to respondent.[3]
On November 21, 1995, respondent, making a special appearance through counsel,
moved to dismiss the complaint and to quash the writ of attachment and garnishment on
the ground that the trial court had no jurisdiction over the person of respondent, the
summons prepared on October 30, 1995 having been unserved as of November 17, 1995.
The trial court denied the urgent motion as well as respondents subsequent motion for
reconsideration.[4]
On May 24, 1996, respondent filed a petition for certiorari in the Court of Appeals
assailing the orders of the trial court. During the pendency of the petition, on May 27, 1996,
petitioner filed with the trial court a Motion for Leave to Serve Summons Through
Publication. Its motion was granted, but the publication was held in abeyance on October 2,
1996. On the same date, petitioner entered into an agreement with TODAY for the
publication of the summons on October 4, 11, and 18, 1996. Petitioner received the trial
courts order at the close of office hours on October 3, 1996. Attempts to prevent the
publication by requesting the trial court through telephone to inform the newspaper
publisher of its order and informing the newspaper itself of the same proved futile, as
nobody in the court was contacted by petitioner while the telephone lines of the newspaper
were busy. As a result, TODAY published the summons on October 4, 1996. It was only on
October 8, 1996 that petitioner was able to inform the newspaper of the October 2, 1996
order and to request the latter to hold in abeyance further publication of the summons.[5]
On February 27, 1997, the Court of Appeals promulgated its decision, the dispositive
portion of which states:
THE FOREGOING CONSIDERED, the issuance of a Writ of Attachment together with the
Notice of Garnishment is hereby validated: but the implementation of the Writ of
Attachment/Garnishment is prohibited until after the Court shall have acquired jurisdiction
over the person of the petitioner, either through voluntary appearance or service of
summons.
SO ORDERED.[6]
On March 19, 1997, petitioner filed a motion for reconsideration with the appeals court
insofar as it held that the trial court had no jurisdiction on the person of petitioner and for
this reason suspended implementation of the writ of attachment/garnishment. However,
the Court of Appeals denied petitioners motion.
On August 1, 1997, petitioner filed a petition for certiorari with this Court. Again, during
the pendency of the case, petitioner filed with the trial court on August 15, 1997 another
Motion to Serve Summons through Publication with Leave of Court. In the meantime, on
August 27, 1997, this Court issued a resolution dismissing petitioners petition for review
on certiorari for failure of petitioner to comply with procedural requirements.[7]
On November 27, 1997, Deputy Sheriff Glenn B. Parra, together with Atty. Rodulfo
Baculi, Jr., representative of petitioner, went to the PILTEL office at the Bankers Center
Building, Ayala Avenue, Makati City to serve summons on respondent, who was then the
chairman of the board of PILTEL and was expected to attend a board meeting on that day.
Upon arrival, they asked the receptionist, Arlene Cuenco, if respondent would attend the
meeting. Cuenco conferred with Anne V. Morallo, executive secretary of the president of
PILTEL, who then called respondents office at the BA Lepanto Building, Paseo de Roxas Ave.,
Makati City. Morallo was informed that respondent was not going to attend the meeting.
Nevertheless, Sheriff Parra and Atty. Baculi waited until 11:30 a. m. They proceeded to
respondents office at the BA Lepanto Building when respondent failed to appear at the
board meeting. The security guard at BA Lepanto told them that respondent was holding
office at the 14th floor, but when they reached the said floor, they were told by a member A. RESPONDENT ONGPIN, AT THE TIME OF SUBSTITUTED SERVICE OF
of the Internal Security Personnel that respondent was not known at that place. SUMMONS, WAS CHAIRMAN OF THE BOARD OF DIRECTORS OF PILTEL
In the afternoon of the same day, Sheriff Parra returned to the PILTEL office to serve WHOSE OFFICES SHOULD BE CONSIDERED HIS REGULAR PLACE OF
the summons on respondent. There, he met for the first time Anne V. Morallo, who told him BUSINESS.
that she was authorized to receive court processes for and on behalf of respondent even B. MS. ANNE V. MORALLO, THE EXECUTIVE SECRETARY OF THE PRESIDENT OF
though the latter was not holding office in the building. Morallo was so advised by Atty. PILTEL WAS NOT ONLY AUTHORIZED TO RECEIVE SUMMONS AND COURT
Joseph Santiago, Chief of the Legal Department of PILTEL. Thus, Sheriff Parra served the PROCESSES ON BEHALF OF RESPONDENT ONGPIN, BUT WAS ALSO A
summons on Morallo who received it accordingly. However, when Morallo tried to forward COMPETENT PERSON TO RECEIVE SUMMONS.
the court process to respondent, the latters lawyer, Atty. David S. Narvasa, refused to C. THE ONLY REASON WHY MS. ANNE V. MORALLO DID NOT TRANSMIT THE
receive it.[8] SUMMONS TO RESPONDENT ONGPIN WAS THAT RESPONDENT ONGPINS
After serving summons through Morallo, Sheriff Parra then implemented the writ of COUNSEL, ALSO THE LEGAL COUNSEL OF PILTEL, ADVISED HER TO KEEP IT.
attachment by serving notices of garnishment on the following: (1) Stock Transfer Office -
This assignment of errors boils down to the following questions: (1) whether or not
FEBTC; (2) Professional Stock Transfer; (3) Stock Transfer Services; (4) The Corporate
respondent Ongpins continuous special appearances before the court for five years may be
Secretary, Belle Corp., Tagaytay Highlands; and (5) International Exchange Bank, Head Office
deemed voluntary appearance as contemplated by the Revised Rules on Civil Procedure on
and all branches thereof.[9]
acquisition of jurisdiction over the person of defendant; and (2) whether or not the
On December 4, 1997, respondent filed with the trial court an Urgent Omnibus Motion:
substituted service of summons on Anne V. Morallo, executive secretary of the president of
(a) to Dismiss; (b) for Prohibition of the Implementation of the Writ of Attachment dated 16
PILTEL, was valid.
November 1995; (c) for Quashal of the Notice of Garnishment dated 27 November 1997;
First. Petitioner maintains that the trial court had already acquired jurisdiction over the
and (d) for Release of Properties attached thereby. On April 19, 1999, the trial court denied
person of respondent Ongpin by virtue of the numerous appearances by his counsel and
respondents motion for lack of merit. Respondents motion for reconsideration was likewise
respondents undeniable knowledge of the complaint against him.
denied on October 13, 1999.
This contention has no merit. A party who makes a special appearance in court
Consequently, respondent filed a petition for certiorari with application for a
challenging the jurisdiction of said court based on the ground, e. g., invalidity of the service
Temporary Restraining Order and Writ of Preliminary Injunction in the Court of Appeals. The
of summons, cannot be considered to have submitted himself to the jurisdiction of the
Court of Appeals promulgated its decision on December 27, 2000, annulling and setting
court.[11] In fact, in La Naval Drug Corp. vs. Court of Appeals,[12] this Court ruled that even the
aside the orders of the trial court, dated April 19, 1999 and October 13, 1999, on the ground
assertion of affirmative defenses aside from lack of jurisdiction over the person of the
that PILTEL was not the regular place of business of respondent and that, even if it was,
defendant cannot be considered a waiver of the defense of lack of jurisdiction over such
Morallo could not be considered a competent person in charge of respondents office, as she
person.
was the executive secretary of the president of PILTEL and not of respondent. Hence, this
In the present case, although respondent had indeed filed numerous pleadings, these
petition for review under Rule 45 of the Revised Rules of Civil Procedure.[10]
pleadings were precisely for the purpose of contesting the jurisdiction of the court over the
Petitioner makes the following assignment of errors:
person of respondent on the ground that there was no valid service of summons on him. It
would be absurd to hold that respondent, by making such appearance, thereby submitted
THE COURT OF APPEALS ERRED IN ANNULLING THE ORDERS OF THE TRIAL COURT DATED 19
himself to the jurisdiction of the court.
APRIL 1999 AND 13 OCTOBER 1999 BECAUSE:
Petitioner cites the ruling in Macapagal v. Court of Appeals[13] for its contention that the
feigned unawareness of a defendant is equivalent to voluntary appearance. The facts
I. RESPONDENT ONGPIN, AFTER FIVE LONG YEARS OF SPECIAL APPEARANCE,
of Macapagal are, however, different from the facts of this case. In that case, this Court
SHOULD BE DEEMED TO HAVE VOLUNTARILY SUBJECTED HIMSELF TO THE
considered the petitioner to have been validly served summons based on its findings that
JURISDICTION OF THE TRIAL COURT.
summons was served on the legal counsel of the two corporations and its officers and
II. THE SUBSTITUTED SERVICE OF SUMMONS ON RESPONDENT ONGPIN ON 27
directors. Petitioners defense that at the time of the service of summons he was no longer
NOVEMBER 1997 WAS VALID, CONSIDERING THAT:
connected with both corporations, having resigned from them before such service, was
dismissed by this Court as flimsy. The finding of this Court on the feigned unawareness of
petitioner was based on the fact that Philfinances woes were widely publicized. This,
together with counsels authority to receive service of summons on behalf of petitioner, was
the basis for this Courts ruling that jurisdiction over the person of the latter had already
been acquired by the trial court.
In contrast, summons in this case was served on the executive secretary of the
president of PILTEL, a company which is not a party to the present action. Respondent
Ongpin, through counsel, entered numerous special appearances in court precisely to
question the courts jurisdiction over his person either due to failure to serve summons or to
an invalid service of summons on him. Jurisdiction cannot be acquired over the person of
respondent even if he knows of the case against him unless he is validly served with
summons.[14]
Second. Petitioner contends that the Court of Appeals erred in ruling that (1)
substituted service of summons at the PILTEL office where respondent sits as chairman of
the board is invalid as the PILTEL office is not his regular place of business; and (2) Anne V.
Morallo, the executive secretary of PILTELs president, was not authorized to receive the
summons on behalf of respondent Ongpin as she was not his executive secretary but that of
the presidents.
We think no error was incurred by the Court of Appeals in this ruling. Rule 14, 7 of the
1997 Revised Rules of Civil Procedure provides that if, for justifiable causes, personal service
cannot be effected on defendant, service may be effected (a) by leaving copies of the
summons at the defendants residence with some person of suitable age and discretion
residing therein, or (b) by leaving the copies at defendants office or regular place of business
with some competent person in charge thereof.[15] The word office or the phrase regular
place of business refers to the office or place of business of the defendant at the time of
service. The rule specifically designates the persons to whom copies of the process should
be left. In Mapa vs. Court of Appeals,[16] substituted service of summons in a person claiming
to be authorized to receive service of summons in behalf of the corporation was held to be
invalid as far as jurisdiction over the person of the chairman of the board was concerned
inasmuch as he was not holding office in the corporation but in his residence. Thus, it does
not necessarily follow that the regular place of business of a chairman of the board of
directors is the same as the address of the corporation as it is possible for him to hold office
elsewhere.
In the case at bar, the corporation (PILTEL), where substituted summons was served
and of which respondent was the chairman of the board, was not even a party to the
present suit. Respondent was sued in his personal capacity as surety for PAI. Even from the
initial inquiries made by the sheriff and petitioners representative in the office of PILTEL, it
was evident that respondent was not holding office there. Indeed, Morallo, executive
secretary of the PILTEL, had to call respondents secretary at the BA Lepanto Building, Paseo
de Roxas, to find out whether he was attending the board meeting to be held on that day.
Thus, the process server already knew that respondent was not holding office at the PILTEL
office but somewhere else.
As the PILTEL office is not respondents regular place of business, it cannot therefore be
said that Anne V. Morallo, the person who received the service of summons in behalf of
respondent, was authorized to receive service of process on behalf of respondent.
Third. It is not clear whether respondent could be personally served with summons
because he had transferred residence to Hongkong. Thus in its complaint, petitioner alleged
that respondents address was either at ATA Capital Corporation, 3404 1 Exchange Square,
#8 Connaught Place, Central Hongkong or South China Morning, Post Center #22 Tai Fat
Street, Taipo Industrial Estate, Taipo, New Territories, Hongkong. But later, it tried to
personally serve summons on respondent at the PILTEL office, where he served as chairman
of the board of directors. When respondent failed to attend the meeting, the process server
proceeded to the BA Lepanto Building, Paseo de Roxas, Makati City, where, as the process
server learned from Morallo, respondent was allegedly holding office.
Under the Rules, if a defendant is a non-resident and his property in the Philippines had
been attached, service may, by leave of court, be effected outside the Philippines or by
publication in a newspaper of general circulation.[17] In the same manner, if the
whereabouts of the defendant is unknown and cannot be ascertained by diligent inquiry,
service may, by leave of court, likewise be effected by publication in a newspaper of general
circulation.[18] In this case, the plaintiff must show that the address of defendant is unknown
and cannot be ascertained by diligent inquiry.[19]
It is clear that petitioner is not without remedy under the Revised Rules of Civil
Procedure to enforce the writ of attachment through a valid service of summons. If, indeed,
respondent is no longer a resident of the Philippines, petitioner still can, by leave of court,
serve summons by publication, as it in fact tried to do. The records show that petitioner
attempted to serve summons by publication, but later abandoned its effort and for some
reason attempted personal service instead.
If, on the other hand, respondent is a resident and petitioner cannot determine the
correct address of respondent, petitioner only needs to show that respondents address is
unknown and cannot be ascertained by diligent inquiry. Upon compliance with this
requirement, it can validly serve summons by publication in a newspaper of general
circulation.
Petitioner cannot fall back on allegations of knowledge of respondent to avoid
complying with the standards and guidelines set by the Rules. What we said in Oate v.
Abrogar[20]bears repeating in this case:
... More important than the need for insuring success in the enforcement of the writ is the
need for affirming a principle on that most fundamental of all requisites the jurisdiction of
the court issuing attachment over the person of the defendant. It may be that the same
result would follow from requiring that a new writ be served all over again. The symbolic
significance of such an act, however, is that it would affirm our commitment to the rule of
law.

WHEREFORE, the decision of the Court of Appeals is affirmed. No pronouncement as to

costs.
SO ORDERED.
FILOMENA DOMAGAS, petitioner, vs. VIVIAN LAYNO JENSEN, respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari, under Rule 45 of the Rules of Court, of the
Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 73995, which affirmed the
Decision[2] of the Regional Trial Court (RTC) of Dagupan City, Branch 44, in Civil Case No.
2000-0244-D, which declared null and void the decision of the Municipal Trial Court (MTC)
of Calasiao, Pangasinan in Civil Case No. 879.[3]
The antecedent facts follow.
On February 19, 1999, petitioner Filomena Domagas filed a complaint for forcible entry
against respondent Vivian Jensen before the MTC of Calasiao, Pangasinan. The petitioner
alleged in her complaint that she was the registered owner of a parcel of land covered by
Original Certificate of Title (OCT) No. P-30980, situated in Barangay Buenlag, Calasiao,
Pangasinan, and with an area of 827 square meters. On January 9, 1999 the respondent, by
means of force, strategy and stealth, gained entry into the petitioners property by
excavating a portion thereof and thereafter constructing a fence thereon. As such, the
petitioner was deprived of a 68-square meter portion of her property along the boundary
line. The petitioner prayed that, after due proceedings, judgment be rendered in her favor,
thus:
3. And, after trial, judgment be rendered:
a) DECLARING the writ of Preliminary Mandatory Injunction and Writ of
Preliminary Injunction permanent;
b) ORDERING defendant, his representatives, agents and persons acting
under her, to vacate the portion of the property of the plaintiff occupied
by them and to desist from entering, excavating and constructing in the
said property of the plaintiff described in paragraph 2 hereof and/or
from disturbing the peaceful ownership and possession of the plaintiff
over the said land, pending the final resolution of the instant action;
c) ORDERING defendant to pay reasonable rental at FIVE THOUSAND
(P5,000.00) PESOS per month from January 9, 1999 up to the time she
finally vacates and removes all constructions made by her in the property
of the plaintiff and up to the time she finally restores the said property in
the condition before her illegal entry, excavation and construction in the
property of the plaintiff;
d) ORDERING defendant to pay actual damages in the amount of TWENTY
THOUSAND (P20,000.00) PESOS; moral damages in the amount of
TWENTY THOUSAND (P20,000.00) PESOS; attorneys fees of THIRTY
THOUSAND (P30,000.00) PESOS in retainers fee and ONE THOUSAND
FIVE HUNDRED (P1,500.00) PESOS per court appearance fee; exemplary
damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS, and,
costs.
Plaintiff further prays for other reliefs and remedies just and equitable in the premises.[4]
The case was docketed as Civil Case No. 879. The summons and the complaint were not
served on the respondent because the latter was apparently out of the country. This was
relayed to the Sheriff by her (the respondents) brother, Oscar Layno, who was then in the
respondents house at No. 572 Barangay Buenlag, Calasiao, Pangasinan. The Sheriff left the
summons and complaint with Oscar Layno, who received the same.[5]
Nonetheless, on May 17, 1999, the court rendered judgment ordering the respondent
and all persons occupying the property for and in the latters behalf to vacate the disputed
area and to pay monthly rentals therefor, including actual damages, attorneys fees, and
exemplary damages. The fallo of the decision reads:
1) Ordering the defendant, her representatives, agents and persons acting under
her, to vacate the 68-square meters which she encroached upon;
2) Ordering the defendant to pay a monthly rental of P1,000.00 to the plaintiff;
3) To pay plaintiff actual damages of P20,000.00; attorneys fees of P15,000.00 and
exemplary damages in the amount of P20,000.00 plus the costs.
SO ORDERED.[6]
The respondent failed to appeal the decision. Consequently, a writ of execution was
issued on September 27, 1999.
On August 16, 2000, the respondent filed a complaint against the petitioner before the
RTC of Dagupan City for the annulment of the decision of the MTC in Civil Case No. 879, on
the ground that due to the Sheriffs failure to serve the complaint and summons on her
because she was in Oslo, Norway, the MTC never acquired jurisdiction over her person. The
respondent alleged therein that the service of the complaint and summons through
substituted service on her brother, Oscar Layno, was improper because of the following: (a)
when the complaint in Civil Case No. 879 was filed, she was not a resident of Barangay
Buenlag, Calasiao, Pangasinan, but of Oslo, Norway, and although she owned the house
where Oscar Layno received the summons and the complaint, she had then leased it to
Eduardo Gonzales; (b) she was in Oslo, Norway, at the time the summons and the complaint
were served; (c) her brother, Oscar Layno, was merely visiting her house in Barangay
Buenlag and was not a resident nor an occupant thereof when he received the complaint
and summons; and (d) Oscar Layno was never authorized to receive the summons and the
complaint for and in her behalf.[7]
The respondent further alleged that the MTC had no jurisdiction over the subject
matter of the complaint in Civil Case No. 879 because the petitioner, the plaintiff therein,
failed to show prior possession of the property. She further claimed that the alleged forcible
entry was simply based on the result of the survey conducted by Geodetic Engineer
Leonardo de Vera showing that the property of the respondent encroached on that of the
petitioner.
The respondent filed a Manifestation dated August 31, 2000, and appended thereto
the following: (a) a copy[8] of her passport showing that she left the country on February 17,
1999; (b) a copy[9] of the Contract of Lease dated November 24, 1997, executed by her and
Eduardo D. Gonzales over her house for a period of three (3) years or until November 24,
2000; (c) her affidavit[10] stating, inter alia, that she owned the house at Barangay Buenlag,
Calasiao, Pangasinan, which she leased to Eduardo Gonzales; that she was married to Jarl
Jensen, a citizen of Norway, on August 23, 1987 and had resided in Norway with her
husband since 1993; that she arrived in the Philippines on December 31, 1998, but left on
February 17, 1999; she returned to the Philippines on July 30, 2000 and learned, only then,
of the complaint against her and the decision of the MTC in Civil Case No. 879; her brother
Oscar Layno was not a resident of the house at Barangay Buenlag; and that she never
received the complaint and summons in said case; (d) the affidavit[11] of Oscar Layno
declaring that sometime in April 1999, he was in the respondents house to collect rentals
from Eduardo Gonzales; that the Sheriff arrived and served him with a copy of the summons
and the complaint in Civil Case No. 879; and that he never informed the respondent of his
receipt of the said summons and complaint; (e) an affidavit[12] of Eduardo Gonzales stating
that he leased the house of the respondent and resided thereat; the respondent was not a
resident of the said house although he (Gonzales) allowed the respondent to occupy a room
therein whenever she returned to the Philippines as a balikbayan; and that Oscar Layno was
not residing therein but only collected the rentals.
In her answer to the complaint, the petitioner alleged that the respondent was a
resident of Barangay Buenlag, Calasiao, Pangasinan and was the owner of the subject
premises where Oscar Layno was when the Sheriff served the summons and complaint; that
the service of the complaint and summons by substituted service on the respondent, the
defendant in Civil Case No. 879, was proper since her brother Oscar Layno, a resident and
registered voter of Barangay. Buenlag, Calasiao, Pangasinan, received the complaint and
summons for and in her behalf.
The petitioner appended the following to her answer: (a) a copy[13] of the Deed of
Absolute Sale executed by Jose Layno in her favor, dated August 26, 1992, showing that the
respondent was a resident of Barangay Buenlag, Calasiao, Pangasinan; (b) a Real Estate
Mortgage[14] executed by the respondent, dated February 9, 1999 showing that she was a
resident of Barangay Buenlag, Calasiao, Pangasinan; (c) the Joint Affidavit[15] of Vicenta
Peralta and Orlando Macalanda, both residents of Barangay Buenlag, Calasiao, Pangasinan,
declaring that the respondent and her brother Oscar Layno were their neighbors; that the
respondent and her brother had been residents of Barangay Buenlag since their childhood;
that although the respondent left the country on several occasions, she returned to the
Philippines and resided in her house at No. 572 located in the said barangay; and (d) the
Voters Registration Record[16] of Oscar Layno, approved on June 15, 1997.
After due proceedings, the trial court rendered a decision in favor of the respondent.
The dispositive portion reads:
WHEREFORE, judgment is rendered in favor of plaintiff Vivian Layno Jensen and against
defendant Filomena Domagas, as follows:
1. The Decision of the Municipal Trial Court of Calasiao, Pangasinan in Civil Case No.
879, entitled Filomena Domagas versus Vivian Layno Jensen is declared null and
void, for lack of jurisdiction over the person of the plaintiff and the subject matter.
2. Defendant Filomena Domagas is ordered to pay plaintiff, the following:
a.) Actual damages, representing litigation expenses in the amount
of P50,000.00;
b.) Attorneys fees in the amount of P50,000.00;
c.) Moral Damages in the amount of P50,000.00;
d.) Exemplary Damages in the amount of P50,000.00; and
e.) Costs of suit.
SO ORDERED.[17]
The trial court declared that there was no valid service of the complaint and summons
on the respondent, the defendant in Civil Case No. 879, considering that she left the
Philippines on February 17, 1999 for Oslo, Norway, and her brother Oscar Layno was never
authorized to receive the said complaint and summons for and in her behalf.
The petitioner appealed the decision to the CA which, on May 6, 2003, rendered
judgment affirming the appealed decision with modifications. The CA ruled that the
complaint in Civil Case No. 879 was one for ejectment, which is an action quasi in rem. The
appellate court ruled that since the defendant therein was temporarily out of the country,
the summons and the complaint should have been served via extraterritorial service under
Section 15 in relation to Section 16, Rule 14 of the Rules of Court, which likewise requires
prior leave of court. Considering that there was no prior leave of court and none of the
modes of service prescribed by the Rules of Court was followed by the petitioner, the CA
concluded that there was really no valid service of summons and complaint upon the
respondent, the defendant in Civil Case No. 879.
 Hence, the present petition.
The petitioner assails the decision of the CA, alleging that the appellate court erred in
holding that the respondents complaint for ejectment is an action quasi in rem. The
petitioner insists that the complaint for forcible entry is an action in personam; therefore,
substituted service of the summons and complaint on the respondent, in accordance with
Section 7, Rule 14 of the Rules of Court, is valid. The petitioner, likewise, asserts that Oscar
Layno is a resident and a registered voter of Barangay Buenlag, Calasiao, Pangasinan; hence,
the service of the complaint and summons on the respondent through him is valid.
The respondent, on the other hand, asserts that the action for forcible entry filed
against her was an action quasi in rem, and that the applicable provision of the Rules of
Court is Section 15 of Rule 14, which calls for extraterritorial service of summons.
The sole issue is whether or not there was a valid service of the summons and
complaint in Civil Case No. 879 on the respondent herein who was the defendant in the said
case. The resolution of the matter is anchored on the issue of whether or not the action of
the petitioner in the MTC against the respondent herein is an action in personam or quasi in
rem.
The ruling of the CA that the petitioners complaint for forcible entry of the petitioner
against the respondent in Civil Case No. 879 is an action quasi in rem, is erroneous. The
action of the petitioner for forcible entry is a real action and one in personam.
The settled rule is that the aim and object of an action determine its
character.[18] Whether a proceeding is in rem, or in personam, or quasi in rem for that
matter, is determined by its nature and purpose, and by these only.[19] A proceeding
in personam is a proceeding to enforce personal rights and obligations brought against the
person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose
of it in accordance with the mandate of the court.[20] The purpose of a proceeding in
personam is to impose, through the judgment of a court, some responsibility or liability
directly upon the person of the defendant.[21] Of this character are suits to compel a
defendant to specifically perform some act or actions to fasten a pecuniary liability on
him.[22] An action in personam is said to be one which has for its object a judgment against
the person, as distinguished from a judgment against the propriety to determine its state. It
has been held that an action in personam is a proceeding to enforce personal rights or
obligations; such action is brought against the person. As far as suits for injunctive relief are
concerned, it is well-settled that it is an injunctive act in personam.[23] In Combs v.
Combs,[24] the appellate court held that proceedings to enforce personal rights and
obligations and in which personal judgments are rendered adjusting the rights and
obligations between the affected parties is in personam. Actions for recovery of real
property are in personam.[25]
On the other hand, a proceeding quasi in rem is one brought against persons seeking to
subject the property of such persons to the discharge of the claims assailed.[26] In an
action quasi in rem, an individual is named as defendant and the purpose of the proceeding
is to subject his interests therein to the obligation or loan burdening the
property.[27] Actions quasi in rem deal with the status, ownership or liability of a particular
property but which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the rights or interests of
all possible claimants. The judgments therein are binding only upon the parties who joined
in the action.[28]
Section 1, Rule 70 of the Rules of Court provides:
Section 1. Who may institute proceedings, and when. - Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building in force,
intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of any contract, express or implied, or
the legal representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or withholding of
possession, bring an action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons claiming under
them, for the restitution of such possession, together with damages and costs.
Under Section 15, Rule 70 of the said Rule, the plaintiff may be granted a writ of
preliminary prohibition or mandatory injunction:
Sec. 15. Preliminary Injunction. The court may grant preliminary injunction, in accordance
with the provisions of Rule 58 hereof, to prevent the defendant from committing further
acts of dispossession against the plaintiff.
A possessor deprived of his possession through forcible entry or unlawful detainer may,
within five (5) days from the filing of the complaint, present a motion in the action for
forcible entry or unlawful detainer for the issuance of a writ of preliminary mandatory
injunction to restore him in his possession. The court shall decide the motion within thirty
(30) days from the filing thereof.
If, after due proceedings, the trial court finds for the plaintiff, it shall then render
judgment in his or her favor, thus:
Sec. 17. Judgment. If, after trial, the court finds that the allegations of the complaint are
true, it shall render judgment in favor of the plaintiff for the restitution of the premises, the
sum justly due as arrears of rent or as reasonable compensation for the use and occupation
of the premises, attorneys fees and costs. If it finds that said allegations are not true, it shall
render judgment for the defendant to recover his costs. If a counterclaim is established, the
court shall render judgment for the sum found in arrears from either party and award costs
as justice requires.
From the aforementioned provisions of the Rules of Court and by its very nature and
purpose, an action for unlawful detainer or forcible entry is a real action and in
personam because the plaintiff seeks to enforce a personal obligation or liability on the
defendant under Article 539 of the New Civil Code,[29] for the latter to vacate the property
subject of the action, restore physical possession thereof to the plaintiff, and pay actual
damages by way of reasonable compensation for his use or occupation of the property.[30]
As gleaned from the averments of the petitioners complaint in the MTC, she sought a
writ of a preliminary injunction from the MTC and prayed that the said writ be made
permanent. Under its decision, the MTC ordered the defendant therein (the respondent in
this case), to vacate the property and pay a monthly rental of P1,000.00 to the plaintiff
therein (the petitioner in this case).
On the issue of whether the respondent was validly served with the summons and
complaint by the Sheriff on April 5, 1999, the petitioner asserts that since her action of
forcible entry against the respondent in Civil Case No. 879 was in personam, summons may
be served on the respondent, by substituted service, through her brother, Oscar Layno, in
accordance with Section 7, Rule 14 of the Rules of Court. The petitioner avers that Oscar
Layno, a person of suitable age and discretion, was residing in the house of the respondent
on April 5, 1999. She avers that the fact that the house was leased to and occupied by
Eduardo Gonzales was of no moment. Moreover, the Sheriff is presumed to have performed
his duty of properly serving the summons on the respondent by substituted service.
The contention of the petitioner has no merit.
In Asiavest Limited v. Court of Appeals,[31] the Court had the occasion to state:
In an action in personam, jurisdiction over the person of the defendant is necessary for the
court to validly try and decide the case. Jurisdiction over the person of a resident defendant
who does not voluntarily appear in court can be acquired by personal service of summons as
provided under Section 7, Rule 14 of the Rules of Court. If he cannot be personally served
with summons within a reasonable time, substituted service may be made in accordance
with Section 8 of said Rule. If he is temporarily out of the country, any of the following
modes of service may be resorted to: (a) substituted service set forth in Section 8; (2)
personal service outside the country, with leave of court; (3) service by publication, also
with leave of court; or (4) any other manner the court may deem sufficient.[32]
Thus, any judgment of the court which has no jurisdiction over the person of the
defendant is null and void.[33]
In the present case, the records show that the respondent, before and after his
marriage to Jarl Jensen on August 23, 1987, remained a resident of Barangay Buenlag,
Calasiao, Pangasinan. This can be gleaned from the Deed of Absolute Sale dated August 26,
1992 in which she declared that she was a resident of said barangay. Moreover, in the Real
Estate Mortgage Contract dated February 9, 1999, ten days before the complaint in Civil
Case No. 879 was filed, the petitioner categorically stated that she was a Filipino and a
resident of Barangay Buenlag, Calasiao, Pangasinan. Considering that the respondent was in
Oslo, Norway, having left the Philippines on February 17, 1999, the summons and complaint
in Civil Case No. 879 may only be validly served on her through substituted service under
Section 7, Rule 14 of the Rules of Court, which reads:
SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be served within a
reasonable time as provided in the preceding section, service may be effected (a) by leaving
copies of the summons at the defendants residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at defendants office or regular
place of business with some competent person in charge thereof.
Strict compliance with the mode of service is required in order that the court may
acquire jurisdiction over the person of the defendant.[34] The statutory requirement of
substituted service must be followed faithfully and strictly and any substituted service other
than that authorized by the statute is rendered ineffective.[35] As the Court held in Hamilton
v. Levy:[36]
The pertinent facts and circumstances attendant to the service of summons must be stated
in the proof of service or Officers Return; otherwise, any substituted service made in lieu of
personal service cannot be upheld. This is necessary because substituted service is in
derogation of the usual method of service. It is a method extraordinary in character and
hence may be used only as prescribed and in the circumstances authorized by statute. Here,
no such explanation was made. Failure to faithfully, strictly, and fully comply with the
requirements of substituted service renders said service ineffective.[37]
In Keister v. Narcereo,[38] the Court held that the term dwelling house or residence are
generally held to refer to the time of service; hence, it is not sufficient to leave the summons
at the formers dwelling house, residence or place of abode, as the case may be. Dwelling
house or residence refers to the place where the person named in the summons is living at
the time when the service is made, even though he may be temporarily out of the country
at the time. It is, thus, the service of the summons intended for the defendant that must be
left with the person of suitable age and discretion residing in the house of the defendant.
Compliance with the rules regarding the service of summons is as much important as the
issue of due process as of jurisdiction.[39]
The Return of Service filed by Sheriff Eduardo J. Abulencia on the service of summons
reads:
Respectfully returned to the court of origin the herein summons and enclosures in the
above-entitled case, the undersigned caused the service on April 5, 1999.
Defendant Vivian Layno Jensen is out of the country as per information from her brother
Oscar Layno, however, copy of summons and enclosures was received by her brother Oscar
Layno on April 5, 1999 as evidenced by his signature appearing in the original summons.
Calasiao, Pangasinan, April 6, 1999.
(Sgd.)
EDUARDO J. ABULENCIA
Junior Process Server[40]
As gleaned from the said return, there is no showing that as of April 5, 1999, the house
where the Sheriff found Oscar Layno was the latters residence or that of the respondent
herein. Neither is there any showing that the Sheriff tried to ascertain where the residence
of the respondent was on the said date. It turned out that the occupant of the house was a
lessor, Eduardo Gonzales, and that Oscar Layno was in the premises only to collect the
rentals from him. The service of the summons on a person at a place where he was a visitor
is not considered to have been left at the residence or place or abode, where he has another
place at which he ordinarily stays and to which he intends to return.[41]
The Voters Registration Record of Oscar Layno dated June 15, 1997 wherein he
declared that he was a resident of No. 572 Barangay Buenlag, Calasiao, Pangasinan, as well
as the Joint Affidavit of Vicenta Peralta and Orlando Macasalda cannot prevail over the
Contract of Lease the respondent had executed in favor of Eduardo Gonzales showing that
the latter had resided and occupied the house of the respondent as lessee since November
24, 1997, and the affidavit of Eduardo Gonzales that Oscar Layno was not residing in the said
house on April 5, 1999.
In sum, then, the respondent was not validly served with summons and the complaint
in Civil Case No. 879 on April 5, 1999, by substituted service. Hence, the MTC failed to
acquire jurisdiction over the person of the respondent; as such, the decision of the MTC in
Civil Case No. 879 is null and void.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. No costs.
SO ORDERED.
G.R. No. 183035 : January 9, 2013
OPTIMA REALTY CORPORATION, Petitioner, v. HERTZ PHIL. EXCLUSIVE CARS,
INC., Respondent.
DECISION
SERENO, C.J.:
Before us is a Rule 45 Petition assailing the Decision1 and Resolution2 of the Court of Appeals
(CA) in CA-GR SP No. 99890, which reversed the Decision3 and Resolution4 of the Regional
Trial Court (RTC), Branch 13 7, Makati City in Civil Case No. 06-672. The RTC had affirmed in
toto the 22 May 2006 Decision5 of the Metropolitan Trial Court (MeTC), Branch 64, Makati
City in Civil Case No. 90842 evicting respondent Hertz Phil.
Exclusive Cars, Inc. (Hertz) and ordering it to pay back rentals and other arrearages to
petitioner Optima Realty Corporation (Optima).
Optima is engaged in the business of leasing and renting out commercial spaces and
buildings to its tenants. On 12 December 2002, it entered into a Contract of Lease with
respondent over a 131-square-meter office unit and a parking slot in the Optima Building for
a period of three years commencing on 1 March 2003 and ending on 28 February 2006.6 On
9 March 2004, the parties amended their lease agreement by shortening the lease period to
two years and five months, commencing on 1 October 2003 and ending on 28 February
2006.7?r?l1
Renovations in the Optima Building commenced in January and ended in November
2005.8 As a result, Hertz alleged that it experienced a 50% drop in monthly sales and a
significant decrease in its personnels productivity. It then requested a 50% discount on its
rent for the months of May, June, July and August 2005.9?r?l1
On 8 December 2005, Optima granted the request of Hertz.10 However, the latter still failed
to pay its rentals for the months of August to December of 2005 and January to February
2006,11 or a total of seven months. In addition, Hertz likewise failed to pay its utility bills for
the months of November and December of 2005 and January and February of 2006,12 or a
total of four months.
On 8 December 2005, Optima wrote another letter to Hertz,13 reminding the latter that the
Contract of Lease could be renewed only by a new negotiation between the parties and
upon written notice by the lessee to the lessor at least 90 days prior to the termination of
the lease period.14 As no letter was received from Hertz regarding its intention to seek
negotiation and extension of the lease contract within the 90-day period, Optima informed
it that the lease would expire on 28 February 2006 and would not be renewed.15?r?l1
On 21 December 2005, Hertz wrote a letter belatedly advising Optima of the formers desire
to negotiate and extend the lease.16 However, as the Contract of Lease provided that the
notice to negotiate its renewal must be given by the lessee at least 90 days prior to the
expiration of the contract, petitioner no longer entertained respondents notice.
On 30 January 2006, Hertz filed a Complaint for Specific Performance, Injunction and
Damages and/or Sum of Money with prayer for the issuance of a Temporary Restraining
Order (TRO) and Writ of Preliminary Injunction (Complaint for Specific Performance) against
Optima. In that Complaint, Hertz prayed for the issuance of a TRO to enjoin petitioner from
committing acts that would tend to disrupt respondents peaceful use and possession of the
leased premises; for a Writ of Preliminary Injunction ordering petitioner to reconnect its
utilities; for petitioner to be ordered to renegotiate a renewal of the Contract of Lease; and
for actual, moral and exemplary damages, as well as attorneys fees and costs.
On 1 March 2006, Optima, through counsel, wrote Hertz a letter requiring the latter to
surrender and vacate the leased premises in view of the expiration of the Contract of Lease
on 28 February 2006.17 It likewise demanded payment of the sum of ?420,967.28 in rental
arrearages, unpaid utility bills and other charges.18 Hertz, however, refused to vacate the
leased premises.19 As a result, Optima was constrained to file before the MeTC a Complaint
for Unlawful Detainer and Damages with Prayer for the Issuance of a TRO and/or
Preliminary Mandatory Injunction (Unlawful Detainer Complaint) against Hertz.20?r?l1
On 14 March 2006, Summons for the Unlawful Detainer Complaint was served on Henry
Bobiles, quality control supervisor of Hertz, who complied with the telephone instruction of
manager Rudy Tirador to receive the Summons.21?r?l1
On 28 March 2006, or 14 days after service of the Summons, Hertz filed a Motion for Leave
of Court to file Answer with Counterclaim and to Admit Answer with Counterclaim (Motion
for Leave to File Answer).22 In that Motion, Hertz stated that, "in spite of the defective
service of summons, it opted to file the instant Answer with Counterclaim with Leave of
Court."23 In the same Motion, it likewise prayed that, in the interest of substantial justice,
the Answer with Counterclaim attached to the Motion for Leave to File Answer should be
admitted regardless of its belated filing, since the service of summons was defective.24?r?l1
On 22 May 2006, the MeTC rendered a Decision,25 ruling that petitioner Optima had
established its right to evict Hertz from the subject premises due to nonpayment of rentals
and the expiration of the period of lease.26 The dispositive portion of the Decision
reads:cralawlibrary
WHEREFORE, premises considered, the Court hereby renders judgment for the plaintiff and
against the defendant, ordering:cralawlibrary
1. the defendant corporation and all persons claiming rights from it to immediately vacate
the leased premises and to surrender possession thereof to the plaintiff;
2. the defendant corporation to pay the plaintiff the amount of Four Hundred Twenty
Thousand Nine Hundred Sixty Seven Pesos and 28/100 (P420,967.28) representing its
rentals arrearages and utility charges for the period of August 2005 to February 2006,
deducting therefrom defendants security deposit;
3. the defendant corporation to pay the amount of Fifty Four Thousand Two Hundred Pesos
(P54,200.00) as a reasonable monthly compensation for the use and occupancy of the
premises starting from March 2006 until possession thereof is restored to the plaintiff; and
4. the defendant corporation to pay the amount of Thirty Thousand Pesos (P30,000.00) as
and for attorneys fees; and
5. the cost of suit. ???r?bl? ??r??l l?? l?br?r
SO ORDERED.27?r?l1
Hertz appealed the MeTCs Decision to the RTC.28?r?l1
Finding no compelling reason to warrant the reversal of the MeTCs Decision, the RTC
affirmed it by dismissing the appeal in a Decision29 dated 16 March 2007.
On 18 June 2007, the RTC denied respondents Motion for Reconsideration of its assailed
Decision.30?r?l1
Hertz thereafter filed a verified Rule 42 Petition for Review on Certiorari with the CA.31?r?l1
On appeal, the CA ruled that, due to the improper service of summons, the MeTC failed to
acquire jurisdiction over the person of respondent Hertz. The appellate court thereafter
reversed the RTC and remanded the case to the MeTC to ensure the proper service of
summons. Accordingly, the CA issued its 17 March 2008 Decision, the fallo of which
reads:cralawlibrary
WHEREFORE, premises considered, the May 22, 2006 Decision of the Metropolitan Trial
Court of Makati City, Branch 64, in Civil Case No. 90842, and both the March 16, 2007
Decision, as well as the June 18, 2007 Resolution, of the Regional Trial Court of Makati City,
Branch 137, in Civil Case No. 06-672, are hereby REVERSED, ANNULLED and SET ASIDE due
to lack of jurisdiction over the person of the defendant corporation HERTZ. This case is
hereby REMANDED to the Metropolitan Trial Court of Makati City, Branch 64, in Civil Case
No. 90842, which is DIRECTED to ensure that its Sheriff properly serve summons to only
those persons listed in Sec. 11, Rule 14 of the Rules of Civil Procedure in order that the MTC
could acquire jurisdiction over the person of the defendant corporation HERTZ.
SO ORDERED.32?r?l1
Petitioners Motion for Reconsideration of the CAs Decision was denied in a Resolution dated
20 May 2008.33?r?l1
Aggrieved by the ruling of the appellate court, petitioner then filed the instant Rule 45
Petition for Review on Certiorari with this Court.34?r?l1
THE ISSUES
As culled from the records, the following issues are submitted for resolution by this
Court:cralawlibrary
1. Whether the MeTC properly acquired jurisdiction over the person of respondent Hertz;
2. Whether the unlawful detainer case is barred by litis pendentia; and
3. Whether the ejectment of Hertz and the award of damages, attorneys fees and costs are
proper. ???r?bl? ??r??l l?? l?br?r improper service of summons. The defenses that it pleaded were limited to litis pendentia,
THE COURTS RULING
We grant the Petition and reverse the assailed Decision and Resolution of the appellate
court.
I lead to no other conclusion than that Hertz voluntarily appeared before the court a quo. We
The MeTC acquired jurisdiction over the person of respondent Hertz.
In civil cases, jurisdiction over the person of the defendant may be acquired either by
service of summons or by the defendants voluntary appearance in court and submission to
its authority.35?r?l1
In this case, the MeTC acquired jurisdiction over the person of respondent Hertz by reason
of the latters voluntary appearance in court.
In Philippine Commercial International Bank v. Spouses Dy,36 we had occasion to
state:cralawlibrary
Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive
power of legal processes exerted over his person, or his voluntary appearance in court. As a
general proposition, one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. It is by reason of this rule that we have had occasion to declare that
the filing of motions to admit answer, for additional time to file answer, for reconsideration
of a default judgment, and to lift order of default with motion for reconsideration, is
considered voluntary submission to the court's jurisdiction. This, however, is tempered by
the concept of conditional appearance, such that a party who makes a special appearance
to challenge, among others, the court's jurisdiction over his person cannot be considered to
have submitted to its authority.
Prescinding from the foregoing, it is thus clear that:cralawlibrary
(1) Special appearance operates as an exception to the general rule on voluntary
appearance;
(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant
must be explicitly made, i.e., set forth in an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court,
especially in instances where a pleading or motion seeking affirmative relief is filed and
submitted to the court for resolution. (Emphases supplied) ???r?bl? ??r??l l?? l?br?r
In this case, the records show that the following statement appeared in respondents Motion
for Leave to File Answer:cralawlibrary
In spite of the defective service of summons, the defendant opted to file the instant Answer
with Counterclaim with Leave of Court, upon inquiring from the office of the clerk of court
of this Honorable Court and due to its notice of hearing on March 29, 2005 application for
TRO/Preliminary Mandatory Injunction was received on March 26, 2006. (Emphasis
supplied)37?r?l1
Furthermore, the Answer with Counterclaim filed by Hertz never raised the defense of
pari delicto, performance of its obligations and lack of cause of action.38 Finally, it even
asserted its own counterclaim against Optima.39?r?l1
Measured against the standards in Philippine Commercial International Bank, these actions
therefore rule that, by virtue of the voluntary appearance of respondent Hertz before the
MeTC, the trial court acquired jurisdiction over respondents.
II
The instant ejectment case is not barred by litis pendentia. Hertz contends that the instant
case is barred by litis pendentia because of the pendency of its Complaint for Specific
Performance against Optima before the RTC.
We disagree.
Litis pendentia requires the concurrence of the following elements:cralawlibrary
(1) Identity of parties, or at least their representation of the same interests in both actions;
(2) Identity of rights asserted and reliefs prayed for, the relief being founded on the same
facts; and
(3) Identity with respect to the two preceding particulars in the two cases, such that any
judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case.40?r?l1 ???r?bl? ??r??l l?? l?br?r compensation to Optima, since the former continued to occupy the leased premises even
Here, while there is identity of parties in both cases, we find that the rights asserted and the
reliefs prayed for under the Complaint for Specific Performance and those under the
present Unlawful Detainer Complaint are different. As aptly found by the trial
court:cralawlibrary
The Complaint for Specific Performance] seeks to compel plaintiff-appellee Optima to: (1)
renegotiate the contract of lease; (2) reconnect the utilities at the leased premises; and (3)
pay damages. On the other hand, the unlawful detainer case sought the ejectment of
defendant-appellant Hertz from the leased premises and to collect arrears in rentals and
utility bills.41?r?l1
As the rights asserted and the reliefs sought in the two cases are different, we find that the
pendency of the Complaint for Specific Performance is not a bar to the institution of the
present case for ejectment.
III
The eviction of respondent and the award of damages,
attorneys fees and costs were proper.
We find that the RTCs ruling upholding the ejectment of Hertz from the building premises
was proper. First, respondent failed to pay rental arrearages and utility bills to Optima; and,
second, the Contract of Lease expired without any request from Hertz for a renegotiation
thereof at least 90 days prior to its expiration.
On the first ground, the records show that Hertz failed to pay rental arrearages and utility
bills to Optima. Failure to pay timely rentals and utility charges is an event of default under
the Contract of Lease,42entitling the lessor to terminate the lease.
Moreover, the failure of Hertz to pay timely rentals and utility charges entitles the lessor to
judicially eject it under the provisions of the Civil Code.43?r?l1
On the second ground, the records likewise show that the lease had already expired on 28
February 2006 because of Hertzs failure to request a renegotiation at least 90 days prior to
the termination of the lease period.
The pertinent provision of the Contract of Lease reads:cralawlibrary
x x x. The lease can be renewed only by a new negotiation between the parties upon written
notice by the LESSEE to be given to the LESSOR at least 90 days prior to termination of the
above lease period.44?r?l1
As the lease was set to expire on 28 February 2006, Hertz had until 30 November 2005
within which to express its interest in negotiating an extension of the lease with Optima.
However, Hertz failed to communicate its intention to negotiate for an extension of the
lease within the time agreed upon by the parties. Thus, by its own provisions, the Contract
of Lease expired on 28 February 2006.
Under the Civil Code, the expiry of the period agreed upon by the parties is likewise a
ground for judicial ejectment.45?r?l1
As to the award of monthly compensation, we find that Hertz should pay adequate
after the expiration of the lease contract. As the lease price during the effectivity of the
lease contract was P54,200 per month, we find it to be a reasonable award.
Finally, we uphold the award of attorney's fees in the amount of P30,000 and judicial costs
in the light of Hertz's unjustifiable and unlawful retention of the leased premises, thus
forcing Optima to file the instant case in order to protect its rights and interest.
From the foregoing, we find that the MeTC committed no reversible error in its 22 May 2006
Decision, and that the RTC committed no reversible error either in affirming the MeTC's
Decision.
WHEREFORE, in view of the foregoing, the instant Rule 45 Petition for Review is GRANTED.
The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 99890 are
hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court, Branch 13 7,
Makati City in Civil Case No. 06-672 affirming in toto the Decision of the Metropolitan Trial
Court, Branch 64, Makati City in Civil Case No. 90842 is hereby REINSTATED and AFFIRMED.
SO ORDERED.
PERKIN ELMER SINGAPORE PTE LTD., G.R. No. 172242 respondent was likewise granted the right to purchase and sell the products of PEIA subject
Petitioner, Present: to the terms and conditions set forth in the Distribution Agreement. PEIA, on the other
hand, shall give respondent a commission for the sale of its products in the Philippines.
YNARES-SANTIAGO, J.,Chairperson,
AUSTRIA-MARTINEZ, Under the same Distribution Agreement, respondent shall order the products of
- versus - CHICO-NAZARIO, and PEIA, which it shall sell in the Philippines, either from PEIA itself or from Perkin-Elmer
NACHURA, JJ. Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation duly
organized and existing under Philippine laws, and involved in the business of wholesale
Promulgated: trading of all kinds of scientific, biotechnological, and analytical instruments and
DAKILA TRADING CORPORATION, appliances. PEIA allegedly owned 99% of the shares of PEIP.
Respondent. August 14, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x On 2 August 1997, however, PEIA unilaterally terminated the Distribution
Agreement, prompting respondent to file before the RTC of Mandaluyong City, Branch 212,
a Complaint[6] for Collection of Sum of Money and Damages with Prayer for Issuance of a
DECISION Writ of Attachment against PEIA and PEIP, docketed as Civil Case No. MC99-605.

CHICO-NAZARIO, J.:
The case before this Court is a Petition for Review[1] on Certiorari under Rule 45 of
the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the
Decision,[2] dated 4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which
affirmed the Orders, dated 4 November 2002[3] and 20 June 2003,[4] of the Mandaluyong
City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-605, which, in turn,
denied the Motion to Dismiss and subsequent Motion for Reconsideration of herein
petitioner Perkin Elmer Singapore Pte Ltd.
Petitioner is a corporation duly organized and existing under the laws
of Singapore. It is not considered as a foreign corporation doing business in
the Philippines. Herein respondent Dakila Trading Corporation is a corporation organized
and existing under Philippine laws, and engaged in the business of selling and leasing out
laboratory instrumentation and process control instrumentation, and trading of laboratory
chemicals and supplies.
The antecedents of the present case are as follows:
[5]
Respondent entered into a Distribution Agreement on 1 June 1990 with Perkin-
Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly organized and existing under the
laws of Singapore and engaged in the business of manufacturing, producing, selling or
distributing various laboratory/analytical instruments. By virtue of the said agreement, PEIA
appointed the respondent as the sole distributor of its products in the Philippines. The
The RTC issued an Order,[7] dated 26 March 1999, denying respondents prayer for
the issuance of a writ of attachment. The respondent moved for the reconsideration of the
said Order but it was denied in another Order, dated 11 January 2000.[8]
Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of
Court to Deputize Respondents General Manager, Richard A. Tee, to Serve Summons
Outside of the Philippines,[9] which the RTC granted in its Order, dated 27 April
2000.[10] Thus, an Alias Summons, dated 4 September 2000, was issued by the RTC to
PEIA.But the said Alias Summons was served on 28 September 2000 and received
by Perkinelmer Asia, a Singaporean based sole proprietorship, owned by the petitioner and,
allegedly, a separate and distinct entity from PEIA.
PEIP moved to dismiss[11] the Complaint filed by respondent on the ground that it
states no cause of action. Perkinelmer Asia, on the other hand, through its counsel, sent
letters, dated 12 October 2000[12] and 15 November 2000,[13] to the respondent and to the
RTC, respectively, to inform them of the wrongful service of summons upon Perkinelmer
Asia.
Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint,
together with the Amended Complaint claiming that PEIA had become a sole
proprietorship[14] owned by the petitioner, and subsequently changed its name to
Perkinelmer Asia. Being a sole proprietorship of the petitioner, a change in PEIAs name and
juridical status did not detract from the fact that all its due and outstanding obligations to
third parties were assumed by the petitioner. Hence, in its Amended
Complaint[15]respondent sought to change the name of PEIA to that of the petitioner. In an
Order, dated 24 July 2001,[16] the RTC admitted the Amended Complaint filed by the
respondent.Respondent then filed another Motion[17] for the Issuance of Summons and for
Leave of Court to Deputize Respondents General Manager, Richard A. Tee, to Serve
Summons Outside the Philippines. In another Order, dated 4 March 2002,[18] the RTC
deputized respondents General Manager to serve summons on petitioner in Singapore. The
RTC thus issued summons[19] to the petitioner. Acting on the said Order, respondents
General Manager went to Singapore and served summons on the petitioner.
Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to
Dismiss filed by PEIP, compelling the latter to file its Answer to the Amended Complaint.
Petitioner subsequently filed with the RTC a Special Appearance and Motion to
[20]
Dismiss respondents Amended Complaint on 30 May 2002 based on the following
grounds: (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) the
respondent failed to state a cause of action against the petitioner because it is not the real
party-in-interest; (3) even assuming arguendo that the respondent correctly filed the case
against the petitioner, the Distribution Agreement which was the basis of its claim grants
PEIA the right to terminate the contract at any time; and (4) the venue was improperly
laid. The RTC in its Order, dated 4 November 2002, denied petitioners Motion to Dismiss,
ratiocinating as follows:
Prescinding from the above arguments of both parties, the [RTC] is inclined
to DENY the Motion to Dismiss.
A careful scrutiny on (sic) the allegation in the (Amended) Complaint would
show that [herein respondent] alleges ownership by the [herein petitioner]
of shares of stocks in the [PEIP]. Such allegation of ownership of shares of
stocks by the [petitioner] would reveal that there is an allegation of
personal property in the Philippines. Shares of stocks represent personal
property of the shareholder. Thus, it follows that even though the Amended
Complaint is primarily for damages, it does relate to a property of the
[petitioner], to which the latter has a claim interest (sic), or an actual or
contingent lien, which will make it fall under one of the requisite (sic) for
extraterritorial service under Section 15, Rule 14, of the Rules of
Court. Thus, it could be gainfully said that the summons had been validly
served for [RTC] to acquire jurisdiction over the [petitioner].
The [petitioner] hinges its dismissal on the failure of the [respondent] to
state a cause of action. The [RTC] would like to emphasize that in a Motion
to Dismiss, it hypothetically admits the truth of the facts alleged in a
complaint.
When the ground for dismissal is that the complaint states no cause of
action, such fact can be determined only from the facts alleged in the
complaint x x x and from no other x x x and the Court cannot consider other
matters aliunde x x x. This implies that the issue must be passed upon on
the basis of the allegations and declare them to be false, otherwise it would
be a procedural error and a denial of due process to the [respondent] x x x.
The three (3) essential elements of a cause of action are the
following:
a) The plaintiffs legal rights;
b) A correlative obligation of the defendant;
c) The omission of the defendant in violation of the legal
rights.
A cursory reading of the Amended Complaint would reveal that all
of the essential elements of a cause of action are attendant in the Amended
Complaint.
As for the contention that venue was improperly laid, x x x, the [RTC] in its
ultimate desire that the ends of justice could be served in its fullest, cannot
rule that venue was improperly laid.
xxxx
The stipulation as to the venue of a prospective action does not preclude
the filing of the suit in the residence of the [respondent] under Section 2,
Rule 4, Rules of Court, especially where the venue stipulation was imposed
by the [petitioner] for its own benefits.
xxxx
The [RTC] further believes that it is imperative that in order to ferret out the
truth, a full-blown trial is necessary for parties to be able to prove or
disprove their allegations.[21]
 Petitioner moved for the reconsideration of the aforesaid Order but, it was denied
by the RTC in its Order, dated 20 June 2003.
Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997
Revised Rules of Civil Procedure with application for temporary restraining order and/or
preliminary injunction before the Court of Appeals alleging that the RTC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss the
Amended Complaint. The Court of Appeals never issued any temporary restraining order or
writ of injunction. On 4 April 2006, the Court of Appeals rendered a Decision affirming the
RTC Orders of 4 November 2002 and 20 June 2003.
This brings us to the present Petition before this Court wherein petitioner raised the
following issues.
I.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN NOT RULING THAT THE SERVICE OF SUMMONS ON PETITIONER
WAS DEFECTIVE AND THAT THE TRIAL COURT THUS FAILED TO ACQUIRE
JURISDICTION OVER THE PERSON OF THE PETITIONER.
II.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN RULING THAT THE SOLE ISSUE IN THE PETITION
FOR CERTIORARI FILED BEFORE IT IS THE QUESTION OF WHETHER THE TRIAL
COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER
THROUGH THE EXTRATERRITORIAL SERVICE OF SUMMONS.
A.
WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE
GRANTED THE PETITION FOR CERTIORARI AND REVERSED
THE RTC ORDERS ON THE GROUND THAT THE AMENDED
COMPLAINT FAILED TO STATE A CAUSE OF ACTION AGAINST
PETITIONER.
1. BASED ON THE ALLEGATIONS IN THE EX-
PARTE MOTION TO ADMIT AMENDED COMPLAINT,
AMENDED COMPLAINT, AND ALL DOCUMENTS ATTACHED
AND/OR RELATED THERETO, PETITIONER IS NOT THE REAL
PARTY-IN-INTEREST DEFENDANT IN THE CASE BELOW.
2. ASSUMING ARGUENDO THAT RESPONDENT
DAKILA FILED THIS CASE AGAINST THE CORRECT [PARTY],
INASMUCH AS THE DISTRIBUTION AGREEMENT DATED 1
JUNE 1990 GRANTS [PEIA] THE RIGHT TO TERMINATE THE
CONTRACT AT ANY TIME, RESPONDENT DAKILA FAILS TO
STATE A CAUSE OF ACTION IN THE CASE BELOW.
B.
WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE
GRANTED THE PETITION FOR CERTIORARI AND REVERSED
THE RTC ORDERS ON THE GROUND OF IMPROPER VENUE.
III.
WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY RESTRAINING
ORDER AND/OR WRIT OF INJUNCTION.
The foregoing issues raised by petitioner essentially requires this Court to make a
determination of the (1) proper service of summons and acquisition of jurisdiction by the
RTC over the person of the petitioner; (2) existence of a cause of action against petitioner in
respondents Amended Complaint; and (3) proper venue for respondents civil case against
petitioner.
Petitioner contends that Civil Case No. MC99-605 involves an action for collection of
sum of money and damages arising from the alleged breach of the Distribution
Agreement. The action is one in personam, or an action against a person based on his
personal liability; and for the court a quo to acquire jurisdiction over the person of the
petitioner, personal service of summons, and not extraterritorial service of summons, must
be made within the state even if the petitioner is a non-resident. Petitioner avers that
extraterritorial service of summons stated under Section 15, Rule 14 of the 1997 Revised
Rules of Civil Procedure, is only proper in in rem and quasi in rem cases; thus, resort to an
extraterritorial service of summons in the case at bar was erroneous. Petitioner asseverates
that the allegations in the respondents Amended Complaint that the petitioner has personal
properties within the Philippines does not make the present case one that relates to, or the
subject of which is, property within the Philippines warranting the extraterritorial service of
summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner
states that for an action to be considered as one that relates to, or the subject of which is,
property within the Philippines, the main subject matter of the action must be the property
within the Philippines itself, and such was not the situation in this case. Likewise, the prayer
in respondents Amended Complaint for the issuance of a writ of attachment over the
personal property of PEIP, which is 99% owned by petitioner (as the supposed successor of
PEIA), did not convert the action from one in personam to one that is quasi in rem. Also, the
petitioner points out that since the respondents prayer for the issuance of a writ of
attachment was denied by the RTC in its Order, dated 26 March 1999, then the nature of
Civil Case No. MC99-605 remains in personam, contrary to the ruling of the Court of Appeals
that by the attachment of the petitioners interest in PEIP the action in personam was
converted to an action quasi in rem.Resultantly, the extraterritorial service of summons on
the petitioner was not validly effected, and did not give the RTC jurisdiction over the
petitioner.
Petitioner further argues that the appellate court should have granted its Petition
for Certiorari on the ground that the RTC committed grave abuse of discretion amounting to
lack or excess of jurisdiction in refusing to dismiss respondents Amended Complaint for
failure to state a cause of action against petitioner which was not the real party-in-interest
in Civil Case No. MC99-605. Petitioner claims that it had never used the name PEIA as its
corporate name, and neither did it change its name from that of PEIA.Petitioner stresses
that PEIA is an entirely different corporate entity that is not connected in whatever manner
to the petitioner. Even assuming arguendo that petitioner is the real party-in-interest in Civil
Case No. MC99-605 or that petitioner and PEIA are one and the same entity, petitioner still
avows that the respondent failed to state a cause of action against it because the
Distribution Agreement expressly grants PEIA the right to terminate the said contract at any
time.
Lastly, it is the contention of the petitioner that the appellate court should have
granted its Petition for Certiorari because the RTC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case No. MC99-605 for
having been filed in an improper venue. Petitioner asserts that in the Distribution
Agreement entered into between the respondent and PEIA, both had mutually agreed to
the exclusive jurisdiction of the courts of Singapore or of the Philippines as elected by
PEIA. Absent any waiver by PEIA of its right to choose the venue of the dispute, the
Complaint filed by the respondent before the RTC in the Philippines should have been
dismissed on the ground of improper venue.
The Petition is meritorious.
Jurisdiction is the power with which courts are invested for administering justice;
that is, for hearing and deciding cases. In order for the court to have authority to dispose of
the case on the merits, it must acquire jurisdiction over the subject matter and the
parties.[22]
Jurisdiction of the court over the subject matter is conferred only by the
Constitution or by law. It is determinable on the basis of allegations in the complaint.[23]
Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while
jurisdiction over the defendants in a civil case is acquired either through the service of
summons upon them in the manner required by law or through their voluntary appearance
in court and their submission to its authority. If the defendants have not been summoned,
unless they voluntarily appear in court, the court acquires no jurisdiction over their persons
and a judgment rendered against them is null and void. To be bound by a decision, a party
should first be subjected to the courts jurisdiction.[24]
Thus, one of the modes of acquiring jurisdiction over the person of the defendant or
respondent in a civil case is through service of summons. It is intended to give notice to the
defendant or respondent that a civil action has been commenced against him. The
defendant or respondent is thus put on guard as to the demands of the plaintiff or the
petitioner.[25]
The proper service of summons differs depending on the nature of the civil case
instituted by the plaintiff or petitioner: whether it is in personam, in rem, or quasi in
rem.Actions in personam, are those actions brought against a person on the basis of his
personal liability; actions in rem are actions against the thing itself instead of against the
person; and actions are quasi in rem, where an individual is named as defendant and the
purpose of the proceeding is to subject his or her interest in a property to the obligation or
loan burdening the property.[26]
Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are
only four instances wherein a defendant who is a non-resident and is not found in the
country may be served with summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiff; (2) when the action relates to, or the subject of
which is property, within the Philippines, in which the defendant claims a lien or an interest,
actual or contingent; (3) when the relief demanded in such action consists, wholly or in part,
in excluding the defendant from any interest in property located in the Philippines; and (4)
when the defendant non-residents property has been attached within the Philippines. In
these instances, service of summons may be effected by (a) personal service out of the
country, with leave of court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.[27]
Undoubtedly, extraterritorial service of summons applies only where the action is in
rem or quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine courts
already have jurisdiction to hear and decide the case because, in actions in rem and quasi in
rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction
on the court, provided that the court acquires jurisdiction over the res.[28] Thus, in such
instance, extraterritorial service of summons can be made upon the defendant. The said
extraterritorial service of summons is not for the purpose of vesting the court with
jurisdiction, but for complying with the requirements of fair play or due process, so that the
defendant will be informed of the pendency of the action against him and the possibility
that property in the Philippines belonging to him or in which he has an interest may be
subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his
interest if he is so minded.[29] On the other hand, when the defendant or respondent does
not reside and is not found in the Philippines,[30] and the action involved is in personam,
Philippine courts cannot try any case against him because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in court.[31]
In the case at bar, this Court sustains the contention of the petitioner that there can
never be a valid extraterritorial service of summons upon it, because the case before the
court a quo involving collection of a sum of money and damages is, indeed, an action in
personam, as it deals with the personal liability of the petitioner to the respondent by
reason of the alleged unilateral termination by the former of the Distribution
Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004, upheld the nature
of the instant case as an action in personam. In the said Decision the appellate court ruled
that:
In the instant petition, [respondents] cause of action in Civil Case
No. MC99-605 is anchored on the claim that petitioner unilaterally
terminated the Distribution Agreement. Thus, [respondent] prays in its
[C]omplaint that Upon the filing of the Complaint, issue an Order fixing the
amount of the bond and issue a writ of attachment requiring the sheriff to
attach the properties of [Perkin-Elmer Philippines], which are not exempt
from execution, and as much as may be sufficient to satisfy [respondents]
demands.
The action instituted by [respondent] affects the parties alone, not
the whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded.
xxxx
The objective sought in [respondents] [C]omplaint was to establish
a claim against petitioner for its alleged unilateral termination of
[D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-605 is an
action in personam because it is an action against persons, namely, herein
petitioner, on the basis of its personal liability. As such, personal service of
summons upon the [petitioner] is essential in order for the court to
acquire of (sic) jurisdiction over [its person].[32] (Emphasis supplied.)
Thus, being an action in personam, personal service of summons within the Philippines is
necessary in order for the RTC to validly acquire jurisdiction over the person of the
petitioner, and this is not possible in the present case because the petitioner is a non-
resident and is not found within the Philippines. Respondents allegation in its Amended
Complaint that petitioner had personal property within the Philippines in the form of shares
of stock in PEIP did not make Civil Case No. MC99-605 fall under any of the four instances
mentioned in Section 15, Rule 14 of the Rules of Court, as to convert the action in
personam to an action in rem or quasi in rem and, subsequently, make the extraterritorial
service of summons upon the petitioner valid.
It is incorrect for the RTC to have ruled that the allegations made by the respondent
in its Amended Complaint, which is primarily for collection of a sum of money and damages,
that the petitioner owns shares of stock within the Philippines to which the petitioner claims
interest, or an actual or contingent lien, would make the case fall under one of the aforesaid
instances wherein extraterritorial service of summons under Section 15, Rule 14 of the 1997
Revised Rules of Civil Procedure, would be valid. The RTC in arriving at such conclusions
relied on the second instance, mentioned under Section 15, Rule 14 of the 1997 Revised
Rules of Civil Procedure (i.e., when the action relates to, or the subject of which is property,
within the Philippines, in which the defendant claims a lien or interest, actual or contingent),
where extraterritorial service of summons can be properly made. However, the aforesaid
second instance has no application in the case before this Court. Primarily, the Amended
Complaint filed by the respondent against the petitioner was for the collection of sum of
money and damages. The said case was neither related nor connected to any property of
the petitioner to which it claims a lien or interest. The action for collection of a sum of
money and damages was purely based on the personal liability of the petitioner towards the
respondent. The petitioner is correct in saying that mere allegations of personal property
within the Philippines does not necessarily make the action as one that relates to or the
subject of which is, property within the Philippines as to warrant the extraterritorial service
of summons. For the action to be considered one that relates to, or the subject of which, is
the property within the Philippines, the main subject matter of the action must be the
property itself of the petitioner in the Philippines. By analogy, an action involving title to or
possession of real or personal property -- such as the foreclosure of real estate or chattel
mortgage where the mortgagor does not reside or is not found in the Philippines -- can be
considered as an action which relates to, or the subject of which is, property within the
Philippines, in which the defendant claims a lien or interest, actual or contingent; and in
such instance, judgment will be limited to the res.[33]
Moreover, the allegations made by the respondent that the petitioner has property
within the Philippines were in support of its application for the issuance of a writ of
attachment, which was denied by the RTC. Hence, it is clear from the foregoing that the
Complaint filed by the respondent against the petitioner does not really relate to, or the
subject of which is, property within the Philippines of the petitioner.
This Court also finds error in the Decision of the Court of Appeals. It is provided for
in the said Decision, thus:
However, let it be emphasized that in the [C]omplaint filed before
the trial court, [respondent] prayed that Upon the filing of the Complaint,
issue an Order fixing the amount of the bond and issue a writ of attachment
requiring the sheriff to attach the properties of [Perkin-Elmer Philippines],
which are not exempt from execution, and as much as may be sufficient to
satisfy [respondents] demands.
In other words, although the [C]omplaint before the trial court does
not involve the personal status of the [respondent], nevertheless, the case
involves property within the Philippines in which the [petitioner] has or
claim an interest, or which the [respondent] has attached, which is one of
the instances where extraterritorial service of summons is proper.
xxxx
Hence, it is submitted that one of the instances when exterritorial
service of summons under Section 15, Rule 14 of the Rules of Court is
proper may be considered to have been met.This is because the [C]omplaint
for collection of sum of money which is an action in personam was
converted into an action quasi in rem by the attachment of [petitioners]
interest in [Perkin-Elmer Philippines].[34] (Emphasis supplied.)
Respondents allegation in its Amended Complaint that petitioner had personal
property within the Philippines in the form of shares of stock in PEIP does not convert Civil
Case No. MC99-605 from an action in personam to one quasi in rem, so as to qualify said
case under the fourth instance mentioned in Section 15, Rule 14 of the 1997 Revised Rules
of Civil Procedure (i.e., when the non-resident defendants property has been attached
within the Philippines), wherein extraterritorial service of summons upon the petitioner
would have been valid. It is worthy to note that what is required under the aforesaid
provision of the Revised Rules of Civil Procedure is not a mere allegation of the existence of
personal property belonging to the non-resident defendant within the Philippines but, more
precisely, that the non-resident defendants personal property located within the
Philippines must have been actually attached. This Court in the case of Venturanza v. Court
of Appeals[35] ruled that when the attachment was void from the beginning, the action in
personam which required personal service of summons was never converted into an
action in rem where service by publication would have been valid.Hence, the appellate court
erred in declaring that the present case, which is an action in personam, was converted to
an action quasi in rem because of respondents allegations in its Amended Complaint that
petitioner had personal property within the Philippines.
Glaringly, respondents prayer in its Amended Complaint for the issuance of a writ of
attachment over petitioners purported shares of stock in PEIP located within
the Philippines was denied by the court a quo in its Order dated 26 March
1999. Respondents Motion for Reconsideration of the said Order was likewise denied by the
RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioners alleged personal
property within the Philippines, in the form of shares of stock in PEIP, had not been
attached; hence, Civil Case No. MC99-605, for collection of sum of money and damages,
remains an action in personam. As a result, the extraterritorial service of summons was not
validly effected by the RTC against the petitioner, and the RTC thus failed to acquire
jurisdiction over the person of the petitioner. The RTC is therefore bereft of any authority to
act upon the Complaint filed before it by the respondent insofar as the petitioner is
concerned.
If there was no valid summons served upon petitioner, could RTC have acquired
jurisdiction over the person of the petitioner by the latters voluntary appearance? As a rule,
even if the service of summons upon the defendant or respondent in a civil case is defective,
the court can still acquire jurisdiction over his person when he voluntary appears in court or
submits himself to its authority. Nonetheless, voluntary appearance, as a mode of acquiring
jurisdiction over the person of the defendant, is likewise inapplicable in this case.
It is settled that a party who makes a special appearance in court for the purpose of
challenging the jurisdiction of said court, based on the invalidity of the service of summons,
cannot be considered to have voluntarily submitted himself to the jurisdiction of the
court.[36] In the present case, petitioner has been consistent in all its pleadings in assailing
the service of summons upon it and the jurisdiction of the RTC over its person. Thus, the
petitioner cannot be declared in estoppel when it filed an Answer ad cautelamwith
compulsory counterclaim before the RTC while the instant Petition was still pending before
this Court. The petitioner was in a situation wherein it had no other choice but to file an
Answer; otherwise, the RTC would have already declared that petitioner had waived its right
to file responsive pleadings.[37] Neither can the compulsory counterclaim contained in
petitioners Answer ad cautelam be considered as voluntary appearance of petitioner before
the RTC. Petitioner seeks to recover damages and attorneys fees as a consequence of
the unfounded suit filed by respondent against it. Thus, petitioners compulsory
counterclaim is only consistent with its position that the respondent wrongfully filed a case
against it and the RTC erroneously exercised jurisdiction over its person.
Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the
RTC over respondents complaint and over petitioners counterclaim -- while it may have no
jurisdiction over the former, it may exercise jurisdiction over the latter. The compulsory
counterclaim attached to petitioners Answer ad cautelam can be treated as a separate
action, wherein petitioner is the plaintiff while respondent is the defendant.[38] Petitioner
could have instituted a separate action for the very same claims but, for the sake of
expediency and to avoid multiplicity of suits, it chose to demand the same in Civil Case No.
MC99-605.[39] Jurisdiction of the RTC over the subject matter and the parties in the
counterclaim must thus be determined separately and independently from the jurisdiction
of the same court in the same case over the subject matter and the parties in respondents
complaint.
Moreover, even though the petitioner raised other grounds in its Motion to Dismiss
aside from lack of jurisdiction over its person, the same is not tantamount to its voluntary
appearance or submission to the authority of the court a quo. While in De Midgely v.
Ferandos,[40] it was held that, in a Motion to Dismiss, the allegation of grounds other than
lack of jurisdiction over the person of the defendant, including a prayer "for such other
reliefs as" may be deemed "appropriate and proper" amounted to voluntary appearance,
such ruling must be deemed superseded by the declaration of this Court in La Naval Drug
Corporation v. Court of Appeals[41] that estoppel by jurisdiction must be unequivocal and
intentional. It would be absurd to hold that petitioner unequivocally and intentionally
submitted itself to the jurisdiction of the court by seeking other reliefs to which it might be
entitled when the only relief that it could properly ask from the trial court is the dismissal of
the complaint against it.[42] Thus, the allegation of grounds other than lack of jurisdiction
with a prayer for such other reliefs as may be deemed appropriate and proper cannot be
considered as unequivocal and intentional estoppel. Most telling is Section 20, Rule 14 of
the Rules of Court, which expressly provides:
SEC. 20. Voluntary appearance. - The defendants voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds aside from
lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance.[43] (Emphasis supplied.)
In sum, this Court finds that the petitioner did not submit itself voluntarily to the
authority of the court a quo; and in the absence of valid service of summons, the RTC utterly
failed to acquire jurisdiction over the person of the petitioner.
Anent the existence of a cause of action against petitioner and the proper venue of
the case, this Court upholds the findings of the RTC on these issues.
Dismissal of a Complaint for failure to state a cause of action is provided for by the
Rules of Court.[44] When a Motion to Dismiss is grounded on the failure to state a cause of
action, a ruling thereon should be based only on the facts alleged in the complaint. The
court must pass upon this issue based solely on such allegations, assuming them to be
true. For it to do otherwise would be a procedural error and a denial of plaintiffs right to
due process.[45] While, truly, there are well-recognized exceptions[46] to the rule that the
allegations are hypothetically admitted as true and inquiry is confined to the face of the
complaint,[47] none of the exceptions apply in this case. Hence, the general rule applies. The
defense of the petitioner that it is not the real party-in-interest is evidentiary in nature
which must be proven in trial. The appellate court, then, cannot be faulted for not granting
petitioners Motion to Dismiss on the ground of failure to state a cause of action.
In the same way, the appellate court did not err in denying petitioners Motion to
Dismiss Civil Case No. MC99-605 on the ground of improper venue. In arriving at such
conclusion, this Court quotes with approval the following ratiocination of the RTC:
As for the contention that venue was improperly laid, x x x, the [trial
court] in its ultimate desire that the ends of justice could be served in its
fullest, cannot rule that venue was improperly laid.

xxxx
The stipulation as to the venue of a prospective action does not preclude
the filing of the suit in the residence of the [respondent] under Section 2,
Rule 4, Rules of Court, especially where the venue stipulation was
imposed by the [petitioner] for its own benefits.[48] (Emphasis supplied.)
Despite the venue stipulation found in the Distribution Agreement stipulating that
the exclusive jurisdiction over disputes arising from the same shall lie in the courts of
Singapore or of the Territory (referring to the Philippines), whichever is elected by PEIA (or
petitioner, as PEIAs alleged successor), the RTC of the Philippines cannot be considered as
an improper venue. Truly, the venue stipulation used the word exclusive, however, a closer
look on the Distribution Agreement would reveal that the venue stipulation was really in the
alternative i.e., courts of Singapore or of the Territory, meaning, the Philippines; thus, the
court a quo is not an improper venue for the present case.
Nonetheless, it bears to emphasize that despite our findings that based on the allegations in
respondents Complaint in Civil Case No. MC99-605, respondent appears to have a cause of
action against the petitioner and that the RTC is the proper venue for the said case, Civil
Case No. MC99-605 is still dismissible, for the RTC never acquired jurisdiction over the
person of the petitioner. The extraterritorial service of summons upon the petitioner
produces no effect because it can only be done if the action is in rem or quasi in rem. The
case for collection of sum of money and damages filed by the respondent against the
petitioner being an action in personam, then personal service of summons upon the
petitioner within the Philippines is essential for the RTC to validly acquire jurisdiction over
the person of the petitioner. Having failed to do so, the RTC can never subject petitioner to
its jurisdiction. The mere allegation made by the respondent that the petitioner had shares
of stock within the Philippines was not enough to convert the action from one in
personam to one that was quasi in rem, for petitioners purported personal property was
never attached; thus, the extraterritorial service of summons upon the petitioner remains
invalid. In light of the foregoing findings, this Court concludes that the RTC has no power to
hear and decide the case against the petitioner, because the extraterritorial service of
summons was not validly effected upon the petitioner and the RTC never acquired
jurisdiction over its person.
Finally, as regards the petitioners counterclaim, which is purely for damages and attorneys
fees by reason of the unfounded suit filed by the respondent against it, it has long been
settled that the same truly falls under the classification of compulsory counterclaim and it
must be pleaded in the same action, otherwise, it is barred.[49] In the case at bar, this Court
orders the dismissal of the Complaint filed by the respondent against the petitioner
because the court a quo failed to acquire jurisdiction over the person of the latter.Since
the Complaint of the respondent was dismissed, what will happen then to the counterclaim
of the petitioner? Does the dismissal of the complaint carry with it the dismissal of the
counterclaim?
In the cases of Metal Engineering Resources Corp. v. Court of
Appeals,[50] International Container Terminal Services, Inc. v. Court of Appeals,[51] and BA
Finance Corporation v. Co.,[52] the Court ruled that if the court does not have jurisdiction to
entertain the main action of the case and dismisses the same, then the compulsory
counterclaim, being ancillary to the principal controversy, must likewise be dismissed since
no jurisdiction remained for any grant of relief under the counterclaim.[53] If we follow the
aforesaid pronouncement of the Court in the cases mentioned above, the counterclaim of
the herein petitioner being compulsory in nature must also be dismissed together with the
Complaint. However, in the case of Pinga vs. Heirs of German Santiago,[54] the Court
explicitly expressed that:
Similarly, Justice Feria notes that the present rule reaffirms the right
of the defendant to move for the dismissal of the complaint and to
prosecute his counterclaim, as stated in the separate opinion [of Justice
Regalado in BA Finance]. Retired Court of Appeals Justice Hererra
pronounces that the amendment to Section 3, Rule 17 [of the 1997 Revised
Rules of Civil Procedure] settles that nagging question whether the
dismissal of the complaint carries with it the dismissal of the counterclaim,
and opines that by reason of the amendments, the rulings in Metals
Engineering, International Container, and BA Finance may be deemed
abandoned. x x x.
x x x, when the Court promulgated the 1997 Rules of Civil
Procedure, including the amended Rule 17, those previous jural doctrines
that were inconsistent with the new rules incorporated in the 1997 Rules of
Civil Procedure were implicitly abandoned insofar as incidents arising after
the effectivity of the new procedural rules on 1 July 1997. BA Finance, or
even the doctrine that a counterclaim may be necessarily dismissed along
with the complaint, clearly conflicts with the 1997 Rules of Civil
Procedure. The abandonment of BA Finance as doctrine extends as far back
as 1997, when the Court adopted the new Rules of Civil Procedure. If, since
then, abandonment has not been affirmed in jurisprudence, it is only
because no proper case has arisen that would warrant express confirmation
of the new rule. That opportunity is here and now, and we thus rule that
 the dismissal of a complaint due to fault of the plaintiff is without
prejudice to the right of the defendant to prosecute any pending
counterclaims of whatever nature in the same or separate action. We
confirm that BA Finance and all previous rulings of the Court that are
inconsistent with this present holding are now abandoned.[55] [Emphasis
supplied].
It is true that the aforesaid declaration of the Court refers to instances covered by
Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure[56] on dismissal of the
complaint due to the fault of the plaintiff. Nonetheless, it does not also preclude the
application of the same to the instant case just because the dismissal of respondents
Complaint was upon the instance of the petitioner who correctly argued lack of jurisdiction
over its person.
Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the
situation wherein the very filing of the complaint by the plaintiff against the defendant
caused the violation of the latters rights. As to whether the dismissal of such a complaint
should also include the dismissal of the counterclaim, the Court acknowledged that said
matter is still debatable, viz:
Whatever the nature of the counterclaim, it bears the same integral
characteristics as a complaint; namely a cause (or causes) of action
constituting an act or omission by which a party violates the right of
another. The main difference lies in that the cause of action in the
counterclaim is maintained by the defendant against the plaintiff, while the
converse holds true with the complaint. Yet, as with a complaint, a
counterclaim without a cause of action cannot survive.
x x x if the dismissal of the complaint somehow eliminates the
cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that
hardly is the case, especially as a general rule.More often than not, the
allegations that form the counterclaim are rooted in an act or omission of
the plaintiff other than the plaintiffs very act of filing the
complaint. Moreover, such acts or omissions imputed to the plaintiff are
often claimed to have occurred prior to the filing of the complaint itself. The
only apparent exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the complaint
precisely causes the violation of the defendants rights. Yet even in such an
instance, it remains debatable whether the dismissal or withdrawal of the
complaint is sufficient to obviate the pending cause of action maintained
by the defendant against the plaintiff.[57]
Based on the aforequoted ruling of the Court, if the dismissal of the complaint
somehow eliminates the cause of the counterclaim, then the counterclaim cannot
survive.Conversely, if the counterclaim itself states sufficient cause of action then
it should stand independently of and survive the dismissal of the complaint. Now, having
been directly confronted with the problem of whether the compulsory counterclaim by
reason of the unfounded suit may prosper even if the main complaint had been
dismissed, we rule in the affirmative.
It bears to emphasize that petitioners counterclaim against respondent is for
damages and attorneys fees arising from the unfounded suit. While respondents Complaint
against petitioner is already dismissed, petitioner may have very well already incurred
damages and litigation expenses such as attorneys fees since it was forced to engage legal
representation in the Philippines to protect its rights and to assert lack of jurisdiction of the
courts over its person by virtue of the improper service of summons upon it. Hence, the
cause of action of petitioners counterclaim is not eliminated by the mere dismissal of
respondents complaint.
It may also do well to remember that it is this Court which mandated that claims for
damages and attorneys fees based on unfounded suit constitute compulsory
counterclaim which must be pleaded in the same action or, otherwise, it shall be barred. It
will then be iniquitous and the height of injustice to require the petitioner to make the
counterclaim in the present action, under threat of losing his right to claim the same ever
again in any other court, yet make his right totally dependent on the fate of the
respondents complaint.
If indeed the Court dismisses petitioners counterclaim solely on the basis of the
dismissal of respondents Complaint, then what remedy is left for the petitioner? It can be
said that he can still file a separate action to recover the damages and attorneys fees based
on the unfounded suit for he cannot be barred from doing so since he did file the
compulsory counterclaim in the present action, only that it was dismissed when
respondents Complaint was dismissed. However, this reasoning is highly flawed and
irrational considering that petitioner, already burdened by the damages and attorneys fees
it may have incurred in the present case, must again incur more damages and attorneys fees
in pursuing a separate action, when, in the first place, it should not have been involved in
any case at all.
 Since petitioners counterclaim is compulsory in nature and its cause of action
survives that of the dismissal of respondents complaint, then it should be resolved based on
its own merits and evidentiary support.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The

Decision of the Court of Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the
Orders, dated 4 November 2002 and 20 June 2003, of
the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-605, is
hereby REVERSED AND SET ASIDE. Respondents Amended Complaint in Civil Case No.
MC99-605 as against the petitioner is hereby ordered DISMISSED, and all the proceedings
against petitioner in the court a quo by virtue thereof are hereby DECLARED NULL AND
VOID. The Regional Trial Court of Mandaluyong City, Branch 212, is DIRECTED to proceed
without further delay with the resolution of respondents Complaint in Civil Case No. MC99-
605 as to defendant PEIP, as well as petitioners counterclaim. No costs.
SO ORDERED.