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G.R. No.

113074 January 22, 1997 the ASSIGNOR is hereby named and constituted as
ASSIGNEE's Attorney-In-Fact, but any such suit without
ASSIGNEE's consent will exclusively be the
ALFRED HAHN, petitioner,
responsibility and for the account of the ASSIGNOR,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE
AKTIENGSELLSCHAFT (BMW), respondents. 2. That the ASSIGNOR and the ASSIGNEE shall
continue business relations as has been usual in the
past without a formal contract, and for that purpose, the
dealership of ASSIGNOR shall cover the ASSIGNEE's
complete production program with the only limitation
MENDOZA, J.: that, for the present, in view of ASSIGNEE's limited
production, the latter shall not be able to supply
automobiles to ASSIGNOR.
This is a petition for review of the decision1 of the Court of
Appeals dismissing a complaint for specific performance which
petitioner had filed against private respondent on the ground that Per the agreement, the parties "continue[d] business relations as
the Regional Trial Court of Quezon City did not acquire has been usual in the past without a formal contract." But on
jurisdiction over private respondent, a nonresident foreign February 16, 1993, in a meeting with a BMW representative and
corporation, and of the appellate court's order denying petitioner's the president of Columbia Motors Corporation (CMC), Jose
motion for reconsideration. Alvarez, petitioner was informed that BMW was arranging to grant
the exclusive dealership of BMW cars and products to CMC,
which had expressed interest in acquiring the same. On February
The following are the facts: 24, 1993, petitioner received confirmation of the information from
BMW which, in a letter, expressed dissatisfaction with various
Petitioner Alfred Hahn is a Filipino citizen doing business under aspects of petitioner's business, mentioning among other things,
the name and style "Hahn-Manila." On the other hand, private decline in sales, deteriorating services, and inadequate showroom
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) and warehouse facilities, and petitioner's alleged failure to comply
is a nonresident foreign corporation existing under the laws of the with the standards for an exclusive BMW dealer.2 Nonetheless,
former Federal Republic of Germany, with principal office at BMW expressed willingness to continue business relations with
Munich, Germany. the petitioner on the basis of a "standard BMW importer" contract,
otherwise, it said, if this was not acceptable to petitioner, BMW
would have no alternative but to terminate petitioner's exclusive
On March 7, 1967, petitioner executed in favor of private dealership effective June 30, 1993.
respondent a "Deed of Assignment with Special Power of
Attorney," which reads in full as follows:
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment. 3 Hahn
WHEREAS, the ASSIGNOR is the present owner and insisted that as long as the assignment of its trademark and
holder of the BMW trademark and device in the device subsisted, he remained BMW's exclusive dealer in the
Philippines which ASSIGNOR uses and has been using Philippines because the assignment was made in consideration of
on the products manufactured by ASSIGNEE, and for the exclusive dealership. In the same letter petitioner explained
which ASSIGNOR is the authorized exclusive Dealer of that the decline in sales was due to lower prices offered for BMW
the ASSIGNEE in the Philippines, the same being cars in the United States and the fact that few customers returned
evidenced by certificate of registration issued by the for repairs and servicing because of the durability of BMW parts
Director of Patents on 12 December 1963 and is and the efficiency of petitioner's service.
referred to as Trademark No. 10625;

Because of Hahn's insistence on the former business relation,


WHEREAS, the ASSIGNOR has agreed to transfer and BMW withdrew on March 26, 1993 its offer of a "standard importer
consequently record said transfer of the said BMW contract" and terminated the exclusive dealer relationship
trademark and device in favor of the ASSIGNEE herein effective June 30, 1993. 4 At a conference of BMW Regional
with the Philippines Patent Office; Importers held on April 26, 1993 in Singapore, Hahn was
surprised to find Alvarez among those invited from the Asian
NOW THEREFORE, in view of the foregoing and in region. On April 29, 1993, BMW proposed that Hahn and CMC
consideration of the stipulations hereunder stated, the jointly import and distribute BMW cars and parts.
ASSIGNOR hereby affirms the said assignment and
transfer in favor of the ASSIGNEE under the following Hahn found the proposal unacceptable. On May 14, 1993, he filed
terms and conditions: a complaint for specific performance and damages against BMW
to compel it to continue the exclusive dealership. Later he filed an
1. The ASSIGNEE shall take appropriate steps against amended complaint to include an application for temporary
any user other than ASSIGNOR or infringer of the BMW restraining order and for writs of preliminary, mandatory and
trademark in the Philippines; for such purpose, the prohibitory injunction to enjoin BMW from terminating his
ASSIGNOR shall inform the ASSIGNEE immediately of exclusive dealership. Hahn's amended complaint alleged in
any such use or infringement of the said trademark pertinent parts:
which comes to his knowledge and upon such
information the ASSIGNOR shall automatically act as 2. Defendant [BMW] is a foreign corporation doing
Attorney-In-Fact of the ASSIGNEE for such case, with business in the Philippines with principal offices at
full power, authority and responsibility to prosecute Munich, Germany. It may be served with summons and
unilaterally or in concert with ASSIGNEE, any such other court processes through the Secretary of the
infringer of the subject mark and for purposes hereof
Department of Trade and Industry of the Philippines. . . On July 13, 1993, following the posting of the required bond, a
. writ of preliminary injunction was issued.

xxx xxx xxx On July 1, 1993, BMW moved to dismiss the case, contending
that the trial court did not acquire jurisdiction over it through the
service of summons on the Department of Trade and Industry,
5. On March 7, 1967, Plaintiff executed in favor of
because it (BMW) was a foreign corporation and it was not doing
defendant BMW a Deed of Assignment with Special
business in the Philippines. It contended that the execution of the
Power of Attorney covering the trademark and in
Deed of Assignment was an isolated transaction; that Hahn was
consideration thereof, under its first whereas clause,
not its agent because the latter undertook to assemble and sell
Plaintiff was duly acknowledged as the "exclusive
BMW cars and products without the participation of BMW and
Dealer of the Assignee in the Philippines. . . .
sold other products; and that Hahn was an indentor or middleman
transacting business in his own name and for his own account.
xxx xxx xxx
Petitioner Alfred Hahn opposed the motion. He argued that BMW
8. From the time the trademark "BMW & DEVICE" was was doing business in the Philippines through him as its agent, as
first used by the Plaintiff in the Philippines up to the shown by the fact that BMW invoices and order forms were used
present, Plaintiff, through its firm name "HAHN to document his transactions; that he gave warranties as
MANILA" and without any monetary contribution from exclusive BMW dealer; that BMW officials periodically inspected
defendant BMW, established BMW's goodwill and standards of service rendered by him; and that he was described
market presence in the Philippines. Pursuant thereto, in service booklets and international publications of BMW as a
Plaintiff has invested a lot of money and resources in "BMW Importer" or "BMW Trading Company" in the Philippines.
order to single-handedly compete against other
motorcycle and car companies. . . . Moreover, Plaintiff
The trial court6 deferred resolution of the motion to dismiss until
has built buildings and other infrastructures such as
after trial on the merits for the reason that the grounds advanced
service centers and showrooms to maintain and
by BMW in its motion did not seem to be indubitable.
promote the car and products of defendant BMW.

Without seeking reconsideration of the aforementioned order,


xxx xxx xxx
BMW filed a petition for certiorari with the Court of Appeals
alleging that:
10. In a letter dated February 24, 1993, defendant
BMW advised Plaintiff that it was willing to maintain with
I. THE RESPONDENT JUDGE ACTED WITH UNDUE
Plaintiff a relationship but only "on the basis of a
HASTE OR OTHERWISE INJUDICIOUSLY IN
standard BMW importer contract as adjusted to reflect
PROCEEDINGS LEADING TOWARD THE ISSUANCE
the particular situation in the Philippines" subject to
OF THE WRIT OF PRELIMINARY INJUNCTION, AND
certain conditions, otherwise, defendant BMW would
IN PRESCRIBING THE TERMS FOR THE ISSUANCE
terminate Plaintiffs exclusive dealership and any
THEREOF.
relationship for cause effective June 30, 1993. . . .

II. THE RESPONDENT JUDGE PATENTLY ERRED IN


xxx xxx xxx
DEFERRING RESOLUTION OF THE MOTION TO
DISMISS ON THE GROUND OF LACK OF
15. The actuations of defendant BMW are in breach of JURISDICTION, AND THEREBY FAILING TO
the assignment agreement between itself and plaintiff IMMEDIATELY DISMISS THE CASE A QUO.
since the consideration for the assignment of the BMW
trademark is the continuance of the exclusive
BMW asked for the immediate issuance of a temporary
dealership agreement. It thus, follows that the exclusive
restraining order and, after hearing, for a writ of preliminary
dealership should continue for so long as defendant
injunction, to enjoin the trial court from proceeding further in Civil
BMW enjoys the use and ownership of the trademark
Case No. Q-93-15933. Private respondent pointed out that,
assigned to it by Plaintiff.
unless the trial court's order was set aside, it would be forced to
submit to the jurisdiction of the court by filing its answer or to
The case was docketed as Civil Case No. Q-93-15933 and raffled accept judgment in default, when the very question was whether
to Branch 104 of the Quezon City Regional Trial Court, which on the court had jurisdiction over it.
June 14, 1993 issued a temporary restraining order. Summons
and copies of the complaint and amended complaint were
The Court of Appeals enjoined the trial court from hearing
thereafter served on the private respondent through the
petitioner's complaint. On December 20, 1993, it rendered
Department of Trade and Industry, pursuant to Rule 14, §14 of
judgment finding the trial court guilty of grave abuse of discretion
the Rules of Court. The order, summons and copies of the
in deferring resolution of the motion to dismiss. It stated:
complaint and amended complaint were later sent by the DTI to
BMW via registered mail on June 15, 19935 and received by the
latter on June 24, 1993. Going by the pleadings already filed with the
respondent court before it came out with its questioned
order of July 26, 1993, we rule and so hold that
On June 17, 1993, without proof of service on BMW, the hearing
petitioner's (BMW) motion to dismiss could be resolved
on the application for the writ of preliminary injunction
then and there, and that the respondent judge's
proceeded ex parte, with petitioner Hahn testifying. On June 30,
deferment of his action thereon until after trial on the
1993, the trial court issued an order granting the writ of
preliminary injunction upon the filing of a bond of P100,000.00.
merit constitutes, to our mind, grave abuse of commercial gain or of the purpose and object of the
discretion. business organization: Provided, however, That the
phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign
xxx xxx xxx
entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investor;
. . . [T]here is not much appreciable disagreement as nor having a nominee director or officer to represent its
regards the factual matters relating to the motion to interests in such corporation; nor appointing a
dismiss. What truly divide (sic) the parties and to which representative or distributor domiciled in the Philippines
they greatly differ is the legal conclusions they which transacts business in its own name and for its
respectively draw from such facts, (sic) with Hahn own account. (Emphasis supplied)
maintaining that on the basis thereof, BMW is doing
business in the Philippines while the latter asserts that it
Thus, the phrase includes "appointing representatives or
is not.
distributors in the Philippines" but not when the representative or
distributor "transacts business in its name and for its own
Then, after stating that any ruling which the trial court might make account." In addition, §1(f)(1) of the Rules and Regulations
on the motion to dismiss would anyway be elevated to it on implementing (IRR) the Omnibus Investment Code of 1987 (E.O.
appeal, the Court of Appeals itself resolved the motion. It ruled No. 226) provided:
that BMW was not doing business in the country and, therefore,
jurisdiction over it could not be acquired through service of
(f) "Doing business" shall be any act or combination of
summons on the DTI pursuant to Rule 14, §14. 'The court upheld
acts, enumerated in Article 44 of the Code. In particular,
private respondent's contention that Hahn acted in his own name
"doing business" includes:
and for his own account and independently of BMW, based on
Alfred Hahn's allegations that he had invested his own money and
resources in establishing BMW's goodwill in the Philippines and (1) . . . A foreign firm which does business through
on BMW's claim that Hahn sold products other than those of middlemen acting in their own names, such as
BMW. It held that petitioner was a mere indentor or broker and indentors, commercial brokers or commission
not an agent through whom private respondent BMW transacted merchants, shall not be deemed doing business in the
business in the Philippines. Consequently, the Court of Appeals Philippines. But such indentors, commercial brokers or
dismissed petitioner's complaint against BMW. commission merchants shall be the ones deemed to be
doing business in the Philippines.
Hence, this appeal. Petitioner contends that the Court of Appeals
erred (1) in finding that the trial court gravely abused its discretion The question is whether petitioner Alfred Hahn is the agent or
in deferring action on the motion to dismiss and (2) in finding that distributor in the Philippines of private respondent BMW. If he is,
private respondent BMW is not doing business in the Philippines BMW may be considered doing business in the Philippines and
and, for this reason, dismissing petitioner's case. the trial court acquired jurisdiction over it (BMW) by virtue of the
service of summons on the Department of Trade and Industry.
Otherwise, if Hahn is not the agent of BMW but an independent
Petitioner's appeal is well taken. Rule 14, §14 provides:
dealer, albeit of BMW cars and products, BMW, a foreign
corporation, is not considered doing business in the Philippines
§14. Service upon private foreign corporations. — If the within the meaning of the Foreign Investments Act of 1991 and
defendant is a foreign corporation, or a nonresident the IRR, and the trial court did not acquire jurisdiction over it
joint stock company or association, doing business in (BMW).
the Philippines, service may be made on its resident
agent designated in accordance with law for that
The Court of Appeals held that petitioner Alfred Hahn acted in his
purpose, or, if there be no such agent, on the
own name and for his own account and not as agent or distributor
government official designated by law to that effect, or
in the Philippines of BMW on the ground that "he alone had
on any of its officers or agents within the Philippines.
contacts with individuals or entities interested in acquiring BMW
(Emphasis added).
vehicles. Independence characterizes Hahn's undertakings, for
which reason he is to be considered, under governing statutes, as
What acts are considered "doing business in the Philippines" are doing business." (p. 13) In support of this conclusion, the
enumerated in §3(d) of the Foreign Investments Act of 1991 (R.A. appellate court cited the following allegations in Hahn's amended
No. 7042) as follows:7 complaint:

d) the phrase "doing business" shall include soliciting 8. From the time the trademark "BMW & DEVICE" was
orders, service contracts, opening offices, whether first used by the Plaintiff in the Philippines up to the
called "liaison" offices or branches; appointing present, Plaintiff, through its firm name "HAHN
representatives or distributors domiciled in the MANILA" and without any monetary contributions from
Philippines or who in any calendar year stay in the defendant BMW, established BMW's goodwill and
country for a period or periods totalling one hundred market presence in the Philippines. Pursuant thereto,
eighty (180) days or more; participating in the Plaintiff invested a lot of money and resources in order
management, supervision or control of any domestic to single-handedly compete against other motorcycle
business, firm, entity or corporation in the and car companies. . . . Moreover, Plaintiff has built
Philippines; and any other act or acts that imply a buildings and other infrastructures such as service
continuity of commercial dealings or arrangements, and centers and showrooms to maintain and promote the
contemplate to that extent the performance of acts or car and products of defendant BMW.
works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of,
As the above quoted allegations of the amended complaint show, specifications.10 For example, in its letter to Hahn dated February
however, there is nothing to support the appellate court's finding 23, 1996, BMW stated:
that Hahn solicited orders alone and for his own account and
without "interference from, let alone direction of, BMW." (p. 13) To
In the last years we have pointed out to you in several
the contrary, Hahn claimed he took orders for BMW cars and
discussions and letters that we have to tackle the
transmitted them to BMW. Upon receipt of the orders, BMW fixed
Philippine market more professionally and that we are
the downpayment and pricing charges, notified Hahn of the
through your present activities not adequately prepared
scheduled production month for the orders, and reconfirmed the
to cope with the forthcoming challenges.11
orders by signing and returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW. Title to cars
purchased passed directly to the buyer and Hahn never paid for In effect, BMW was holding Hahn accountable to it under the
the purchase price of BMW cars sold in the Philippines. Hahn was 1967 Agreement.
credited with a commission equal to 14% of the purchase price
upon the invoicing of a vehicle order by BMW. Upon confirmation
in writing that the vehicles had been registered in the Philippines This case fits into the mould of Communications Materials,
and serviced by him, Hahn received an additional 3% of the full Inc. v. Court of Appeals,12 in which the foreign corporation entered
into a "Representative Agreement" and a "Licensing Agreement"
purchase price. Hahn performed after-sale services, including
warranty services, for which he received reimbursement from with a domestic corporation, by virtue of which the latter was
BMW. All orders were on invoices and forms of BMW.8 appointed "exclusive representative" in the Philippines for a
stipulated commission. Pursuant to these contracts, the domestic
corporation sold products exported by the foreign corporation and
These allegations were substantially admitted by BMW which, in put up a service center for the products sold locally. This Court
its petition for certiorari before the Court of Appeals, stated:9 held that these acts constituted doing business in the Philippines.
The arrangement showed that the foreign corporation's purpose
was to penetrate the Philippine market and establish its presence
9.4. As soon as the vehicles are fully manufactured and
in the Philippines.
full payment of the purchase prices are made, the
vehicles are shipped to the Philippines. (The payments
may be made by the purchasers or third-persons or In addition, BMW held out private respondent Hahn as its
even by Hahn.) The bills of lading are made up in the exclusive distributor in the Philippines, even as it announced in
name of the purchasers, but Hahn-Manila is therein the Asian region that Hahn was the "official BMW agent" in the
indicated as the person to be notified. Philippines.13

9.5. It is Hahn who picks up the vehicles from the The Court of Appeals also found that petitioner Alfred Hahn dealt
Philippine ports, for purposes of conducting pre-delivery in other products, and not exclusively in BMW products, and, on
inspections. Thereafter, he delivers the vehicles to the this basis, ruled that Hahn was not an agent of BMW. (p. 14) This
purchasers. finding is based entirely on allegations of BMW in its motion to
dismiss filed in the trial court and in its petition for certiorari before
the Court of Appeals.14 But this allegation was denied by
9.6. As soon as BMW invoices the vehicle ordered,
Hahn15 and therefore the Court of Appeals should not have cited it
Hahn is credited with a commission of fourteen percent
as if it were the fact.
(14%) of the full purchase price thereof, and as soon as
he confirms in writing that the vehicles have been
registered in the Philippines and have been serviced by Indeed this is not the only factual issue raised, which should have
him, he will receive an additional three percent (3%) of indicated to the Court of Appeals the necessity of affirming the
the full purchase prices as commission. trial court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines
Contrary to the appellate court's conclusion, this arrangement
because it sold cars directly to Philippine buyers. 16 This was
shows an agency. An agent receives a commission upon the
denied by BMW, which claimed that Hahn was not its agent and
successful conclusion of a sale. On the other hand, a broker
that, while it was true that it had sold cars to Philippine buyers,
earns his pay merely by bringing the buyer and the seller
this was done without solicitation on its part.17
together, even if no sale is eventually made.

It is not true then that the question whether BMW is doing


As to the service centers and showrooms which he said he had
business could have been resolved simply by considering the
put up at his own expense, Hahn said that he had to follow BMW
parties' pleadings. There are genuine issues of facts which can
specifications as exclusive dealer of BMW in the Philippines.
only be determined on the basis of evidence duly presented.
According to Hahn, BMW periodically inspected the service
BMW cannot short circuit the process on the plea that to compel it
centers to see to it that BMW standards were maintained. Indeed,
to go to trial would be to deny its right not to submit to the
it would seem from BMW's letter to Hahn that it was for Hahn's
jurisdiction of the trial court which precisely it denies. Rule 16, §3
alleged failure to maintain BMW standards that BMW was
authorizes courts to defer the resolution of a motion to dismiss
terminating Hahn's dealership.
until after the trial if the ground on which the motion is based does
not appear to be indubitable. Here the record of the case bristles
The fact that Hahn invested his own money to put up these with factual issues and it is not at all clear whether some
service centers and showrooms does not necessarily prove that allegations correspond to the proof.
he is not an agent of BMW. For as already noted, there are facts
in the record which suggest that BMW exercised control over
Anyway, private respondent need not apprehend that by
Hahn's activities as a dealer and made regular inspections of
responding to the summons it would be waiving its objection to
Hahn's premises to enforce compliance with BMW standards and
the trial court's jurisdiction. It is now settled that, for purposes of
having summons served on a foreign corporation in accordance
with Rule 14, §14, it is sufficient that it be alleged in the complaint
that the foreign corporation is doing business in the Philippines.
The court need not go beyond the allegations of the complaint in
order to determine whether it has Jurisdiction. 18 A determination
that the foreign corporation is doing business is only tentative and
is made only for the purpose of enabling the local court to acquire
jurisdiction over the foreign corporation through service of
summons pursuant to Rule 14, §14. Such determination does not
foreclose a contrary finding should evidence later show that it is
not transacting business in the country. As this Court has
explained:

This is not to say, however, that the petitioner's right to


question the jurisdiction of the court over its person is
now to be deemed a foreclosed matter. If it is true, as
Signetics claims, that its only involvement in the
Philippines was through a passive investment in Sigfil,
which it even later disposed of, and that TEAM Pacific
is not its agent, then it cannot really be said to be doing
business in the Philippines. It is a defense, however,
that requires the contravention of the allegations of the
complaint, as well as a full ventilation, in effect, of the
main merits of the case, which should not thus be within
the province of a mere motion to dismiss. So, also, the
issue posed by the petitioner as to whether a foreign
corporation which has done business in the country, but
which has ceased to do business at the time of the filing
of a complaint, can still be made to answer for a cause
of action which accrued while it was doing business, is
another matter that would yet have to await the
reception and admission of evidence. Since these
points have seasonably been raised by the petitioner,
there should be no real cause for what may
understandably be its apprehension, i.e., that by its
participation during the trial on the merits, it may,
absent an invocation of separate or independent reliefs
of its own, be considered to have voluntarily submitted
itself to the court's jurisdiction.19

Far from committing an abuse of discretion, the trial court properly


deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis,
with the same result if it had denied the motion and conditionally
assumed jurisdiction. It is the Court of Appeals which, by ruling
that BMW is not doing business on the basis merely of uncertain
allegations in the pleadings, disposed of the whole case with
finality and thereby deprived petitioner of his right to be heard on
his cause of action. Nor was there justification for nullifying the
writ of preliminary injunction issued by the trial court. Although the
injunction was issued ex parte, the fact is that BMW was
subsequently heard on its defense by filing a motion to dismiss.

WHEREFORE, the decision of the Court of Appeals is


REVERSED and the case is REMANDED to the trial court for
further proceedings.

SO ORDERED.
G.R. No. 122191 October 8, 1998 detention. Eventually, they were again put in
service by defendant SAUDI (sic). In
September 1990, defendant SAUDIA
SAUDI ARABIAN AIRLINES, petitioner,
transferred plaintiff to Manila.
vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON.
RODOLFO A. ORTIZ, in his capacity as Presiding Judge of On January 14, 1992, just when plaintiff
Branch 89, Regional Trial Court of Quezon City, respondents. thought that the Jakarta incident was already
behind her, her superiors requested her to
see Mr. Ali Meniewy, Chief Legal Officer of
SAUDIA, in Jeddah, Saudi Arabia. When she
saw him, he brought her to the police station
QUISUMBING, J.: where the police took her passport and
questioned her about the Jakarta incident.
Miniewy simply stood by as the police put
This petition for certiorari pursuant to Rule 45 of the Rules of pressure on her to make a statement
Court seeks to annul and set aside the Resolution1dated dropping the case against Thamer and Allah.
September 27, 1995 and the Decision2 dated April 10, 1996 of the
Not until she agreed to do so did the police
Court of Appeals3 in CA-G.R. SP No. 36533,4 and the return her passport and allowed her to catch
Orders5 dated August 29, 1994 6 and February 2, 19957 that were the afternoon flight out of Jeddah.
issued by the trial court in Civil Case No. Q-93-18394.8

One year and a half later or on lune 16, 1993,


The pertinent antecedent facts which gave rise to the instant in Riyadh, Saudi Arabia, a few minutes
petition, as stated in the questioned Decision9, are as follows:
before the departure of her flight to Manila,
plaintiff was not allowed to board the plane
On January 21, 1988 defendant SAUDIA and instead ordered to take a later flight to
hired plaintiff as a Flight Attendant for its Jeddah to see Mr. Miniewy, the Chief Legal
airlines based in Jeddah, Saudi Arabia. . . . Officer of SAUDIA. When she did, a certain
Khalid of the SAUDIA office brought her to a
Saudi court where she was asked to sign a
On April 27, 1990, while on a lay-over in document written in Arabic. They told her that
Jakarta, Indonesia, plaintiff went to a disco this was necessary to close the case against
dance with fellow crew members Thamer Al- Thamer and Allah. As it turned out, plaintiff
Gazzawi and Allah Al-Gazzawi, both Saudi signed a notice to her to appear before the
nationals. Because it was almost morning court on June 27, 1993. Plaintiff then
when they returned to their hotels, they returned to Manila.
agreed to have breakfast together at the
room of Thamer. When they were in te (sic)
room, Allah left on some pretext. Shortly after Shortly afterwards, defendant SAUDIA
he did, Thamer attempted to rape plaintiff. summoned plaintiff to report to Jeddah once
Fortunately, a roomboy and several security again and see Miniewy on June 27, 1993 for
personnel heard her cries for help and further investigation. Plaintiff did so after
rescued her. Later, the Indonesian police receiving assurance from SAUDIA's Manila
came and arrested Thamer and Allah Al- manager, Aslam Saleemi, that the
Gazzawi, the latter as an accomplice. investigation was routinary and that it posed
no danger to her.
When plaintiff returned to Jeddah a few days
later, several SAUDIA officials interrogated In Jeddah, a SAUDIA legal officer brought
her about the Jakarta incident. They then plaintiff to the same Saudi court on June 27,
requested her to go back to Jakarta to help 1993. Nothing happened then but on June
arrange the release of Thamer and Allah. In 28, 1993, a Saudi judge interrogated plaintiff
Jakarta, SAUDIA Legal Officer Sirah Akkad through an interpreter about the Jakarta
and base manager Baharini negotiated with incident. After one hour of interrogation, they
the police for the immediate release of the let her go. At the airport, however, just as her
detained crew members but did not succeed plane was about to take off, a SAUDIA officer
because plaintiff refused to cooperate. She told her that the airline had forbidden her to
was afraid that she might be tricked into take flight. At the Inflight Service Office where
something she did not want because of her she was told to go, the secretary of Mr.
inability to understand the local dialect. She Yahya Saddick took away her passport and
also declined to sign a blank paper and a told her to remain in Jeddah, at the crew
document written in the local dialect. quarters, until further orders.
Eventually, SAUDIA allowed plaintiff to return
to Jeddah but barred her from the Jakarta
On July 3, 1993 a SAUDIA legal officer again
flights. escorted plaintiff to the same court where the
judge, to her astonishment and shock,
Plaintiff learned that, through the intercession rendered a decision, translated to her in
of the Saudi Arabian government, the English, sentencing her to five months
Indonesian authorities agreed to deport imprisonment and to 286 lashes. Only then
Thamer and Allah after two weeks of did she realize that the Saudi court had tried
her, together with Thamer and Allah, for what Acting on the Motion for Reconsideration of
happened in Jakarta. The court found plaintiff defendant Saudi Arabian Airlines filed, thru
guilty of (1) adultery; (2) going to a disco, counsel, on September 20, 1994, and the
dancing and listening to the music in violation Opposition thereto of the plaintiff filed, thru
of Islamic laws; and (3) socializing with the counsel, on October 14, 1994, as well as the
male crew, in contravention of Islamic Reply therewith of defendant Saudi Arabian
tradition. 10 Airlines filed, thru counsel, on October 24,
1994, considering that a perusal of the
plaintiffs Amended Complaint, which is one
Facing conviction, private respondent sought the help of her
for the recovery of actual, moral and
employer, petitioner SAUDIA. Unfortunately, she was denied any
exemplary damages plus attorney's fees,
assistance. She then asked the Philippine Embassy in Jeddah to
upon the basis of the applicable Philippine
help her while her case is on appeal. Meanwhile, to pay for her
law, Article 21 of the New Civil Code of the
upkeep, she worked on the domestic flight of SAUDIA, while
Philippines, is, clearly, within the jurisdiction
Thamer and Allah continued to serve in the international
of this Court as regards the subject matter,
flights. 11
and there being nothing new of substance
which might cause the reversal or
Because she was wrongfully convicted, the Prince of Makkah modification of the order sought to be
dismissed the case against her and allowed her to leave Saudi reconsidered, the motion for reconsideration
Arabia. Shortly before her return to Manila, 12 she was terminated of the defendant, is DENIED.
from the service by SAUDIA, without her being informed of the
cause.
SO ORDERED. 25

On November 23, 1993, Morada filed a Complaint 13 for damages


Consequently, on February 20, 1995, SAUDIA filed its Petition
against SAUDIA, and Khaled Al-Balawi ("Al-Balawi"), its country
for Certiorari and Prohibition with Prayer for Issuance of Writ of
manager.
Preliminary Injunction and/or Temporary Restraining Order 26 with
the Court of Appeals.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss 14 which raised the following grounds, to wit: (1) that the
Respondent Court of Appeals promulgated a Resolution with
Complaint states no cause of action against Saudia; (2) that
Temporary Restraining Order 27 dated February 23, 1995,
defendant Al-Balawi is not a real party in interest; (3) that the
prohibiting the respondent Judge from further conducting any
claim or demand set forth in the Complaint has been waived,
proceeding, unless otherwise directed, in the interim.
abandoned or otherwise extinguished; and (4) that the trial court
has no jurisdiction to try the case.
In another Resolution 28 promulgated on September 27, 1995,
now assailed, the appellate court denied SAUDIA's Petition for the
On February 10, 1994, Morada filed her Opposition (To Motion to
Issuance of a Writ of Preliminary Injunction dated February 18,
Dismiss) 15. Saudia filed a reply 16 thereto on March 3, 1994.
1995, to wit:

On June 23, 1994, Morada filed an Amended


The Petition for the Issuance of a Writ of
Complaint 17 wherein Al-Balawi was dropped as party defendant.
Preliminary Injunction is hereby DENIED,
On August 11, 1994, Saudia filed its Manifestation and Motion to
after considering the Answer, with Prayer to
Dismiss Amended Complaint 18.
Deny Writ of Preliminary Injunction (Rollo, p.
135) the Reply and Rejoinder, it appearing
The trial court issued an Order 19 dated August 29, 1994 denying that herein petitioner is not clearly entitled
the Motion to Dismiss Amended Complaint filed by Saudia. thereto (Unciano Paramedical College,
et. Al., v. Court of Appeals, et. Al., 100335,
April 7, 1993, Second Division).
From the Order of respondent Judge 20 denying the Motion to
Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration 21 of the Order dated August 29, 1994. It alleged SO ORDERED.
that the trial court has no jurisdiction to hear and try the case on
the basis of Article 21 of the Civil Code, since the proper law
On October 20, 1995, SAUDIA filed with this Honorable Court the
applicable is the law of the Kingdom of Saudi Arabia. On October
instant Petition 29 for Review with Prayer for Temporary
14, 1994, Morada filed her Opposition 22(To Defendant's Motion
Restraining Order dated October 13, 1995.
for Reconsideration).

However, during the pendency of the instant Petition, respondent


In the Reply 23 filed with the trial court on October 24, 1994,
Court of Appeals rendered the Decision 30dated April 10, 1996,
SAUDIA alleged that since its Motion for Reconsideration raised
now also assailed. It ruled that the Philippines is an appropriate
lack of jurisdiction as its cause of action, the Omnibus Motion
forum considering that the Amended Complaint's basis for
Rule does not apply, even if that ground is raised for the first time
recovery of damages is Article 21 of the Civil Code, and thus,
on appeal. Additionally, SAUDIA alleged that the Philippines does
clearly within the jurisdiction of respondent Court. It further held
not have any substantial interest in the prosecution of the instant
that certiorari is not the proper remedy in a denial of a Motion to
case, and hence, without jurisdiction to adjudicate the same.
Dismiss, inasmuch as the petitioner should have proceeded to
trial, and in case of an adverse ruling, find recourse in an appeal.
Respondent Judge subsequently issued another Order 24 dated
February 2, 1995, denying SAUDIA's Motion for Reconsideration.
The pertinent portion of the assailed Order reads as follows:
On May 7, 1996, SAUDIA filed its Supplemental Petition for II.
Review with Prayer for Temporary Restraining Order 31 dated
April 30, 1996, given due course by this Court. After both parties
WHETHER RESPONDENT APPELLATE
submitted their Memoranda, 32 the instant case is now deemed
COURT ERRED IN RULING THAT IN THIS
submitted for decision.
CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA raised the following issues:


Petitioner SAUDIA claims that before us is a conflict of laws that
must be settled at the outset. It maintains that private
I respondent's claim for alleged abuse of rights occurred in the
Kingdom of Saudi Arabia. It alleges that the existence of a foreign
element qualifies the instant case for the application of the law of
The trial court has no jurisdiction to hear and
the Kingdom of Saudi Arabia, by virtue of the lex loci delicti
try Civil Case No. Q-93-18394 based on
commissi rule. 34
Article 21 of the New Civil Code since the
proper law applicable is the law of the
Kingdom of Saudi Arabia inasmuch as this On the other hand, private respondent contends that since her
case involves what is known in private Amended Complaint is based on Articles 19 35 and 21 36 of the
international law as a "conflicts problem". Civil Code, then the instant case is properly a matter of domestic
Otherwise, the Republic of the Philippines will law. 37
sit in judgment of the acts done by another
sovereign state which is abhorred.
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
II Philippines and Saudi Arabia.

Leave of court before filing a supplemental As stated by private respondent in her Amended
pleading is not a jurisdictional requirement. Complaint 38 dated June 23, 1994:
Besides, the matter as to absence of leave of
court is now moot and academic when this
2. Defendant SAUDI ARABIAN AIRLINES or
Honorable Court required the respondents to
SAUDIA is a foreign airlines corporation
comment on petitioner's April 30, 1996
doing business in the Philippines. It may be
Supplemental Petition For Review With
served with summons and other court
Prayer For A Temporary Restraining Order
processes at Travel Wide Associated Sales
Within Ten (10) Days From Notice Thereof.
(Phils.). Inc., 3rd Floor, Cougar Building, 114
Further, the Revised Rules of Court should
Valero St., Salcedo Village, Makati, Metro
be construed with liberality pursuant to
Manila.
Section 2, Rule 1 thereof.

xxx xxx xxx


III

6. Plaintiff learned that, through the


Petitioner received on April 22, 1996 the April
intercession of the Saudi Arabian
10, 1996 decision in CA-G.R. SP NO. 36533
government, the Indonesian authorities
entitled "Saudi Arabian Airlines v. Hon.
agreed to deport Thamer and Allah after two
Rodolfo A. Ortiz, et al." and filed its April 30,
weeks of detention. Eventually, they were
1996 Supplemental Petition For Review With
again put in service by defendant SAUDIA. In
Prayer For A Temporary Restraining Order
September 1990, defendant SAUDIA
on May 7, 1996 at 10:29 a.m. or within the
transferred plaintiff to Manila.
15-day reglementary period as provided for
under Section 1, Rule 45 of the Revised
Rules of Court. Therefore, the decision in CA- 7. On January 14, 1992, just when plaintiff
G.R. SP NO. 36533 has not yet become final thought that the Jakarta incident was already
and executory and this Honorable Court can behind her, her superiors reauested her to
take cognizance of this case. 33 see MR. Ali Meniewy, Chief Legal Officer of
SAUDIA in Jeddah, Saudi Arabia. When she
saw him, he brought her to the police station
From the foregoing factual and procedural antecedents, the
where the police took her passport and
following issues emerge for our resolution:
questioned her about the Jakarta incident.
Miniewy simply stood by as the police put
I. pressure on her to make a statement
dropping the case against Thamer and Allah.
Not until she agreed to do so did the police
WHETHER RESPONDENT APPELLATE
return her passport and allowed her to catch
COURT ERRED IN HOLDING THAT THE
the afternoon flight out of Jeddah.
REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND
TRY CIVIL CASE NO. Q-93-18394 8. One year and a half later or on June 16,
ENTITLED "MILAGROS P. MORADA V. 1993, in Riyadh, Saudi Arabia, a few minutes
SAUDI ARABIAN AIRLINES". before the departure of her flight to Manila,
plaintiff was not allowed to board the plane
and instead ordered to take a later flight to "foreign element". The presence of a foreign element is inevitable
Jeddah to see Mr. Meniewy, the Chief Legal since social and economic affairs of individuals and associations
Officer of SAUDIA. When she did, a certain are rarely confined to the geographic limits of their birth or
Khalid of the SAUDIA office brought her to a conception. 40
Saudi court where she was asked to sigh a
document written in Arabic. They told her that
The forms in which this foreign element may appear are
this was necessary to close the case against
many. 41 The foreign element may simply consist in the fact that
Thamer and Allah. As it turned out, plaintiff
one of the parties to a contract is an alien or has a foreign
signed a notice to her to appear before the
domicile, or that a contract between nationals of one State
court on June 27, 1993. Plaintiff then
involves properties situated in another State. In other cases, the
returned to Manila.
foreign element may assume a complex form. 42

9. Shortly afterwards, defendant SAUDIA


In the instant case, the foreign element consisted in the fact that
summoned plaintiff to report to Jeddah once
private respondent Morada is a resident Philippine national, and
again and see Miniewy on June 27, 1993 for
that petitioner SAUDIA is a resident foreign corporation. Also, by
further investigation. Plaintiff did so after
virtue of the employment of Morada with the petitioner Saudia as
receiving assurance from SAUDIA's Manila
a flight stewardess, events did transpire during her many
manger, Aslam Saleemi, that the
occasions of travel across national borders, particularly from
investigation was routinary and that it posed
Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that
no danger to her.
caused a "conflicts" situation to arise.

10. In Jeddah, a SAUDIA legal officer brought


We thus find private respondent's assertion that the case is purely
plaintiff to the same Saudi court on June 27,
domestic, imprecise. A conflicts problem presents itself here, and
1993. Nothing happened then but on June
the question of jurisdiction 43 confronts the court a quo.
28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta
incident. After one hour of interrogation, they After a careful study of the private respondent's Amended
let her go. At the airport, however, just as her Complaint, 44 and the Comment thereon, we note that she aptly
plane was about to take off, a SAUDIA officer predicated her cause of action on Articles 19 and 21 of the New
told her that the airline had forbidden her to Civil Code.
take that flight. At the Inflight Service Office
where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and On one hand, Article 19 of the New Civil Code provides:
told her to remain in Jeddah, at the crew
quarters, until further orders. Art. 19. Every person must, in the exercise of
his rights and in the performance of his
duties, act with justice give everyone his due
11. On July 3, 1993 a SAUDIA legal officer
again escorted plaintiff to the same court and observe honesty and good faith.
where the judge, to her astonishment and
shock, rendered a decision, translated to her On the other hand, Article 21 of the New Civil Code provides:
in English, sentencing her to five months
imprisonment and to 286 lashes. Only then
did she realize that the Saudi court had tried Art. 21. Any person who willfully causes loss
her, together with Thamer and Allah, for what or injury to another in a manner that is
happened in Jakarta. The court found plaintiff contrary to morals, good customs or public
guilty of (1) adultery; (2) going to a disco, policy shall compensate the latter for
dancing, and listening to the music in damages.
violation of Islamic laws; (3) socializing with
the male crew, in contravention of Islamic Thus, in Philippine National Bank (PNB) vs. Court of
tradition. Appeals, 45 this Court held that:

12. Because SAUDIA refused to lend her a The aforecited provisions on human relations
hand in the case, plaintiff sought the help of were intended to expand the concept of torts
the Philippines Embassy in Jeddah. The in this jurisdiction by granting adequate legal
latter helped her pursue an appeal from the remedy for the untold number of moral
decision of the court. To pay for her upkeep, wrongs which is impossible for human
she worked on the domestic flights of foresight to specifically provide in the
defendant SAUDIA while, ironically, Thamer statutes.
and Allah freely served the international
flights. 39
Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private
Where the factual antecedents satisfactorily establish the respondent's assertion that violations of Articles 19 and 21 are
existence of a foreign element, we agree with petitioner that the actionable, with judicially enforceable remedies in the municipal
problem herein could present a "conflicts" case. forum.

A factual situation that cuts across territorial lines and is affected Based on the allegations 46 in the Amended Complaint, read in the
by the diverse laws of two or more states is said to contain a light of the Rules of Court on jurisdiction 47 we find that the
Regional Trial Court (RTC) of Quezon City possesses jurisdiction Weighing the relative claims of the parties, the court a quo found
over the subject matter of the suit. 48 Its authority to try and hear it best to hear the case in the Philippines. Had it refused to take
the case is provided for under Section 1 of Republic Act No. 7691, cognizance of the case, it would be forcing plaintiff (private
to wit: respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains
substantial connections. That would have caused a fundamental
Sec. 1. Section 19 of Batas Pambansa Blg.
unfairness to her.
129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby
amended to read as follows: Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private
Sec. 19. Jurisdiction in Civil Cases. —
respondent) should be upheld.
Regional Trial Courts shall exercise exclusive
jurisdiction:
Similarly, the trial court also possesses jurisdiction over the
persons of the parties herein. By filing her Complaint and
xxx xxx xx
Amended Complaint with the trial court, private respondent has
x
voluntary submitted herself to the jurisdiction of the court.

(8) In all other cases in


The records show that petitioner SAUDIA has filed several
which demand, exclusive
motions 50 praying for the dismissal of Morada's Amended
of interest, damages of
Complaint. SAUDIA also filed an Answer In Ex Abundante
whatever kind, attorney's
Cautelam dated February 20, 1995. What is very patent and
fees, litigation expenses,
explicit from the motions filed, is that SAUDIA prayed for other
and cots or the value of
reliefs under the premises. Undeniably, petitioner SAUDIA has
the property in
effectively submitted to the trial court's jurisdiction by praying for
controversy exceeds
the dismissal of the Amended Complaint on grounds other than
One hundred thousand
lack of jurisdiction.
pesos (P100,000.00) or,
in such other cases in
Metro Manila, where the As held by this Court in Republic vs. Ker and Company, Ltd.: 51
demand, exclusive of the
above-mentioned items
We observe that the motion to dismiss filed
exceeds Two hundred
on April 14, 1962, aside from disputing the
Thousand pesos
lower court's jurisdiction over defendant's
(P200,000.00).
person, prayed for dismissal of the complaint
(Emphasis ours)
on the ground that plaintiff's cause of action
has prescribed. By interposing such second
xxx xxx xx ground in its motion to dismiss, Ker and Co.,
x Ltd. availed of an affirmative defense on the
basis of which it prayed the court to resolve
controversy in its favor. For the court to
And following Section 2 (b), Rule 4 of the Revised Rules of Court
validly decide the said plea of defendant Ker
— the venue, Quezon City, is appropriate:
& Co., Ltd., it necessarily had to acquire
jurisdiction upon the latter's person, who,
Sec. 2 Venue in Courts of First Instance. — being the proponent of the affirmative
[Now Regional Trial Court] defense, should be deemed to have
abandoned its special appearance and
voluntarily submitted itself to the jurisdiction
(a) xxx xxx xxx of the court.

(b) Personal actions. — All other actions may Similarly, the case of De Midgely vs. Ferandos, held that;
be commenced and tried where the
defendant or any of the defendants resides or
may be found, or where the plaintiff or any of When the appearance is by motion for the
the plaintiff resides, at the election of the purpose of objecting to the jurisdiction of the
plaintiff. court over the person, it must be for the sole
and separate purpose of objecting to the
jurisdiction of the court. If his motion is for any
Pragmatic considerations, including the convenience of the other purpose than to object to the jurisdiction
parties, also weigh heavily in favor of the RTC Quezon City
of the court over his person, he thereby
assuming jurisdiction. Paramount is the private interest of the submits himself to the jurisdiction of the court.
litigant. Enforceability of a judgment if one is obtained is quite A special appearance by motion made for the
obvious. Relative advantages and obstacles to a fair trial are
purpose of objecting to the jurisdiction of the
equally important. Plaintiff may not, by choice of an inconvenient court over the person will be held to be a
forum, "vex", "harass", or "oppress" the defendant, e.g. by general appearance, if the party in said
inflicting upon him needless expense or disturbance. But unless
motion should, for example, ask for a
the balance is strongly in favor of the defendant, the plaintiffs dismissal of the action upon the further
choice of forum should rarely be disturbed. 49
ground that the court had no jurisdiction over place where a power of attorney is to be
the subject matter. 52 exercised;

Clearly, petitioner had submitted to the jurisdiction of the Regional (6) the intention of the contracting parties as
Trial Court of Quezon City. Thus, we find that the trial court has to the law that should govern their
jurisdiction over the case and that its exercise thereof, justified. agreement, thelex loci intentionis;

As to the choice of applicable law, we note that choice-of-law (7) the place where judicial or administrative
problems seek to answer two important questions: (1) What legal proceedings are instituted or done. The lex
system should control a given situation where some of the fori — the law of the forum — is particularly
significant facts occurred in two or more states; and (2) to what important because, as we have seen earlier,
extent should the chosen legal system regulate the situation. 53 matters of "procedure" not going to the
substance of the claim involved are governed
by it; and because the lex fori applies
Several theories have been propounded in order to identify the
whenever the content of the otherwise
legal system that should ultimately control. Although ideally, all
applicable foreign law is excluded from
choice-of-law theories should intrinsically advance both notions of
application in a given case for the reason that
justice and predictability, they do not always do so. The forum is
it falls under one of the exceptions to the
then faced with the problem of deciding which of these two
applications of foreign law; and
important values should be stressed. 54

(8) the flag of a ship, which in many cases is


Before a choice can be made, it is necessary for us to determine
decisive of practically all legal relationships of
under what category a certain set of facts or rules fall. This
the ship and of its master or owner as such. It
process is known as "characterization", or the "doctrine of
also covers contractual relationships
qualification". It is the "process of deciding whether or not the
particularly contracts of
facts relate to the kind of question specified in a conflicts
affreightment. 60 (Emphasis ours.)
rule." 55The purpose of "characterization" is to enable the forum to
select the proper law. 56
After a careful study of the pleadings on record, including
allegations in the Amended Complaint deemed admitted for
Our starting point of analysis here is not a legal relation, but a
purposes of the motion to dismiss, we are convinced that there is
factual situation, event, or operative fact. 57An essential element
reasonable basis for private respondent's assertion that although
of conflict rules is the indication of a "test" or "connecting factor"
she was already working in Manila, petitioner brought her to
or "point of contact". Choice-of-law rules invariably consist of a
Jeddah on the pretense that she would merely testify in an
factual relationship (such as property right, contract claim) and a
investigation of the charges she made against the two SAUDIA
connecting factor or point of contact, such as the situs of the res,
crew members for the attack on her person while they were in
the place of celebration, the place of performance, or the place of
Jakarta. As it turned out, she was the one made to face trial for
wrongdoing. 58
very serious charges, including adultery and violation of Islamic
laws and tradition.
Note that one or more circumstances may be present to serve as
the possible test for the determination of the applicable
There is likewise logical basis on record for the claim that the
law. 59 These "test factors" or "points of contact" or "connecting
"handing over" or "turning over" of the person of private
factors" could be any of the following:
respondent to Jeddah officials, petitioner may have acted beyond
its duties as employer. Petitioner's purported act contributed to
(1) The nationality of a person, his domicile, and amplified or even proximately caused additional humiliation,
his residence, his place of sojourn, or his misery and suffering of private respondent. Petitioner thereby
origin; allegedly facilitated the arrest, detention and prosecution of
private respondent under the guise of petitioner's authority as
employer, taking advantage of the trust, confidence and faith she
(2) the seat of a legal or juridical person, such
reposed upon it. As purportedly found by the Prince of Makkah,
as a corporation; the alleged conviction and imprisonment of private respondent
was wrongful. But these capped the injury or harm allegedly
(3) the situs of a thing, that is, the place inflicted upon her person and reputation, for which petitioner could
where a thing is, or is deemed to be situated. be liable as claimed, to provide compensation or redress for the
In particular, the lex situs is decisive when wrongs done, once duly proven.
real rights are involved;
Considering that the complaint in the court a quo is one involving
(4) the place where an act has been done, torts, the "connecting factor" or "point of contact" could be the
the locus actus, such as the place where a place or places where the tortious conduct or lex loci
contract has been made, a marriage actus occurred. And applying the torts principle in a conflicts case,
celebrated, a will signed or a tort committed. we find that the Philippines could be said as a situs of the tort (the
The lex loci actus is particularly important in place where the alleged tortious conduct took place). This is
contracts and torts; because it is in the Philippines where petitioner allegedly
deceived private respondent, a Filipina residing and working here.
According to her, she had honestly believed that petitioner would,
(5) the place where an act is intended to in the exercise of its rights and in the performance of its duties,
come into effect, e.g., the place of "act with justice, give her due and observe honesty and good
performance of contractual duties, or the faith." Instead, petitioner failed to protect her, she claimed. That
certain acts or parts of the injury allegedly occurred in another intimately concerned with the ultimate outcome of the case below,
country is of no moment. For in our view what is important here is not just for the benefit of all the litigants, but also for the
the place where the over-all harm or the totality of the alleged vindication of the country's system of law and justice in a
injury to the person, reputation, social standing and human rights transnational setting. With these guidelines in mind, the trial court
of complainant, had lodged, according to the plaintiff below must proceed to try and adjudge the case in the light of relevant
(herein private respondent). All told, it is not without basis to Philippine law, with due consideration of the foreign element or
identify the Philippines as the situs of the alleged tort. elements involved. Nothing said herein, of course, should be
construed as prejudging the results of the case in any manner
whatsoever.
Moreover, with the widespread criticism of the traditional rule
of lex loci delicti commissi, modern theories and rules on tort
liability 61 have been advanced to offer fresh judicial approaches WHEREFORE, the instant petition for certiorari is hereby
to arrive at just results. In keeping abreast with the modern DISMISSED. Civil Case No. Q-93-18394 entitled "Milagros P.
theories on tort liability, we find here an occasion to apply the Morada vs. Saudi Arabia Airlines" is hereby REMANDED to
"State of the most significant relationship" rule, which in our view Regional Trial Court of Quezon City, Branch 89 for further
should be appropriate to apply now, given the factual context of proceedings.
this case.
SO ORDERED.
In applying said principle to determine the State which has the
most significant relationship, the following contacts are to be
taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place
where the injury occurred; (b) the place where the conduct
causing the injury occurred; (c) the domicile, residence,
nationality, place of incorporation and place of business of the
parties, and (d) the place where the relationship, if any, between
the parties is centered. 62

As already discussed, there is basis for the claim that over-all


injury occurred and lodged in the Philippines. There is likewise no
question that private respondent is a resident Filipina national,
working with petitioner, a resident foreign corporation engaged
here in the business of international air carriage. Thus, the
"relationship" between the parties was centered here, although it
should be stressed that this suit is not based on mere labor law
violations. From the record, the claim that the Philippines has the
most significant contact with the matter in this dispute, 63 raised by
private respondent as plaintiff below against defendant (herein
petitioner), in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of


the tort complained of and the place "having the most interest in
the problem", we find, by way of recapitulation, that the Philippine
law on tort liability should have paramount application to and
control in the resolution of the legal issues arising out of this case.
Further, we hold that the respondent Regional Trial Court has
jurisdiction over the parties and the subject matter of the
complaint; the appropriate venue is in Quezon City, which could
properly apply Philippine law. Moreover, we find untenable
petitioner's insistence that "[s]ince private respondent instituted
this suit, she has the burden of pleading and proving the
applicable Saudi law on the matter." 64As aptly said by private
respondent, she has "no obligation to plead and prove the law of
the Kingdom of Saudi Arabia since her cause of action is based
on Articles 19 and 21" of the Civil Code of the Philippines. In her
Amended Complaint and subsequent pleadings, she never
alleged that Saudi law should govern this case. 65 And as correctly
held by the respondent appellate court, "considering that it was
the petitioner who was invoking the applicability of the law of
Saudi Arabia, then the burden was on it [petitioner] to plead and
to establish what the law of Saudi Arabia is". 66

Lastly, no error could be imputed to the respondent appellate


court in upholding the trial court's denial of defendant's (herein
petitioner's) motion to dismiss the case. Not only was jurisdiction
in order and venue properly laid, but appeal after trial was
obviously available, and expeditious trial itself indicated by the
nature of the case at hand. Indubitably, the Philippines is the state
of Customs John S. Sy issued a Decision decreeing the forfeiture
and the sale of the cargo in favor of the government. 13
G.R. Nos. 121576-78 June 16, 2000
To enforce its preferred salvor's lien, herein Private Respondent
Duraproof Services filed with the Regional Trial Court of Manila a
BANCO DO BRASIL, petitioner,
Petition for Certiorari, Prohibition and Mandamus 14 assailing the
vs.
actions of Commissioner Mison and District Collector Sy. Also
THE COURT OF APPEALS, HON. ARSENIO M. GONONG, and
impleaded as respondents were PPA Representative Silverio
CESAR S. URBINO, SR., respondents.
Mangaoang and Med Line Philippines, Inc.

DE LEON, JR., J.:


On January 10, 1989, private respondent amended its
Petition 15 to include former District Collector Quiray; PPA Port
Before us is a petition for review on certiorari of the Decision 1 and Manager Adolfo Ll. Amor, Jr.; x Vlason Enterprises as
the Resolution 2 of the Court of Appeals 3 dated July 19, 1993 and represented by its president, Vicente Angliongto; Singkong
August 15, 1995, respectively, which reinstated the entire Trading Company as represented by Atty. Eddie Tamondong;
Decision 4 dated February 18, 1991 of the Regional Trial Court of Banco Du Brasil; Dusit International Co.; Thai-Nan Enterprises
Manila, Branch 8, holding, among others, petitioner Banco do Ltd., and Thai-United Trading Co., Ltd. 16 . . .
Brasil liable to private respondent Cesar Urbino, Sr. for damages
amounting to $300,000.00. 5
Summonses for the amended Petition were served on Atty.
Joseph Capuyan for Med Line Philippines: Anglionto (through his
At the outset, let us state that this case should have been secretary, Betty Bebero), Atty. Tamondong and Commissioner
consolidated with the recently decided case of Vlason Enterprises Mison. 17 Upon motion of the private respondent, the trial court
Corporation v. Court of Appeals and Duraproof Services, allowed summons by publication to be served upon defendants
represented by its General Manager, Cesar Urbino Sr. 6 , for these who were not residents and had no direct representative in the
two (2) cases involved the same material antecedents, though the country. 18
main issue proffered in the present petition vary with the Vlason
case.
On January 29, 1990, private respondent moved to declare
respondents in default, but the trial court denied the motion in its
The material antecedents, as quoted from the Vlason 7 case, are: February 23, 1990 Order 19 , because Mangaoang and Amor had
jointly filed a Motion to Dismiss, while Mison and Med Line had
moved separately for an extension to file a similar motion. 20 Later
Poro Point Shipping Services, then acting as the local it rendered an Order dated July 2, 1990, giving due course to the
agent of Omega Sea Transport Company of Honduras motions to dismiss filed by Mangaoang and Amor on the ground
& Panama, a Panamanian Company (hereafter referred of litis pendentia, and by the commissioner and district collector of
to as Omega), requested permission for its vessel M/V customs on the ground of lack of jurisdiction. 21 In another Order,
Star Ace, which had engine trouble, to unload its cargo the trial court dismissed the action against Med Line Philippines
and to store it at the Philippine Ports Authority (PPA)
on the ground of litis pendentia. 22
compound in San Fernando, La Union while awaiting
transhipment to Hongkong. The request was approved
by the Bureau of Customs. 8 Despite the approval, the On two other occasions, private respondent again moved to
customs personnel boarded the vessel when it docked declare the following in default: [Vlason], Quiray, Sy and Mison on
on January 7, 1989, on suspicion that it was the March 26, 1990; 23 and Banco [do] Bra[s]il, Dusit International Co.,
hijacked M/V Silver Med owned by Med Line Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd.
Philippines Co., and that its cargo would be smuggled on August 24, 1990. 24 There is no record, however, that the trial
into the country. 9 The district customs collector seized court acted upon the motions. On September 18, 1990, [private
said vessel and its cargo pursuant to Section 2301, respondent] filed another Motion for leave to amend the
Tariff and Customs Code. A notice of hearing of SFLU petition, 25 alleging that its counsel failed to include "necessary
Seizure Identification No. 3-89 was served on its and/or indispensable parties": Omega represented by Cadacio;
consignee, Singkong Trading Co. of Hongkong, and its and M/V Star Ace represented by Capt. Nahon Rada, relief
shipper, Dusit International Co., Ltd. of Thailand. captain. Aside from impleading these additional respondents,
private respondent also alleged in the Second (actually, third)
Amended Petition 26 that the owners of the vessel intended to
While seizure proceedings were ongoing, La Union was hit by
transfer and alienate their rights and interest over the vessel and
three typhoons, and the vessel ran aground and was abandoned. its cargo, to the detriment of the private respondent.
On June 8, 1989, its authorized representative, Frank Cadacio,
entered into salvage agreement with private respondent to secure
and repair the vessel at the agreed consideration of $1 million and The trial court granted leave to private respondent to amend its
"fifty percent (50%) [of] the cargo after all expenses, cost and Petition, but only to exclude the customs commissioner and the
taxes." 10 district collector. 27 Instead, private respondent filed the "Second
Amended Petition with Supplemental Petition" against Singkong
Trading Company; and Omega and M/V Star Ace, 28 to which
Finding that no fraud was committed, the District Collector of Cadacio and Rada filed a Joint Answer. 29
Customs, Aurelio M. Quiray, lifted the warrant of seizure on July
1989. 11 However, in a Second Indorsement dated November 11,
1989, then Customs Commissioner Salvador M. Mison declined Declared in default in an Order issued by the trial court on
to issue a clearance for Quiray's Decision; instead, he forfeited January 23, 1991, were the following: Singkong Trading Co.,
the vessel and its cargo in accordance with Section 2530 of the Commissioner Mison, M/V Star Ace and Omega. 30 Private
Tariff and Customs Code. 12 Accordingly, acting District Collector respondent filed, and the trial court granted, an ex parte Motion to
present evidence against the defaulting respondents. 31 Only
private respondent, Atty. Tamondong, Commissioner Mison, 4. Banco [Du] Brasil to pay [private
Omega and M/V Star Ace appeared in the next pretrial hearing; respondent] in the amount of $300,000.00 in
thus, the trial court declared the other respondents in default and damages; 35 and finally,
allowed private respondent to present evidence against
them. 32 Cesar Urbino, general manager of private respondent,
5. Costs of [s]uit.
testified and adduced evidence against the other respondents, . .
. 33
Subsequently, upon the motion of Omega, Singkong
Trading Co., and private respondent, the trial court
On December 29, 1990, private respondent and Rada,
approved a Compromise Agreement 36 among the
representing Omega, entered into a Memorandum of Agreement
movants, reducing by 20 percent the amounts
stipulating that Rada would write and notify Omega regarding the
adjudged. For their part, respondents-movants agreed
demand for salvage fees of private respondent; and that if Rada
not to appeal the Decision. 37 On March 8, 1991, private
did not receive any instruction from his principal, he would assign
respondent moved for the execution of judgment,
the vessel in favor of the salvor. 34
claiming that the trial court Decision had already
become final and executory. The Motion was granted
On February 18, 1991, the trial court disposed as follows: and a Writ of Execution was issued. To satisfy the
Decision, Sheriffs Jorge Victorino, Amado Sevilla and
Dionisio Camañgon were deputized on March 13, 1991
WHEREFORE, IN VIEW OF THE FOREGOING, based
to levy and to sell on execution the defendants vessel
on the allegations, prayer and evidence adduced, both
and personal property.
testimonial and documentary, the Court is convinced,
that, indeed, defendants/respondents are liable to
[private respondent] in the amount as prayed for in the xxx xxx xxx
petition for which it renders judgment as follows:
On March 18, 1991, the Bureau of Customs also filed
1. Respondent M/V Star Ace, represented by an ex parte Motion to recall the execution, and to quash
Capt. Nahum Rada, [r]elief [c]aptain of the the notice of levy and the sale on execution. Despite
vessel and Omega Sea Transport Company, this Motion, the auction sale was conducted on March
Inc., represented by Frank Cadacio[,] is 21, 1991 by Sheriff Camañgon, with private respondent
ordered to refrain from alienating or submitting the winning bid. The trial court ordered the
[transferring] the vessel M/V Star Ace to any deputy sheriffs to cease and desist from implementing
third parties; the Writ of Execution and from levying on the personal
property of the defendants. Nevertheless, Sheriff
Camañgon issued the corresponding Certificate of Sale
2. Singkong Trading Company to pay the
on March 27, 1991.
following:

On April 10, 1991, petitioner Banco do Brasil filed, by special


a. Taxes due the government;
appearance, an Urgent Motion to Vacate Judgement and to
Dismiss Case 38 on the ground that the February 18, 1991
b. Salvage fees on the vessel in Decision of the trial court is void with respect to it for having been
the amount of $1,000,000.00 rendered without validly acquiring jurisdiction over the person of
based on . . . Lloyd's Standard Banco do Brasil. Petitioner subsequently amended its petition 39 to
Form of Salvage Agreement; specifically aver that its special appearance is solely for the
purpose of questioning the Court's exercise of personal
jurisdiction.
c. Preservation, securing and
guarding fees on the vessel in the
amount of $225,000.00; On May 20, 1991, the trial court issued an Order 40 acting
favorably on petitioner's motion and set aside as against petitioner
the decision dated February 18, 1991 for having been rendered
d. Maintenance fees in the amount
without jurisdiction over Banco do Brasil's person. Private
of P2,685,000.00; respondent sought reconsideration 41 of the Order dated May 20,
1991. However, the trial court in an Order 42 dated June 21, 1991
e. Salaries of the crew from August denied said motion.
16, 1989 to December 1989 in the
amount of $43,000.00 and unpaid Meanwhile, a certiorari petition 43 was filed by private respondent
salaries from January 1990 up to
before public respondent Court of Appeals seeking to nullify the
the present; cease and desist Order dated April 5, 1991 issued by Judge
Arsenio M. Gonong. Two (2) more separate petitions
f. Attorney's fees in the amount of for certiorari were subsequently filed by private respondent. The
P656,000.00; second petition 44 sought to nullify the Order 45 dated June 26,
1992 setting aside the Deputy Sheriff's return dated April 1, 1991
as well as the certificate of sale issued by Deputy Sheriff
3. [Vlason] Enterprises to pay [private Camañgon. The third petition 46 sought to nullify the Order dated
respondent] in the amount of P3,000,000.00 October 5, 1992 of the Court of Tax Appeals directing the
for damages; Commissioner of Customs to place Bureau of Customs and PNP
officers and guards to secure the M/V Star Ace and its cargoes,
make inventory of the goods stored in the premises as indicated
to belong to the private respondent. Likewise challenged was the instead of against the person, or in an action quasi in rem, where
Order dated August 17, 1992 authorizing the sale of M/V Star Ace an individual is named as defendant and the purpose of the
and its cargoes. proceeding is to subject his interest therein to the obligation or
loan burdening the property. This is so inasmuch as, in in
rem and quasi in rem actions, jurisdiction over the person of the
These three (3) petitions were consolidated and on July 19, 1993,
defendant is not a prerequisite to confer jurisdiction on the court
the appellate court rendered its Decision 47 granting private
provided that the court acquires jurisdiction over the res. 56
respondent's petitions, thereby nullifying and setting aside the
disputed orders and effectively "giving way to the entire
decision dated February 18, 1991 of the . . . Regional Trial Court However, where the action is in personam, one brought against a
of Manila, Branch 8, in Civil Case No. 89-51451 which remains person on the basis of his personal liability, jurisdiction over the
valid, final and executory, if not yet wholly executed." 48 person of the defendant is necessary for the court to validly try
and decide the case. When the defendant is a non-resident,
personal service of summons within the state is essential to the
Private respondent Urbino, Vlason Enterprises and petitioner
acquisition of jurisdiction over the person. 57 This cannot be done,
Banco do Brasil filed separate motions for reconsideration. For its
however, if the defendant is not physically present in the country,
part, petitioner Banco do Brasil sought reconsideration, insofar as
and thus, the court cannot acquire jurisdiction over his person and
its liability for damages, on the ground that there was no valid
therefore cannot validly try and decide the case against him. 58
service of summons as service was on the wrong party — the
ambassador of Brazil. Hence, it argued, the trial court did not
acquire jurisdiction over petitioner Banco do In the instant case, private respondent's suit against petitioner is
Brasil. 49 Nonetheless, the appellate court denied the motions for premised on petitioner's being one of the claimants of the subject
reconsideration in its Resolution 50 dated August 15, 1995. vessel M/V Star Ace. 59 Thus, it can be said that private
respondent initially sought only to exclude petitioner from claiming
interest over the subject vessel M/V Star Ace. However, private
Hence, the instant petition.
respondent testified during the presentation of evidence that, for
being a nuisance defendant, petitioner caused irreparable
Petitioner Banco do Brasil takes exception to the appellate court's damage to private respondent in the amount of
declaration that the suit below is in rem, not in personam, 51 thus, $300,000.00. 60 Therefore, while the action is in rem, by claiming
service of summons by publication was sufficient for the court to damages, the relief demanded went beyond the res and sought a
acquire jurisdiction over the person of petitioner Banco do Brasil, relief totally alien to the action.
and thereby liable to private respondent Cesar Urbino for
damages claimed, amounting to $300,000.00. Petitioner further
It must be stressed that any relief granted in rem or quasi in
challenges the finding that the February 18, 1991 decision of the
rem actions must be confined to the res, and the court cannot
trial court was already final and thus, cannot be modified or
lawfully render a personal judgment against the
assailed. 52
defendant. 61 Clearly, the publication of summons effected by
private respondent is invalid and ineffective for the trial court to
Petitioner avers that the action filed against it is an action for acquire jurisdiction over the person of petitioner, since by seeking
damages, as such it is an action in personam which requires to recover damages from petitioner for the alleged commission of
personal service of summons be made upon it for the court to an injury to his person or property 62 caused by petitioner's being a
acquire jurisdiction over it. However, inasmuch as petitioner nuisance defendant, private respondent's action became in
Banco do Brasil is a non-resident foreign corporation, not personam. Bearing in mind the in personam nature of the action,
engaged in business in the Philippines, unless it has property personal or, if not possible, substituted service of summons on
located in the Philippines which may be attached to convert the petitioner, and not extraterritorial service, is necessary to confer
action into an action in rem, the court cannot acquire jurisdiction jurisdiction over the person of petitioner and validly hold it liable to
over it in respect of an action in personam. private respondent for damages. Thus, the trial court had no
jurisdiction to award damages amounting to $300,000.00 in favor
of private respondent and as against herein petitioner.1awphil
The petition bears merit, thus the same should be as it is hereby
granted.
Second. We settled the issue of finality of the trial court's decision
dated February 18, 1991 in the Vlason case, wherein we stated
First. When the defendant is a nonresident and he is not found in that, considering the admiralty case involved multiple defendants,
the country, summons may be served extraterritorially in "each defendant had a different period within which to appeal,
accordance with Rule 14, Section 17 53 of the Rules of Court.
depending on the date of receipt of decision." 63 Only upon the
Under this provision, there are only four (4) instances when lapse of the reglementary period to appeal, with no appeal
extraterritorial service of summons is proper, namely: "(1) when perfected within such period, does the decision become final and
the action affects the personal status of the plaintiffs; (2) when the
executory. 64
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; (3) when the relief demanded in such action In the case of petitioner, its Motion to Vacate Judgment and to
consists, wholly or in part, in excluding the defendant from any Dismiss Case was filed on April 10, 1991, only six (6) days after it
interest in property located in the Philippines; and (4) when the learned of the existence of the case upon being informed by the
defendant non-resident's property has been attached within the Embassy of the Federative Republic of Brazil in the Philippines,
Philippines." 54 In these instances, service of summons may be on April 4, 1991, of the February 18, 1991 decision. 65 Thus, in the
effected by (a) personal service out of the country, with leave of absence of any evidence on the date of receipt of decision, other
court; (b) publication, also with leave of court; or (c) any other than the alleged April 4, 1991 date when petitioner learned of the
manner the court may deem sufficient. 55 decision, the February 18, 1991 decision of the trial court cannot
be said to have attained finality as regards the petitioner.
Clear from the foregoing, extrajudicial service of summons apply
only where the action is in rem, an action against the thing itself
WHEREFORE, the subject petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals dated July
19, 1993 and August 15, 1995, respectively, in CA-G.R. SP Nos.
24669, 28387 and 29317 are hereby REVERSED and SET
ASIDE insofar as they affect petitioner Banco do Brasil. The
Order dated May 20, 1991 of the Regional Trial Court of Manila,
Branch 8 in Civil Case No. 89-51451 is REINSTATED.

SO ORDERED.1âwphi1.nêt
G.R. No. 149177 November 23, 2007 In the meantime, on June 20, 2000, the DPWH approved
Nippon's request for the replacement of Kitamura by a certain Y.
Kotake as project manager of the BBRI Project.13
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD., Petitioners,
vs. On June 29, 2000, the RTC, invoking our ruling in Insular
MINORU KITAMURA, Respondent. Government v. Frank14 that matters connected with the
performance of contracts are regulated by the law prevailing at
the place of performance,15 denied the motion to dismiss.16 The
DECISION
trial court subsequently denied petitioners' motion for
reconsideration,17 prompting them to file with the appellate court,
NACHURA, J.: on August 14, 2000, their first Petition for Certiorari under Rule
65 [docketed as CA-G.R. SP No. 60205].18 On August 23, 2000,
the CA resolved to dismiss the petition on procedural grounds—
Before the Court is a petition for review on certiorari under Rule
for lack of statement of material dates and for insufficient
45 of the Rules of Court assailing the April 18, 2001 Decision1 of verification and certification against forum shopping. 19 An Entry of
the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July Judgment was later issued by the appellate court on September
25, 2001 Resolution2 denying the motion for reconsideration
20, 2000.20
thereof.

Aggrieved by this development, petitioners filed with the CA, on


On March 30, 1999, petitioner Nippon Engineering Consultants
September 19, 2000, still within the reglementary period,
Co., Ltd. (Nippon), a Japanese consultancy firm providing a second Petition for Certiorari under Rule 65 already stating
technical and management support in the infrastructure projects therein the material dates and attaching thereto the proper
of foreign governments,3 entered into an Independent Contractor
verification and certification. This second petition, which
Agreement (ICA) with respondent Minoru Kitamura, a Japanese substantially raised the same issues as those in the first, was
national permanently residing in the Philippines.4 The agreement docketed as CA-G.R. SP No. 60827.21
provides that respondent was to extend professional services to
Nippon for a year starting on April 1, 1999.5 Nippon then assigned
respondent to work as the project manager of the Southern Ruling on the merits of the second petition, the appellate court
Tagalog Access Road (STAR) Project in the Philippines, following rendered the assailed April 18, 2001 Decision22finding no grave
the company's consultancy contract with the Philippine abuse of discretion in the trial court's denial of the motion to
Government.6 dismiss. The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in
the pleadings was the validity of the written agreement put in
When the STAR Project was near completion, the Department of issue. The CA thus declared that the trial court was correct in
Public Works and Highways (DPWH) engaged the consultancy applying instead the principle of lex loci solutionis.23
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.7 Respondent was named as Petitioners' motion for reconsideration was subsequently denied
the project manager in the contract's Appendix 3.1.8 by the CA in the assailed July 25, 2001 Resolution.24

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's Remaining steadfast in their stance despite the series of denials,
general manager for its International Division, informed petitioners instituted the instant Petition for Review
respondent that the company had no more intention of on Certiorari25 imputing the following errors to the appellate court:
automatically renewing his ICA. His services would be engaged
by the company only up to the substantial completion of the STAR
A. THE HONORABLE COURT OF APPEALS
Project on March 31, 2000, just in time for the ICA's expiry. 9
GRAVELY ERRED IN FINDING THAT THE TRIAL
COURT VALIDLY EXERCISED JURISDICTION OVER
Threatened with impending unemployment, respondent, through THE INSTANT CONTROVERSY, DESPITE THE FACT
his lawyer, requested a negotiation conference and demanded THAT THE CONTRACT SUBJECT MATTER OF THE
that he be assigned to the BBRI project. Nippon insisted that PROCEEDINGS A QUO WAS ENTERED INTO BY
respondent’s contract was for a fixed term that had already AND BETWEEN TWO JAPANESE NATIONALS,
expired, and refused to negotiate for the renewal of the ICA.10 WRITTEN WHOLLY IN THE JAPANESE LANGUAGE
AND EXECUTED IN TOKYO, JAPAN.
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 B. THE HONORABLE COURT OF APPEALS
Civil Case No. 00-0264 for specific performance and damages GRAVELY ERRED IN OVERLOOKING THE NEED TO
with the Regional Trial Court of Lipa City.11 REVIEW OUR ADHERENCE TO THE PRINCIPLE
OF LEX LOCI SOLUTIONIS IN THE LIGHT OF
RECENT DEVELOPMENT[S] IN PRIVATE
For their part, petitioners, contending that the ICA had been
INTERNATIONAL LAWS.26
perfected in Japan and executed by and between Japanese
nationals, moved to dismiss the complaint for lack of jurisdiction.
They asserted that the claim for improper pre-termination of The pivotal question that this Court is called upon to resolve is
respondent's ICA could only be heard and ventilated in the proper whether the subject matter jurisdiction of Philippine courts in civil
courts of Japan following the principles of lex loci cases for specific performance and damages involving contracts
celebrationis and lex contractus.12 executed outside the country by foreign nationals may be assailed
on the principles of lex loci celebrationis, lex contractus, the "state
of the most significant relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the president and chief executive officer, not by the company's board
procedural matters raised by the respondent. of directors. In not a few cases, we have ruled that corporate
powers are exercised by the board of directors; thus, no person,
not even its officers, can bind the corporation, in the absence of
Kitamura contends that the finality of the appellate court's
authority from the board.40 Considering that Hasegawa verified
decision in CA-G.R. SP No. 60205 has already barred the filing of
and certified the petition only on his behalf and not on behalf of
the second petition docketed as CA-G.R. SP No. 60827
the other petitioner, the petition has to be denied pursuant
(fundamentally raising the same issues as those in the first one)
to Loquias v. Office of the Ombudsman.41 Substantial compliance
and the instant petition for review thereof.
will not suffice in a matter that demands strict observance of the
Rules.42 While technical rules of procedure are designed not to
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 frustrate the ends of justice, nonetheless, they are intended to
on account of the petition's defective certification of non-forum effect the proper and orderly disposition of cases and effectively
shopping, it was a dismissal without prejudice. 27 The same holds prevent the clogging of court dockets.43
true in the CA's dismissal of the said case due to defects in the
formal requirement of verification28 and in the other requirement in
Further, the Court has observed that petitioners incorrectly filed a
Rule 46 of the Rules of Court on the statement of the material
Rule 65 petition to question the trial court's denial of their motion
dates.29 The dismissal being without prejudice, petitioners can re-
to dismiss. It is a well-established rule that an order denying a
file the petition, or file a second petition attaching thereto the
motion to dismiss is interlocutory, and cannot be the subject of the
appropriate verification and certification—as they, in fact did—and
extraordinary petition for certiorari or mandamus. The appropriate
stating therein the material dates, within the prescribed period30 in
recourse is to file an answer and to interpose as defenses the
Section 4, Rule 65 of the said Rules.31
objections raised in the motion, to proceed to trial, and, in case of
an adverse decision, to elevate the entire case by appeal in due
The dismissal of a case without prejudice signifies the absence of course.44 While there are recognized exceptions to this
a decision on the merits and leaves the parties free to litigate the rule,45 petitioners' case does not fall among them.
matter in a subsequent action as though the dismissed action had
not been commenced. In other words, the termination of a case
This brings us to the discussion of the substantive issue of the
not on the merits does not bar another action involving the same
case.
parties, on the same subject matter and theory.32

Asserting that the RTC of Lipa City is an inconvenient forum,


Necessarily, because the said dismissal is without prejudice and
petitioners question its jurisdiction to hear and resolve the civil
has no res judicata effect, and even if petitioners still indicated in
case for specific performance and damages filed by the
the verification and certification of the second certiorari petition
respondent. The ICA subject of the litigation was entered into and
that the first had already been dismissed on procedural
perfected in Tokyo, Japan, by Japanese nationals, and written
grounds,33 petitioners are no longer required by the Rules to
wholly in the Japanese language. Thus, petitioners posit that local
indicate in their certification of non-forum shopping in the instant
courts have no substantial relationship to the parties 46 following
petition for review of the second certiorari petition, the status of
the [state of the] most significant relationship rule in Private
the aforesaid first petition before the CA. In any case, an omission
International Law.47
in the certificate of non-forum shopping about any event that will
not constitute res judicata and litis pendentia, as in the present
case, is not a fatal defect. It will not warrant the dismissal and The Court notes that petitioners adopted an additional but
nullification of the entire proceedings, considering that the evils different theory when they elevated the case to the appellate
sought to be prevented by the said certificate are no longer court. In the Motion to Dismiss48 filed with the trial court,
present.34 petitioners never contended that the RTC is an inconvenient
forum. They merely argued that the applicable law which will
determine the validity or invalidity of respondent's claim is that of
The Court also finds no merit in respondent's contention that
Japan, following the principles of lex loci celebrationis and lex
petitioner Hasegawa is only authorized to verify and certify, on
contractus.49 While not abandoning this stance in their petition
behalf of Nippon, the certiorari petition filed with the CA and not
before the appellate court, petitioners on certiorari significantly
the instant petition. True, the Authorization35 dated September 4,
invoked the defense of forum non conveniens.50 On petition for
2000, which is attached to the second certiorari petition and which
review before this Court, petitioners dropped their other
is also attached to the instant petition for review, is limited in
arguments, maintained the forum non conveniens defense, and
scope—its wordings indicate that Hasegawa is given the authority
introduced their new argument that the applicable principle is the
to sign for and act on behalf of the company only in the petition
[state of the] most significant relationship rule.51
filed with the appellate court, and that authority cannot extend to
the instant petition for review.36 In a plethora of cases, however,
this Court has liberally applied the Rules or even suspended its Be that as it may, this Court is not inclined to deny this petition
application whenever a satisfactory explanation and a subsequent merely on the basis of the change in theory, as explained
fulfillment of the requirements have been made.37 Given that in Philippine Ports Authority v. City of Iloilo.52 We only pointed out
petitioners herein sufficiently explained their misgivings on this petitioners' inconstancy in their arguments to emphasize their
point and appended to their Reply38 an updated Authorization39 for incorrect assertion of conflict of laws principles.
Hasegawa to act on behalf of the company in the instant petition,
the Court finds the same as sufficient compliance with the Rules.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
However, the Court cannot extend the same liberal treatment to recognition and enforcement of judgments. Corresponding to
the defect in the verification and certification. As respondent these phases are the following questions: (1) Where can or
pointed out, and to which we agree, Hasegawa is truly not should litigation be initiated? (2) Which law will the court apply?
authorized to act on behalf of Nippon in this case. The aforesaid and (3) Where can the resulting judgment be enforced?53
September 4, 2000 Authorization and even the subsequent
August 17, 2001 Authorization were issued only by Nippon's
Analytically, jurisdiction and choice of law are two distinct second phase, the choice of law.70 They determine which state's
concepts.54 Jurisdiction considers whether it is fair to cause a law is to be applied in resolving the substantive issues of a
defendant to travel to this state; choice of law asks the further conflicts problem.71 Necessarily, as the only issue in this case is
question whether the application of a substantive law which will that of jurisdiction, choice-of-law rules are not only inapplicable
determine the merits of the case is fair to both parties. The power but also not yet called for.
to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law. While jurisdiction and
Further, petitioners' premature invocation of choice-of-law rules is
the choice of the lex fori will often coincide, the "minimum
exposed by the fact that they have not yet pointed out any conflict
contacts" for one do not always provide the necessary "significant
between the laws of Japan and ours. Before determining which
contacts" for the other.55 The question of whether the law of a
law should apply, first there should exist a conflict of laws
state can be applied to a transaction is different from the question
situation requiring the application of the conflict of laws
of whether the courts of that state have jurisdiction to enter a
rules.72 Also, when the law of a foreign country is invoked to
judgment.56
provide the proper rules for the solution of a case, the existence
of such law must be pleaded and proved.73
In this case, only the first phase is at issue—
jurisdiction.1âwphi1 Jurisdiction, however, has various aspects.
It should be noted that when a conflicts case, one involving a
For a court to validly exercise its power to adjudicate a
foreign element, is brought before a court or administrative
controversy, it must have jurisdiction over the plaintiff or the
agency, there are three alternatives open to the latter in disposing
petitioner, over the defendant or the respondent, over the subject
of it: (1) dismiss the case, either because of lack of jurisdiction or
matter, over the issues of the case and, in cases involving
refusal to assume jurisdiction over the case; (2) assume
property, over the res or the thing which is the subject of the
jurisdiction over the case and apply the internal law of the forum;
litigation.57 In assailing the trial court's jurisdiction herein,
or (3) assume jurisdiction over the case and take into account or
petitioners are actually referring to subject matter jurisdiction.
apply the law of some other State or States. 74 The court’s power
to hear cases and controversies is derived from the Constitution
Jurisdiction over the subject matter in a judicial proceeding is and the laws. While it may choose to recognize laws of foreign
conferred by the sovereign authority which establishes and nations, the court is not limited by foreign sovereign law short of
organizes the court. It is given only by law and in the manner treaties or other formal agreements, even in matters regarding
prescribed by law.58 It is further determined by the allegations of rights provided by foreign sovereigns.75
the complaint irrespective of whether the plaintiff is entitled to all
or some of the claims asserted therein.59 To succeed in its motion
Neither can the other ground raised, forum non conveniens,76 be
for the dismissal of an action for lack of jurisdiction over the
used to deprive the trial court of its jurisdiction herein. First, it is
subject matter of the claim,60 the movant must show that the court
not a proper basis for a motion to dismiss because Section 1,
or tribunal cannot act on the matter submitted to it because no law
Rule 16 of the Rules of Court does not include it as a
grants it the power to adjudicate the claims.61
ground.77 Second, whether a suit should be entertained or
dismissed on the basis of the said doctrine depends largely upon
In the instant case, petitioners, in their motion to dismiss, do not the facts of the particular case and is addressed to the sound
claim that the trial court is not properly vested by law with discretion of the trial court.78 In this case, the RTC decided to
jurisdiction to hear the subject controversy for, indeed, Civil Case assume jurisdiction. Third, the propriety of dismissing a case
No. 00-0264 for specific performance and damages is one not based on this principle requires a factual determination; hence,
capable of pecuniary estimation and is properly cognizable by the this conflicts principle is more properly considered a matter of
RTC of Lipa City.62 What they rather raise as grounds to question defense.79
subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the "state of the most
Accordingly, since the RTC is vested by law with the power to
significant relationship rule."
entertain and hear the civil case filed by respondent and the
grounds raised by petitioners to assail that jurisdiction are
The Court finds the invocation of these grounds unsound. inappropriate, the trial and appellate courts correctly denied the
petitioners’ motion to dismiss.
Lex loci celebrationis relates to the "law of the place of the
ceremony"63 or the law of the place where a contract is WHEREFORE, premises considered, the petition for review
made.64 The doctrine of lex contractus or lex loci on certiorari is DENIED.
contractus means the "law of the place where a contract is
executed or to be performed."65 It controls the nature,
SO ORDERED.
construction, and validity of the contract66 and it may pertain to the
law voluntarily agreed upon by the parties or the law intended by
them either expressly or implicitly.67 Under the "state of the most
significant relationship rule," to ascertain what state law to apply
to a dispute, the court should determine which state has the most
substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the
contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the
parties.68 This rule takes into account several contacts and
evaluates them according to their relative importance with respect
to the particular issue to be resolved.69

Since these three principles in conflict of laws make reference to


the law applicable to a dispute, they are rules proper for the
G.R. Nos. 178382-83, September 23, 2015 offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him.13
CONTINENTAL MICRONESIA, INC., Petitioner, v. JOSEPH
BASSO, Respondent. Basso filed a Complaint for Illegal Dismissal with Moral and
Exemplary Damages against CMI on December 19, 1996.14
DECISION Alleging the presence of foreign elements, CMI filed a Motion to
Dismiss15 dated February 10, 1997 on the ground of lack of
JARDELEZA, J.: jurisdiction over the person of CMI and the subject matter of the
controversy. In an Order16 dated August 27, 1997, the Labor
This is a Petition for Review on Certiorari1 under Rule 45 of the Arbiter granted the Motion to Dismiss. Applying the doctrine of lex
levised Rules of Court assailing the Decision2 dated May 23, loci contractus, the Labor Arbiter held that the terms and
2006 and Resolution3 dated June 19, 2007 of the Court of provisions of the employment contract show that the parties did
Appeals in the consolidated cases CA-G.R. SP No. 83938 and not intend to apply our Labor Code (Presidential Decree No. 442).
CA-G.R. SP No. 84281. These assailed Decision and Resolution The Labor Arbiter also held that no employer-employee
set aside the Decision4 dated November 28, 2003 of the National relationship existed between Basso and the branch office of CMI
Labor Relations Commission (NLRC) declaring Joseph Basso's in the Philippines, but between Basso and the foreign corporation
(Basso) dismissal illegal, and ordering the payment of separation itself.
pay as alternative to reinstatement and full backwages until the
date of the Decision. On appeal, the NLRC remanded the case to the Labor Arbiter for
the determination of certain facts to settle the issue on jurisdiction.
NLRC ruled that the issue on whether the principle of lex loci
The Facts contractus or lex loci celebrationis should apply has to be further
threshed out.17
Petitioner Continental Micronesia, Inc. (CMI) is a foreign
corporation organized and existing under the laws of and Labor Arbiter's Ruling
domiciled in the United States of America (US). It is licensed to do
business in the Philippines.5 Basso, a US citizen, resided in the Labor Arbiter Madjayran H. Ajan in his Decision18 dated
Philippines prior to his death.6 September 24, 1999 dismissed the case for lack of merit and
jurisdiction.
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr.
Braden), Managing Director-Asia of Continental Airlines, Inc. The Labor Arbiter agreed with CMI that the employment contract
(Continental), offered Basso the position of General Manager of was xecuted in the US "since the letter-offer was under the Texas
the Philippine Branch of Continental. Basso accepted the offer.7 letterhead and the acceptance of Complainant was returned
there."19 Thus, applying the doctrine of lex loci celebrationis, US
It was not until much later that Mr. Braden, who had since laws apply. Also, applying lex loci contractus, the Labor Arbiter
returned to the US, sent Basso the employment contract8 dated ruled that the parties did not intend to apply Philippine laws, thus:
February 1, 1991, which Mr. Braden had already signed. Basso Although the contract does not state what law shall apply, it is
then signed the employment contract and returned it to Mr. obvious that Philippine laws were not written into it. More
Braden as instructed. specifically, the Philippine law on taxes and the Labor Code were
not intended by the parties to apply, otherwise Par. 7 on the
On November 7, 1992, CMI took over the Philippine operations of payment by Complainant U.S. Federal and Home State income
Continental, with Basso retaining his position as General taxes, and Pars. 22/23 on termination by 30-day prior notice, will
Manager.9 not be there. The contract was prepared in contemplation of
Texas or U.S. laws where Par. 7 is required and Pars. 22/23 is
On December 20, 1995, Basso received a letter from Mr. Ralph allowed.20
Schulz (Mr. Schulz), who was then CMI's Vice President of The Labor Arbiter also ruled that Basso was terminated for a valid
Marketing and Sales, informing Basso that he has agreed to work cause based on the allegations of CMI that Basso committed a
in CMI as a consultant on an "as needed basis" effective February series of acts that constitute breach of trust and loss of
1, 1996 to July 31, 1996. The letter also informed Basso that: (1) confidence.21
he will not receive any monetary compensation but will continue
being covered by the insurance provided by CMI; (2) he will enjoy The Labor Arbiter, however, found CMI to have voluntarily
travel privileges; and (3) CMI will advance Php1,140,000.00 for submitted to his office's jurisdiction. CMI participated in the
the payment of housing lease for 12 months.10 proceedings, submitted evidence on the merits of the case, and
sought affirmative relief through a motion to dismiss.22
On January 11, 1996, Basso wrote a counter-proposal11 to Mr.
Schulz regarding his employment status in CMI. On March 14, NLRC's Ruling
1996, Basso wrote another letter addressed to Ms. Marty
Woodward (Ms. Woodward) of CMI's Human Resources On appeal, the NLRC Third Division promulgated its Decision23
Department inquiring about the status of his employment.12 On dated November 28, 2003, the decretal portion of which reads:
the same day, Ms. Woodward responded that pursuant to the WHEREFORE, the decision dated 24 September 1999 is
employment contract dated February 1, 1991, Basso could be VACATED and SET ASIDE. Respondent CMI is ordered to pay
terminated at will upon a thirty-day notice. This notice was complainant the amount of US$5,416.00 for failure to comply with
allegedly the letter Basso received from Mr. Schulz on December the due notice requirement. The other claims are dismissed.
20, 1995. Ms. Woodward also reminded Basso of the telephone
conversation between him, Mr. Schulz and Ms. Woodward on SO ORDERED.24
December 19, 1995, where they informed him of the company's The NLRC did not agree with the pronouncement of the Labor
decision to relieve him as General Manager. Basso, instead, was Arbiter that his office has no jurisdiction over the controversy. It
offered the position of consultant to CMI. Ms. Woodward also ruled that the Labor Arbiter acquired jurisdiction over the case
informed Basso that CMI rejected his counter-proposal and, thus, when CMI voluntarily submitted to his office's jurisdiction by
terminated his employment effective January 31, 1996. CMI presenting evidence, advancing arguments in support of the
legality of its acts, and praying for reliefs on the merits of the CMI "failed to prove its claim of the incidents which were its
case.25cralawred alleged bases for loss of trust or confidence."36 While managerial
employees can be dismissed for loss of trust and confidence,
On the merits, the NLRC agreed with the Labor Arbiter that Basso there must be a basis for such loss, beyond mere whim or
was dismissed for just and valid causes on the ground of breach caprice.
of trust and loss of confidence. The NLRC ruled that under the
applicable rules on loss of trust and confidence of a managerial After the parties filed their Motions for Reconsideration,37 the
employee, such as Basso, mere existence of a basis for believing Court of Appeals promulgated Resolution38 dated June 19, 2007
that such employee has breached the trust of his employer denying CMI's motion, while partially granting Basso's as to the
suffices. However, the NLRC found that CMI denied Basso the computation of backwages.
required due process notice in his dismissal.26
Hence, this petition, which raises the following issues:
Both CMI and Basso filed their respective Motions for I.
Reconsideration dated January 15, 200427 and January 8,
2004.28 Both motions were dismissed in separate Resolutions WHETHER OR NOT THE COURT OF APPEALS ERRED IN
dated March 15, 200429 and February 27, 2004,30 respectively. REVIEWING THE FACTUAL FINDINGS OF THE NLRC
INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR NOT
Basso filed a Petition for Certiorari dated April 16, 2004 with the THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.
Court of Appeals docketed as CA-G.R. SP No. 83938.31 Basso
imputed grave abuse of discretion on the part of the NLRC in II.
ruling that he was validiy dismissed. CMI filed its own Petition for
Certiorari dated May 13, 2004 docketed as CA-G.R. SP No. WHETHER OR NOT THE COURT OF APPEALS ERRED IN
84281,32 alleging that the NLRC gravely abused its discretion RULING THAT THE LABOR ARBITER AND THE NLRC HAD
when it assumed jurisdiction over the person of CMI and the JURISDICTION TO HEAR AND TRY THE ILLEGAL DISMISSAL
subject matter of the case. CASE.

In its Resolution dated October 7, 2004, the Court of Appeals III.


consolidated the two cases33 and ordered the parties to file their
respective Memoranda. WHETHER OR NOT THE COURT OF APPEALS ERRED IN
FINDING THAT BASSO WAS NOT VALIDLY DISMISSED ON
The Court of Appeal's Decision THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor
The Court of Appeals promulgated the now assailed Decision34 Arbiter and the NLRC in the illegal dismissal case. The first and
dated May 23, 2006, the relevant dispositive portion of which third issues will be discussed jointly.
reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. The labor tribunals had jurisdiction over the parties and the
SP No. 84281 is DENIED DUE COURSE and DISMISSED. subject matter of the case.

On the other hand the petition of Basso docketed as CA-G.R. SP CMI maintains that there is a conflict-of-laws issue that must be
No. 83938 is GIVEN DUE COURSE and GRANTED, and settled to determine proper jurisdiction over the parties and the
accordingly, the assailed Decision dated November 28, 2003 and subject matter of the case. It also alleges that the existence of
Resolution dated February 27, 2004 of the NLRC are SET ASIDE foreign elements calls or the application of US laws and the
and VACATED. Instead judgment is rendered hereby declaring doctrines of lex loci celebrationis (the law of the place of the
the dismissal of Basso illegal and ordering Continental to pay him ceremony), lex loci contractus (law of the place where a contract
separation pay equivalent to one (1) month pay for every year of is executed), and lex loci intentionis (the intention of the parties as
service as an alternative to reinstatement. Further, ordering to the law that should govern their agreement). CMI also invokes
Continental to pay Basso his full backwages from the date of his the application of the rule of forum non conveniens to determine
said illegal dismissal until date of this decision. The claim for the propriety of the assumption of jurisdiction by the labor
moral and exemplary damages as well as attorney's fees are tribunals.
dismissed.35
We agree with CMI that there is a conflict-of-laws issue that
The Court of Appeals ruled that the Labor Arbiter and the NLRC needs to be resolved first. Where the facts establish the existence
had jurisdiction over the subject matter of the case and over the of foreign elements, he case presents a conflict-of-laws issue.39
parties. The Court of Appeals explained that jurisdiction over the The foreign element in a case nay appear in different forms, such
subject matter of the action is determined by the allegations of the as in this case, where one of the parties s an alien and the other
complaint and the law. Since the case filed by Basso is a is domiciled in another state.
termination dispute that is "undoubtedly cognizable by the labor
tribunals", the Labor Arbiter and the NLRC had jurisdiction to rule In Hasegawa v. Kitamura,40 we stated that in the judicial
on the merits of the case. On the issue of jurisdiction over he resolution of conflict-of-laws problems, three consecutive phases
person of the parties, who are foreigners, the Court of Appeals are involved: jurisdiction, choice of law, and recognition and
ruled that jurisdiction over the person of Basso was acquired enforcement of judgments. In resolving the conflicts problem,
when he filed the complaint for illegal dismissal, while jurisdiction courts should ask the following questions:
over the person of CMI was acquired through coercive process of 1. "Under the law, do I have jurisdiction over the subject matter
service of summons to its agent in the Philippines. The Court of and the parties to this case?
Appeals also agreed that the active participation of CMI in the
case rendered moot the issue on jurisdiction. 2. "If the answer is yes, is this a convenient forum to the parties,
in light of the facts?
On the merits of the case, the Court of Appeals declared that CMI
illegally dismissed Basso. The Court of Appeals found that CMI's 3. "If the answer is yes, what is the conflicts rule for this particular
allegations of loss of trust and confidence were not established. problem?
4. "If the conflicts rule points to a foreign law, has said law been The labor tribunals can make an intelligent decision as to the law
properly pleaded and proved by the one invoking it? and facts. The incident subject of this case (i.e. dismissal of
Basso) happened in the Philippines, the surrounding
5. "If so, is the application or enforcement of the foreign law in the circumstances of which can be ascertained without having to
forum one of the basic exceptions to the application of foreign leave the Philippines. The acts that allegedly led to loss of trust
law? In short, is there any strong policy or vital interest of the and confidence and Basso's eventual dismissal were committed
forum that is at stake in this case and which should preclude the in the Philippines. As to the law, we hold that Philippine law is the
application of foreign law?41 proper law of he forum, as we shall discuss shortly. Also, the
Jurisdiction is defined as the power and authority of the courts to labor tribunals have the power to enforce their judgments
hear, try and decide cases. Jurisdiction over the subject matter is because they acquired jurisdiction over the persons of both
conferred by the Constitution or by law and by the material parties.
allegations in the complaint, regardless of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs Our labor tribunals being the convenient fora, the next question is
sought therein.42 It cannot be acquired through a waiver or what law should apply in resolving this case.
enlarged by the omission of the parties or conferred by the
acquiescence of the court.43 That the employment contract of The choice-of-law issue in a conflict-of-laws case seeks to answer
Basso was replete with references to US laws, and that it the following important questions: (1) What legal system should
originated from and was returned to the US, do not automatically control a given situation where some of the significant facts
preclude our labor tribunals from exercising jurisdiction to hear occurred in two or more states; and (2) to what extent should the
and try this case. chosen legal system regulate the situation.47 These questions
are entirely different from the question of jurisdiction that only
This case stemmed from an illegal dismissal complaint. The Labor seeks to answer whether the courts of a state where the case is
Code, under Article 217, clearly vests original and exclusive initiated have jurisdiction to enter a judgment.48 As such, the
jurisdiction to hear and decide cases involving termination power to exercise jurisdiction does not automatically give a state
disputes to the Labor Arbiter. Hence, the Labor Arbiter and the constitutional authority to apply forum law.49
NLRC have jurisdiction over the subject matter of the case.
CMI insists that US law is the applicable choice-of-law under the
As regards jurisdiction over the parties, we agree with the Court of principles of lex loci celebrationis and lex loci contractus. It argues
Appeals that the Labor Arbiter acquired jurisdiction over the that the contract of employment originated from and was returned
person of Basso, notwithstanding his citizenship, when he filed his to the US after Basso signed it, and hence, was perfected there.
complaint against CMI. On the other hand, jurisdiction over the CMI further claims that the references to US law in the
person of CMI was acquired through the coercive process of employment contract show the parties' intention to apply US law
service of summons. We note that CMI never denied that it was and not ours. These references are:
served with summons. CMI has, in fact, voluntarily appeared and Foreign station allowance of forty percent (40%) using the "U.S.
participated in the proceedings before the courts. Though a State Department Index, the base being Washington, D.C."
foreign corporation, CMI is licensed to do business in the
Philippines and has a local business address here. The purpose Tax equalization that made Basso responsible for "federal and
of the law in requiring that foreign corporations doing business in any home state income taxes."
the country be licensed to do so, is to subject the foreign
corporations to the jurisdiction of our courts.44 Hardship allowance of fifteen percent (15%) of base pay based
upon the "U.S. Department of State Indexes of living costs
Considering that the Labor Arbiter and the NLRC have jurisdiction abroad."
over the parties and the subject matter of this case, these
tribunals may proceed to try the case even if the rules of conflict- The employment arrangement is "one at will, terminable by either
of-laws or the convenience of the parties point to a foreign forum, party without any further liability on thirty days prior written
this being an exercise of sovereign prerogative of the country notice."50
where the case is filed.45 CMI asserts that the US law on labor relations particularly, the US
Railway Labor Act sanctions termination-at-will provisions in an
The next question is whether the local forum is the convenient employment contract. Thus, CMI concludes that if such laws were
forum in light of the facts of the case. CMI contends that a applied, there would have been no illegal dismissal to speak of
Philippine court is an inconvenient forum. because the termination-at-will provision in Basso's employment
contract would have been perfectly valid.
We disagree.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in
a conflict-of-laws case may assume jurisdiction if it chooses to do In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized
so, provided, that the following requisites are met: (1) that the that an essential element of conflict rules is the indication of a
Philippine Court is one to which the parties may conveniently "test" or "connecting factor" or "point of contact". Choice-of-law
resort to; (2) that the Philippine Court is in a position to make an rules invariably consist of a factual relationship (such as property
intelligent decision as to the law and the facts; and (3) that the right, contract claim) and a connecting fact or point of contact,
Philippine Court has or is likely to have power to enforce its such as the situs of the res, the place of celebration, the place of
decision.46 All these requisites are present here. performance, or the place of wrongdoing. Pursuant to Saudi
Arabian Airlines, we hold that the "test factors," "points of contact"
Basso may conveniently resort to our labor tribunals as he and or "connecting factors" in this case are the following:
CMI lad physical presence in the Philippines during the duration
of the trial. CMI has a Philippine branch, while Basso, before his (1) The nationality, domicile or residence of Basso;
death, was residing here. Thus, it could be reasonably expected
that no extraordinary measures were needed for the parties to (2) The seat of CMI;
make arrangements in advocating their respective cases.
(3) The place where the employment contract has been made, the
locus actus; CMI submits that the Court of Appeals overstepped the
boundaries of the limited scope of its certiorari jurisdiction when
(4) The place where the act is intended to come into effect, e.g., instead of ruling on the existence of grave abuse of discretion, it
the place of performance of contractual duties; proceeded to pass upon the legality and propriety of Basso's
dismissal. Moreover, CMI asserts that it was error on the part of
(5) The intention of the contracting parties as to the law that the Court of Appeals to re-evaluate the evidence and
should govern their agreement, the lex loci intentionis; and circumstances surrounding the dismissal of Basso.

(6) The place where judicial or administrative proceedings are We disagree.


instituted or done.52
The power of the Court of Appeals to review NLRC decisions via
Applying the foregoing in this case, we conclude that Philippine a Petition for Certiorari under Rule 65 of the Revised Rules of
law the applicable law. Basso, though a US citizen, was a Court was settled in our decision in St. Martin Funeral Home v.
resident here from he time he was hired by CMI until his death NLRC.60 The general rule is that certiorari does not lie to review
during the pendency of the case. CMI, while a foreign corporation, errors of judgment of the trial court, as well as that of a quasi-
has a license to do business in the Philippines and maintains a judicial tribunal. In certiorari proceedings, judicial review does not
branch here, where Basso was hired to work. The contract of go as far as to examine and assess the evidence of the parties
employment was negotiated in the Philippines. A purely and to weigh their probative value.61 However, this rule admits of
consensual contract, it was also perfected in the Philippines when exceptions. In Globe Telecom, Inc. v. Florendo-Flores,62 we
Basso accepted the terms and conditions of his employment as stated:
offered by CMI. The place of performance relative to Biasso's In the review of an NLRC decision through a special civil action
contractual duties was in the Philippines. The alleged prohibited for certiorari, resolution is confined only to issues of jurisdiction
acts of Basso that warranted his dismissal were committed in the and grave abuse of discretion on the part of the labor tribunal.
Philippines. Hence, the Court refrains from reviewing factual assessments of
lower courts and agencies exercising adjudicative functions, such
Clearly, the Philippines is the state with the most significant as the NLRC. Occasionally, however, the Court is constrained to
relationship to the problem. Thus, we hold that CMI and Basso delve into factual matters where, as in the instant case, the
intended Philippine law to govern, notwithstanding some findings of the NLRC contradict those of the Labor Arbiter.
references made to US laws and the fact that this intention was
not expressly stated in the contract. We explained in Philippine In this instance, the Court in the exercise of its equity jurisdiction
Export and Foreign Loan Guarantee Corporation v. V. P. Eusebio may look into the records of the case and re-examine the
Construction, Inc.53 that the law selected may be implied from questioned findings. As a corollary, this Court is clothed with
such factors as substantial connection with the transaction, or the ample authority to review matters, even if they are not assigned
nationality or domicile of the parties.54 We cautioned, however, as errors in their appeal, if it finds that their consideration is
that while Philippine courts would do well to adopt the first and necessary to arrive at a just decision of the case. The same
most basic rule in most legal systems, namely, to allow the parties principles are now necessarily adhered to and are applied by the
to select the law applicable to their contract, the selection is Court of Appeals in its expanded jurisdiction over labor cases
subject to the limitation that it is not against the law, morals, or elevated through a petition for certiorari; thus, we see no error on
public policy of the forum.55 its part when it made anew a factual determination of the matters
and on that basis reversed the ruling of the NLRC.63 (Citations
Similarly, in Bank of America, NT&SA v. American Realty omitted.)
Corporation,56 we ruled that a foreign law, judgment or contract Thus, the Court of Appeals may grant the petition when the
contrary to a sound and established public policy of the forum factual hidings complained of are not supported by the evidence
shall not be applied. Thus: on record; when its necessary to prevent a substantial wrong or to
Moreover, foreign law should not be applied when its application do substantial justice; when the findings of the NLRC contradict
would work undeniable injustice to the citizens or residents of the those of the Labor Arbiter; and when necessary to arrive at a just
forum. To give justice is the most important function of law; decision of the case.64 To make these findings, the Court of
hence, a law, or judgment or contract that is obviously unjust Appeals necessarily has to look at the evidence and make its own
negates the fundamental principles of Conflict of Laws.57 factual determination.65
Termination-at-will is anathema to the public policies on labor
protection espoused by our laws and Constitution, which dictates Since the findings of the Labor Arbiter differ with that of the
that no worker shall be dismissed except for just and authorized NLRC, we find that the Court of Appeals correctly exercised its
causes provided by law and after due process having been power to review the evidence and the records of the illegal
complied with.58 Hence, the US Railway Labor Act, which dismissal case.
sanctions termination-at-will, should not be applied in this case.
Basso was illegally dismissed.
Additionally, the rule is that there is no judicial notice of any
foreign law. As any other fact, it must be alleged and proved.59 If It is of no moment that Basso was a managerial employee of CMI
the foreign law is not properly pleaded or proved, the presumption Managerial employees enjoy security of tenure and the right of
of identity or similarity of the foreign law to our own laws, the management to dismiss must be balanced against the
otherwise known as processual presumption, applies. Here, US managerial employee's right to security of tenure, which is not one
law may have been properly pleaded but it was not proved in the of the guaranties he gives up.66
labor tribunals.
In Apo Cement Corporation v. Baptisma,67 we ruled that for an
Having disposed of the issue on jurisdiction, we now rule on the employer to validly dismiss an employee on the ground of loss of
first and third issues. trust and confidence under Article 282 (c) of the Labor Code, the
employer must observe the following guidelines: 1) loss of
The Court of Appeals may review the factual findings of the NLRC confidence should not be simulated; 2) it should not be used as
in a Rule 65 petition. subterfuge for causes which are improper, illegal or unjustified; 3)
it may not be arbitrarily asserted in the face of overwhelming made for the purpose of looking for a technical maintenance
evidence to the contrary; and 4) it must be genuine, not a mere personnel with US Federal Aviation Authority qualifications, which
afterthought to justify earlier action taken in bad faith. More CMI needed at that time. The calls to the US were also made in
importantly, it must be based on a willful breach of trust and connection with his functions as General Manager, such as
founded on clearly established facts. inquiries on his tax returns filed in Nevada. Biasso also explained
that the phone lines82 were open direct lines that all personnel
We agree with the Court of Appeals that the dismissal of Basso were free to use to make direct long distance calls.83
was not founded on clearly established facts and evidence
sufficient to warrant dismissal from employment. While proof Finally, CMI alleged that Basso approved the disbursement of
beyond reasonable doubt is not required to establish loss of trust Php80,000.00 to cover the transfer fee of the Manila Polo Club
and confidence, substantial evidence is required and on the share from Mr. Kenneth Glover, the previous General Manager, to
employer rests the burden to establish it.68 There must be some him. CMI claimed that "nowhere in the said contract was it
basis for the loss of trust, or that the employer has reasonable likewise indicated that the Manila Polo Club share was part of the
ground to believe that the employee is responsible for compensation package given by CMI to Basso."84 CMI's claims
misconduct, which renders him unworthy of the trust and are not credible. Basso explained that the Manila Polo Club share
confidence demanded by his position.69 was offered to him as a bonus to entice him to leave his then
employer, United Airlines. A letter from Mr. Paul J. Casey, former
CMI alleges that Basso committed the following: president of Continental, supports Basso.85 In the letter, Mr.
Casey explained:
(1) As a signing bonus, and a perk to attract Mr. Basso to join
Basso delegated too much responsibility to the General Sales Continental Airlines, he was given the Manila Polo Club share and
Agent and relied heavily on its judgments.70 authorized to have the share re-issued in his name. In addition to
(2) giving Mr. Basso the Manila Polo Club share, Continental agreed
Basso excessively issued promotional tickets to his friends who to pay the dues for a period of three years and this was embodied
had no direct business with CMI.71 in his contract with Continental. This was all clone with my
(3) knowledge and approval.86
The advertising agency that CMI contracted had to deal directly Clause 14 of the employment contract also states:
with Guam because Basso was hardly available.72 Mr. Schulz Club Memberships: The Company will locally pay annual dues for
discovered that Basso exceeded the advertising budget by membership in a club in Manila that your immediate supervisor
$76,000.00 in 1994 and by $20,000.00 in 1995.73 and I agree is of at least that value to Continental through you in
(4) your role as our General Manager for the Philippines.87
Basso spent more time and attention to his personal businesses Taken together, the above pieces of evidence suggest that the
and was reputed to own nightclubs in the Philippines.74 Manila Polo Club share was part of Basso's compensation
(5) package and thus he validly used company funds to pay for the
Basso used free tickets and advertising money to promote his transfer fees. If doubts exist between the evidence presented by
personal business,75 such as a brochure that jointly advertised the employer and the employee, the scales of justice must be
one of Basso's nightclubs with CMI. tilted in favor of the latter.88

We find that CMI failed to discharge its burden to prove the above Finally, CMI violated procedural due process in terminating
acts. CMI merely submitted affidavits of its officers, without any Basso. In King of Kings Transport, Inc. v. Mamac89 we detailed
other corroborating evidence. Basso, on the other hand, had the procedural due process steps in termination of employment:
adequately explained his side. On the advertising agency and To clarify, the following should be considered in terminating the
budget issues raised by CMI, he explained that these were blatant services of employees:
lies as the advertising needs of CMI were centralized in its Guam
office and the Philippine office was not authorized to deal with (1) The first written notice to be served on the employees should
CMI's advertising agency, except on minor issues.76 Basso contain the specific causes or grounds for termination against
further stated that under CMI's existing policy, ninety percent them, and a directive that the employees are given the
(90%) of the advertising decisions were delegated to the opportunity to submit their written explanation within a reasonable
advertising firm of McCann-Ericsson in Japan and only ten period. "Reasonable opportunity" under the Omnibus Rules
percent (10%) were left to the Philippine office.77 Basso also means every kind of assistance that management must accord to
denied the allegations of owning nightclubs and promoting his the employees to enable them to prepare adequately for their
personal businesses and explained that it was illegal for defense. This should be construed as a period of at least five (5)
foreigners in the Philippines to engage in retail trade in the first calendar days from receipt of the notice to give the employees an
place. opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the
Apart from these accusations, CMI likewise presented the findings defenses they will raise against the complaint. Moreover, in order
of the audit team headed by Mr. Stephen D. Goepfert, showing to enable the employees to intelligently prepare their explanation
that "for the period of 1995 and 1996, personal passes for and defenses, the notice should contain a detailed narration of the
Continental and other airline employees were noted (sic) to be facts and circumstances that will serve as basis for the charge
issued for which no service charge was collected."78 The audit against the employees. A general description of the charge will
cited the trip pass log of a total of 10 months. The trip log does not suffice. Lastly, the notice should specifically mention which
not show, however, that Basso caused all the ticket issuances. company rules, if any, are violated and/or which among the
More, half of the trips in the log occurred from March to July of grounds under Art. 282 is being charged against the employees.
1996,79 a period beyond the tenure of Basso. Basso was
terminated effectively on January 31, 1996 as indicated in the (2) After serving the first notice, the employers should schedule
letter of Ms. Woodward.80 and conduct a hearing or conference wherein the employees will
be given the opportunity to: (1) explain and clarify their defenses
CMI also accused Basso of making "questionable overseas to the charge against them; (2) present evidence in support of
phone calls". Basso, however, adequately explained in his their defenses; and (3) rebut the evidence presented against them
Reply81 that the phone calls to Italy and Portland, USA were by the management. During the hearing or conference, the
employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of
their choice. Moreover, this conference or hearing could be used
by the parties as an opportunity to come to an amicable
settlement.

(3) After determining that termination of employment is justified,


the employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2)
grounds have been established to justify the severance of their
employment. (Emphasis in original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December
19, 1995 and March 14, 1996, respectively, are not one of the
valid twin notices. Neither identified the alleged acts that CMI now
claims as bases for Basso's termination. Ms. Woodward's letter
even stressed that the original plan was to remove Basso as
General Manager but with an offer to make him consultant. It was
inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of
consultant. As the Court of Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground
for his dismissal was the exercise of the termination at will clause
in the employment contract. The alleged loss of trust and
confidence claimed by Continental appears to be a mere
afterthought belatedly trotted out to save the day.90
Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly


dismissed from work shall be entitled to reinstatement without
loss of eniority rights and other privileges, and to his full
backwages, inclusive of allowances and to his other benefits or
their monetary equivalent omputed from the time his
compensation was withheld up to the time of actual reinstatement.

Where reinstatement is no longer viable as an option, separation


pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation
pay is in addition to payment of backwages.91 In the case of
Basso, reinstatement is no longer possible since he has already
passed away. Thus, Basso's separation pay with full backwages
shall be paid to his heirs.

As to the computation of backwages, we agree with CMI that


Basso was entitled to backwages only up to the time he reached
65 years old, the compulsory retirement age under the law.92
This is our consistent ruling.93 When Basso was illegally
dismissed on January 31, 1996, he was already 58 years old.94
He turned 65 years old on October 2, 2002. Since backwages are
granted on grounds of equity for earnings lost by an employee
due to his illegal dismissal,95 Basso was entitled to backwages
only for the period he could have worked had he not been illegally
dismissed, i.e. from January 31, 1996 to October 2, 2002.

WHEREFORE, premises considered, the Decision of the Court of


Appeals dated May 23, 2006 and Resolution dated June 19, 2007
in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R.
SP No. 84281 are AFFIRMED, with MODIFICATION as to the
award of backwages. Petitioner Continental Micronesia, Inc. is
hereby ordered to pay Respondent Joseph Basso's heirs: 1)
separation pay equivalent to one (1) month pay for every year of
service, and 2) full backwages from January 31, 1996, the date of
his illegal dismissal, to October 2, 2002, the date of his
compulsory retirement age.

SO ORDERED.
G.R. No. 112573 February 9, 1995 On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records). Despite
receipt of the same, defendant failed to appear at the scheduled
NORTHWEST ORIENT AIRLINES, INC. petitioner,
hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's
vs.
complaint and on [January 29, 1981], rendered judgment ordering
COURT OF APPEALS and C.F. SHARP & COMPANY
the defendant to pay the plaintiff the sum of 83,158,195 Yen and
INC., respondents.
damages for delay at the rate of 6% per annum from August 28,
1980 up to and until payment is completed (pp. 12-14, Records).

On March 24, 1981, defendant received from Deputy Sheriff


PADILLA, JR., J.: Balingit copy of the judgment. Defendant not having appealed the
judgment, the same became final and executory.
This petition for review on certiorari seeks to set aside the
decision of the Court of Appeals affirming the dismissal of the Plaintiff was unable to execute the decision in Japan, hence, on
petitioner's complaint to enforce the judgment of a Japanese May 20, 1983, a suit for enforcement of the judgment was filed by
court. The principal issue here is whether a Japanese court can plaintiff before the Regional Trial Court of Manila Branch 54.2
acquire jurisdiction over a Philippine corporation doing business in
Japan by serving summons through diplomatic channels on the
On July 16, 1983, defendant filed its answer averring that the
Philippine corporation at its principal office in Manila after prior
judgment of the Japanese Court sought to be enforced is null and
attempts to serve summons in Japan had failed.
void and unenforceable in this jurisdiction having been rendered
without due and proper notice to the defendant and/or with
Petitioner Northwest Orient Airlines, Inc. collusion or fraud and/or upon a clear mistake of law and fact (pp.
(hereinafter NORTHWEST), a corporation organized under the 41-45, Rec.).
laws of the State of Minnesota, U.S.A., sought to enforce in Civil
Case No. 83-17637 of the Regional Trial Court (RTC), Branch 54,
Unable to settle the case amicably, the case was tried on the
Manila, a judgment rendered in its favor by a Japanese court
merits. After the plaintiff rested its case, defendant on April 21,
against private respondent C.F. Sharp & Company, Inc.,
1989, filed a Motion for Judgment on a Demurrer to Evidence
(hereinafter SHARP), a corporation incorporated under Philippine
based on two grounds:
laws.
(1) the foreign judgment sought to be enforced is null and void for
want of jurisdiction and (2) the said judgment is contrary to
As found by the Court of Appeals in the challenged decision of 10 Philippine law and public policy and rendered without due process
November 1993, 1 the following are the factual and procedural of law. Plaintiff filed its opposition after which the court a
antecedents of this controversy: quo rendered the now assailed decision dated June 21, 1989
granting the demurrer motion and dismissing the complaint
(Decision, pp. 376-378, Records). In granting the demurrer
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. motion, the trial court held that:
Sharp & Company, through its Japan branch, entered into an
International Passenger Sales Agency Agreement, whereby the
former authorized the latter to sell its air transportation tickets. The foreign judgment in the Japanese Court sought in this action
Unable to remit the proceeds of the ticket sales made by is null and void for want of jurisdiction over the person of the
defendant on behalf of the plaintiff under the said agreement, defendant considering that this is an action in personam; the
plaintiff on March 25, 1980 sued defendant in Tokyo, Japan, for Japanese Court did not acquire jurisdiction over the person of the
collection of the unremitted proceeds of the ticket sales, with defendant because jurisprudence requires that the defendant be
claim for damages. served with summons in Japan in order for the Japanese Court to
acquire jurisdiction over it, the process of the Court in Japan sent
to the Philippines which is outside Japanese jurisdiction cannot
On April 11, 1980, a writ of summons was issued by the 36th Civil
confer jurisdiction over the defendant in the case before the
Department, Tokyo District Court of Japan against defendant at Japanese Court of the case at bar. Boudard versus Tait 67 Phil.
its office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, 170. The plaintiff contends that the Japanese Court acquired
Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve
jurisdiction because the defendant is a resident of Japan, having
the summons was unsuccessful because the bailiff was advised four (4) branches doing business therein and in fact had a permit
by a person in the office that Mr. Dinozo, the person believed to from the Japanese government to conduct business in Japan
be authorized to receive court processes was in Manila and would
(citing the exhibits presented by the plaintiff); if this is so then
be back on April 24, 1980. service of summons should have been made upon the defendant
in Japan in any of these alleged four branches; as admitted by the
On April 24, 1980, bailiff returned to the defendant's office to plaintiff the service of the summons issued by the Japanese Court
serve the summons. Mr. Dinozo refused to accept the same was made in the Philippines thru a Philippine Sheriff. This Court
claiming that he was no longer an employee of the defendant. agrees that if the defendant in a foreign court is a resident in the
court of that foreign court such court could acquire jurisdiction
over the person of the defendant but it must be served upon the
After the two attempts of service were unsuccessful, the judge of defendant in the territorial jurisdiction of the foreign court. Such is
the Tokyo District Court decided to have the complaint and the not the case here because the defendant was served with
writs of summons served at the head office of the defendant in summons in the Philippines and not in Japan.
Manila. On July 11, 1980, the Director of the Tokyo District Court
requested the Supreme Court of Japan to serve the summons
through diplomatic channels upon the defendant's head office in Unable to accept the said decision, plaintiff on July 11, 1989
Manila. moved for reconsideration of the decision, filing at the same time
a conditional Notice of Appeal, asking the court to treat the said
notice of appeal "as in effect after and upon issuance of the terms are applied to natural persons" (Claude
court's denial of the motion for reconsideration." Neon Lights vs. Phil. Advertising Corp., 57
Phil. 607). Thus, as cited by the defendant-
appellee in its brief:
Defendant opposed the motion for reconsideration to which a
Reply dated August 28, 1989 was filed by the plaintiff.
Residence is said to be an attribute of a
natural person, and can be predicated on an
On October 16, 1989, the lower court disregarded the Motion for
artificial being only by more or less imperfect
Reconsideration and gave due course to the plaintiff's Notice of
analogy. Strictly speaking, therefore, a
Appeal. 3
corporation can have no local residence or
habitation. It has been said that a corporation
In its decision, the Court of Appeals sustained the trial court. It is a mere ideal existence, subsisting only in
agreed with the latter in its reliance upon Boudard contemplation of law — an invisible being
vs.Tait 4 wherein it was held that "the process of the court has no which can have, in fact, no locality and can
extraterritorial effect and no jurisdiction is acquired over the occupy no space, and therefore cannot have
person of the defendant by serving him beyond the boundaries of a dwelling place. (18 Am. Jur. 2d, p. 693
the state." To support its position, the Court of Appeals further citing Kimmerle v. Topeka, 88 370, 128 p.
stated: 367; Wood v. Hartfold F. Ins. Co., 13 Conn
202)
In an action strictly in personam, such as the instant case,
personal service of summons within the forum is required for the Jurisprudence so holds that the foreign or
court to acquire jurisdiction over the defendant (Magdalena Estate domestic character of a corporation is to be
Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction on the court, determined by the place of its origin where its
personal or substituted service of summons on the defendant not charter was granted and not by the location
extraterritorial service is necessary (Dial Corp vs. Soriano, 161 of its business activities (Jennings v. Idaho
SCRA 739). Rail Light & P. Co., 26 Idaho 703, 146 p.
101), A corporation is a "resident" and an
inhabitant of the state in which it is
But while plaintiff-appellant concedes that the collection suit filed incorporated and no other (36 Am. Jur. 2d, p.
is an action in personam, it is its theory that a distinction must be 49).
made between an action in personam against a resident
defendant and an action in personam against a non-resident
defendant. Jurisdiction is acquired over a non-resident defendant Defendant-appellee is a Philippine
only if he is served personally within the jurisdiction of the court Corporation duly organized under the
and over a resident defendant if by personal, substituted or Philippine laws. Clearly, its residence is the
constructive service conformably to statutory authorization. Philippines, the place of its incorporation, and
Plaintiff-appellant argues that since the defendant-appellee not Japan. While defendant-appellee
maintains branches in Japan it is considered a resident maintains branches in Japan, this will not
defendant. Corollarily, personal, substituted or constructive make it a resident of Japan. A corporation
service of summons when made in compliance with the does not become a resident of another by
procedural rules is sufficient to give the court jurisdiction to render engaging in business there even though
judgment in personam. licensed by that state and in terms given all
the rights and privileges of a domestic
corporation (Galveston H. & S.A.R. Co. vs.
Such an argument does not persuade. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct.
401).
It is a general rule that processes of the court
cannot lawfully be served outside the On this premise, defendant appellee is a non-
territorial limits of the jurisdiction of the court resident corporation. As such, court
from which it issues (Carter vs. Carter; 41
processes must be served upon it at a place
S.E. 2d 532, 201) and this is regardless of within the state in which the action is brought
the residence or citizenship of the party thus and not elsewhere (St. Clair vs. Cox, 106 US
served (Iowa-Rahr vs. Rahr, 129 NW 494,
350, 27 L ed. 222, 1 S. Ct. 354).5
150 Iowa 511, 35 LRC, NS, 292, Am. Case
1912 D680). There must be actual service
within the proper territorial limits on defendant It then concluded that the service of summons effected in Manila
or someone authorized to accept service for or beyond the territorial boundaries of Japan was null and did not
him. Thus, a defendant, whether a resident or confer jurisdiction upon the Tokyo District Court over the person
not in the forum where the action is filed, of SHARP; hence, its decision was void.
must be served with summons within that
forum.
Unable to obtain a reconsideration of the decision, NORTHWEST
elevated the case to this Court contending that the respondent
But even assuming a distinction between a court erred in holding that SHARP was not a resident of Japan
resident defendant and non-resident and that summons on SHARP could only be validly served within
defendant were to be adopted, such that country.
distinction applies only to natural persons and
not in the corporations. This finds support in
A foreign judgment is presumed to be valid and binding in the
the concept that "a corporation has no home
country from which it comes, until the contrary is shown. It is also
or residence in the sense in which those
proper to presume the regularity of the proceedings and the giving process is so made, the government office or official served shall
of due notice therein.6 transmit by mail a copy of the summons or other legal proccess to
the corporation at its home or principal office. The sending of such
copy is a necessary part of the service. 12
Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a SHARP contends that the laws authorizing service of process
right as between the parties and their successors-in-interest by a upon the Securities and Exchange Commission, the
subsequent title. The judgment may, however, be assailed by Superintendent of Banks, and the Insurance Commissioner, as
evidence of want of jurisdiction, want of notice to the party, the case may be, presuppose a situation wherein the foreign
collusion, fraud, or clear mistake of law or fact. Also, under corporation doing business in the country no longer has any
Section 3 of Rule 131, a court, whether of the Philippines or branches or offices within the Philippines. Such contention is
elsewhere, enjoys the presumption that it was acting in the lawful belied by the pertinent provisions of the said laws. Thus, Section
exercise of jurisdiction and has regularly performed its official 128 of the Corporation Code 13 and Section 190 of the Insurance
duty. Code 14 clearly contemplate two situations: (1) if the corporation
had left the Philippines or had ceased to transact business
therein, and (2) if the corporation has no designated agent.
Consequently, the party attacking a foreign judgment has the
Section 17 of the General Banking Act 15 does not even speak a
burden of overcoming the presumption of its validity.7Being the
corporation which had ceased to transact business in the
party challenging the judgment rendered by the Japanese court,
Philippines.
SHARP had the duty to demonstrate the invalidity of such
judgment. In an attempt to discharge that burden, it contends that
the extraterritorial service of summons effected at its home office Nowhere in its pleadings did SHARP profess to having had a
in the Philippines was not only ineffectual but also void, and the resident agent authorized to receive court processes in Japan.
Japanese Court did not, therefore acquire jurisdiction over it. This silence could only mean, or least create an impression, that it
had none. Hence, service on the designated government official
or on any of SHARP's officers or agents in Japan could be availed
It is settled that matters of remedy and procedure such as those
of. The respondent, however, insists that only service of any of its
relating to the service of process upon a defendant are governed
officers or employees in its branches in Japan could be resorted
by the lex fori or the internal law of the forum.8 In this case, it is
to. We do not agree. As found by the respondent court, two
the procedural law of Japan where the judgment was rendered
attempts at service were made at SHARP's Yokohama branch.
that determines the validity of the extraterritorial service of
Both were unsuccessful. On the first attempt, Mr. Dinozo, who
process on SHARP. As to what this law is is a question of fact,
was believed to be the person authorized to accept court process,
not of law. It may not be taken judicial notice of and must be
was in Manila. On the second, Mr. Dinozo was present, but to
pleaded and proved like any other fact.9 Sections 24 and 25, Rule
accept the summons because, according to him, he was no
132 of the Rules of Court provide that it may be evidenced by an
longer an employee of SHARP. While it may be true that service
official publication or by a duly attested or authenticated copy
could have been made upon any of the officers or agents of
thereof. It was then incumbent upon SHARP to present evidence
SHARP at its three other branches in Japan, the availability of
as to what that Japanese procedural law is and to show that
such a recourse would not preclude service upon the proper
under it, the assailed extraterritorial service is invalid. It did not.
government official, as stated above.
Accordingly, the presumption of validity and regularity of the
service of summons and the decision thereafter rendered by the
Japanese court must stand. As found by the Court of Appeals, it was the Tokyo District Court
which ordered that summons for SHARP be served at its head
office in the Philippine's after the two attempts of service had
Alternatively in the light of the absence of proof regarding
failed. 16 The Tokyo District Court requested the Supreme Court of
Japanese
Japan to cause the delivery of the summons and other legal
law, the presumption of identity or similarity or the so-called
documents to the Philippines. Acting on that request, the
processual presumption 10 may be invoked. Applying it, the
Supreme Court of Japan sent the summons together with the
Japanese law on the matter is presumed to be similar with the
other legal documents to the Ministry of Foreign Affairs of Japan
Philippine law on service of summons on a private foreign
which, in turn, forwarded the same to the Japanese Embassy in
corporation doing business in the Philippines. Section 14, Rule 14
Manila . Thereafter, the court processes were delivered to the
of the Rules of Court provides that if the defendant is a foreign
Ministry (now Department) of Foreign Affairs of the Philippines,
corporation doing business in the Philippines, service may be
then to the Executive Judge of the Court of First Instance (now
made: (1) on its resident agent designated in accordance with law
Regional Trial Court) of Manila, who forthwith ordered Deputy
for that purpose, or, (2) if there is no such resident agent, on the
Sheriff Rolando Balingit to serve the same on SHARP at its
government official designated by law to that effect; or (3) on any
principal office in Manila. This service is equivalent to service on
of its officers or agents within the Philippines.
the proper government official under Section 14, Rule 14 of the
Rules of Court, in relation to Section 128 of the Corporation Code.
If the foreign corporation has designated an agent to receive Hence, SHARP's contention that such manner of service is not
summons, the designation is exclusive, and service of summons valid under Philippine laws holds no water.17
is without force and gives the court no jurisdiction unless made
upon him. 11
In deciding against the petitioner, the respondent court sustained
the trial court's reliance on Boudard vs. Tait 18where this Court
Where the corporation has no such agent, service shall be made held:
on the government official designated by law, to wit: (a) the
Insurance Commissioner in the case of a foreign insurance
The fundamental rule is that jurisdiction in
company; (b) the Superintendent of Banks, in the case of a
personam over nonresidents, so as to sustain
foreign banking corporation; and (c) the Securities and Exchange
a money judgment, must be based upon
Commission, in the case of other foreign corporations duly
licensed to do business in the Philippines. Whenever service of
personal service within the state which [T]he authority of a state over one of its
renders the judgment. citizens is not terminated by the mere fact of
his absence from the state. The state which
accords him privileges and affords protection
xxx xxx xxx
to him and his property by virtue of his
domicile may also exact reciprocal duties.
The process of a court, has no extraterritorial "Enjoyment of the privileges of residence
effect, and no jurisdiction is acquired over the within the state, and the attendant right to
person of the defendant by serving him invoke the protection of its laws, are
beyond the boundaries of the state. Nor has inseparable" from the various incidences of
a judgment of a court of a foreign country state citizenship. The responsibilities of that
against a resident of this country having no citizenship arise out of the relationship to the
property in such foreign country based on state which domicile creates. That
process served here, any effect here against relationship is not dissolved by mere absence
either the defendant personally or his from the state. The attendant duties, like the
property situated here. rights and privileges incident to domicile, are
not dependent on continuous presence in the
state. One such incident of domicile is
Process issuing from the courts of one state amenability to suit within the state even
or country cannot run into another, and
during sojourns without the state, where the
although a nonresident defendant may have state has provided and employed a
been personally served with such process in reasonable method for apprising such an
the state or country of his domicile, it will not
absent party of the proceedings against
give such jurisdiction as to authorize a him. 23
personal judgment against him.

The domicile of a corporation belongs to the state where it was


It further availed of the ruling in Magdalena Estate, incorporated. 24 In a strict technical sense, such domicile as a
Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the corporation may have is single in its essence and a corporation
principle laid down by the Iowa Supreme Court in the 1911 case can have only one domicile which is the state of its creation. 25
of Raher vs. Raher. 21

Nonetheless, a corporation formed in one-state may, for certain


The first three cases are, however, inapplicable. Boudard involved purposes, be regarded a resident in another state in which it has
the enforcement of a judgment of the civil division of the Court of offices and transacts business. This is the rule in our jurisdiction
First Instance of Hanoi, French Indo-China. The trial court
and apropos thereto, it may be necessery to quote what we stated
dismissed the case because the Hanoi court never acquired in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:
jurisdiction over the person of the defendant considering that
"[t]he, evidence adduced at the trial conclusively proves that
neither the appellee [the defendant] nor his agent or employees The issue is whether these Philippine
were ever in Hanoi, French Indo-China; and that the deceased branches or units may be considered
Marie Theodore Jerome Boudard had never, at any time, been his "residents of the Philippine Islands" as that
employee." In Magdalena Estate, what was declared invalid term is used in Section 20 of the Insolvency
resulting in the failure of the court to acquire jurisdiction over the Law . . . or residents of the state under the
person of the defendants in an action in personam was the laws of which they were respectively
service of summons through publication against non-appearing incorporated. The answer cannot be found in
resident defendants. It was claimed that the latter concealed the Insolvency Law itself, which contains no
themselves to avoid personal service of summons upon them. definition of the term, resident, or any clear
In Dial, the defendants were foreign corporations which were not, indication of its meaning. There are however
domiciled and licensed to engage in business in the Philippines other statutes, albeit of subsequent
and which did not have officers or agents, places of business, or enactment and effectivity, from which
properties here. On the other hand, in the instant case, SHARP enlightening notions of the term may be
was doing business in Japan and was maintaining four branches derived.
therein.
The National Internal Revenue Code
Insofar as to the Philippines is concerned, Raher is a thing of the declares that the term "'resident foreign
past. In that case, a divided Supreme Court of Iowa declared that corporation' applies to a foreign corporation
the principle that there can be no jurisdiction in a court of a engaged in trade or business within the
territory to render a personal judgment against anyone upon Philippines," as distinguished from a "'non-
service made outside its limits was applicable alike to cases of resident foreign corporation' . . . (which is
residents and non-residents. The principle was put at rest by the one) not engaged in trade or bussiness within
United States Supreme Court when it ruled in the 1940 case the Philippines." [Sec. 20, pars. (h) and (i)].
of Milliken vs. Meyer 22 that domicile in the state is alone sufficient
to bring an absent defendant within the reach of the state's
The Offshore Banking Law, Presidential
jurisdiction for purposes of a personal judgment by means of
Decree No. 1034, states "that branches,
appropriate substituted service or personal service without the
subsidiaries, affiliation, extension offices or
state. This principle is embodied in section 18, Rule 14 of the
any other units of corporation or juridical
Rules of Court which allows service of summons on residents
person organized under the laws of any
temporarily out of the Philippines to be made out of the country.
foreign country operating in the Philippines
The rationale for this rule was explained in Milliken as follows:
shall be considered residents of the Co., 46 Phil. 70, 76; Yu
Philippines. [Sec. 1(e)]. Cong Eng vs. Trinidad,
47 Phil. 385, 411) We
think it would be entirely
The General Banking Act, Republic Act No.
out of line with this policy
337, places "branches and agencies in the
should we make a
Philippines of foreign banks . . . (which are)
discrimination against a
called Philippine branches," in the same
foreign corporation, like
category as "commercial banks, savings
the petitioner, and
associations, mortgage banks, development
subject its property to the
banks, rural banks, stock savings and loan
harsh writ of seizure by
associations" (which have been formed and
attachment when it has
organized under Philippine laws), making no
complied not only with
distinction between the former and the latter
every requirement of law
in so far as the terms "banking institutions"
made specially of foreign
and "bank" are used in the Act [Sec. 2],
corporations, but in
declaring on the contrary that in "all matters
addition with every
not specifically covered by special provisions
requirement of law made
applicable only to foreign banks, or their
of domestic corporations.
branches and agencies in the Philippines,
...
said foreign banks or their branches and
agencies lawfully doing business in the
Philippines "shall be bound by all laws, rules, Obviously, the assimilation of foreign
and regulations applicable to domestic corporations authorized to do business in the
banking corporations of the same class, Philippines "to the status
except such laws, rules and regulations as of domestic corporations, subsumes their
provided for the creation, formation, being found and operating as corporations,
organization, or dissolution of corporations or hence, residing, in the country.
as fix the relation, liabilities, responsibilities,
or duties of members, stockholders or officers
The same principle is recognized in American
of corporation. [Sec. 18].
law: that the residence of a corporation, if it
can be said to have a residence, is
This court itself has already had occasion to necessarily where it exercises corporate
hold [Claude Neon Lights, Fed. Inc. vs. functions . . .;" that it is considered as
Philippine Advertising Corp., 57 Phil. 607] dwelling "in the place where its business is
that a foreign corporation licitly doing done . . .," as being "located where its
business in the Philippines, which is a franchises are exercised . . .," and as being
defendant in a civil suit, may not be "present where it is engaged in the
considered a non-resident within the scope of prosecution of the corporate enterprise;" that
the legal provision authorizing attachment a "foreign corporation licensed to do business
against a defendant not residing in the in a state is a resident of any country where it
Philippine Islands; [Sec. 424, in relation to maintains an office or agent for transaction of
Sec. 412 of Act No. 190, the Code of Civil its usual and customary business for venue
Procedure; Sec. 1(f), Rule 59 of the Rules of purposes;" and that the "necessary element
1940, Sec. 1(f), Rule 57, Rules of 1964] in in its signification is locality of existence."
other words, a preliminary attachment may [Words and Phrases, Permanent Ed., vol. 37,
not be applied for and granted solely on the pp. 394, 412, 493].
asserted fact that the defendant is a foreign
corporation authorized to do business in the
In as much as SHARP was admittedly doing business in Japan
Philippines — and is consequently and
through its four duly registered branches at the time the collection
necessarily, "a party who resides out of the
suit against it was filed, then in the light of the processual
Philippines." Parenthetically, if it may not be
presumption, SHARP may be deemed a resident of Japan, and,
considered as a party not residing in the
as such, was amenable to the jurisdiction of the courts therein
Philippines, or as a party who resides out of
and may be deemed to have assented to the said courts' lawful
the country, then, logically, it must be
methods of serving process. 27
considered a party who does reside in the
Philippines, who is a resident of the country.
Be this as it may, this Court pointed out that: Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity of
. . . Our laws and
performance of official duty.
jurisprudence indicate a
purpose to assimilate
foreign corporations, duly We find NORTHWEST's claim for attorney's fees, litigation
licensed to do business expenses, and exemplary damages to be without merit. We find
here, to the status of no evidence that would justify an award for attorney's fees and
domestic corporations. litigation expenses under Article 2208 of the Civil Code of the
(Cf. Section 73, Act No. Philippines. Nor is an award for exemplary damages warranted.
1459, and Marshall Wells Under Article 2234 of the Civil Code, before the court may
Co. vs. Henry W. Elser & consider the question of whether or not exemplary damages
should be awarded, the plaintiff must show that he is entitled to
moral, temperate, or compensatory damaged. There being no
such proof presented by NORTHWEST, no exemplary damages
may be adjudged in its favor.

WHEREFORE, the instant petition is partly GRANTED, and the


challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses, and
exemplary damages but REVERSED insofar as in sustained the
trial court's dismissal of NORTHWEST's complaint in Civil Case
No. 83-17637 of Branch 54 of the Regional Trial Court of Manila,
and another in its stead is hereby rendered ORDERING private
respondent C.F. SHARP L COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment
subject of said case, with interest thereon at the legal rate from
the filing of the complaint therein until the said foreign judgment is
fully satisfied.

Costs against the private respondent.

SO ORDERED.
G.R. No. 108538 January 22, 1996 This is in response to your letter, dated 20 June 1991,
which I received on 3 July 1991. Please address all
communications to my lawyer, Atty. Alfredo D.
LOURDES A. VALMONTE and ALFREDO D.
Valmonte, whose address, telephone and fax numbers
VALMONTE, petitioners,
appear below.
vs.
THE HONORABLE COURT OF APPEALS, THIRD DIVISION
and ROSITA DIMALANTA, respondents. c/o Prime Marine
Gedisco Center, Unit 304
1564 A. Mabini, Ermita
DECISION
Metro Manila
Telephone: 521-1736
MENDOZA, J.: Fax: 521-2095

Petitioner Lourdes A. Valmonte is a foreign resident. The question Service of summons was then made upon petitioner Alfredo D.
is whether in an action for partition filed against her and her Valmonte, who at the time, was at his office in Manila. Petitioner
husband, who is also her attorney, summons intended for her Alfredo D. Valmonte accepted the summons, insofar as he was
may be served on her husband, who has a law office in the concerned, but refused to accept the summons for his wife,
Philippines. The Regional Trial Court of Manila, Branch 48, said Lourdes A. Valmonte, on the ground that he was not authorized to
no and refused to declare Lourdes A. Valmonte in default, but the accept the process on her behalf. Accordingly the process server
Court of Appeals said yes. Hence this petition for review left without leaving a copy of the summons and complaint for
on certiorari. petitioner Lourdes A. Valmonte.

The facts of the case are as follows: Petitioner Alfredo D. Valmonte thereafter filed his Answer with
Counterclaim. Petitioner Lourdes A. Valmonte, however, did not
file her Answer. For this reason private respondent moved to
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are
declare her in default. Petitioner Alfredo D. Valmonte entered a
husband and wife. They are both residents of 90222 Carkeek special appearance in behalf of his wife and opposed the private
Drive South Seattle, Washington, U.S.A. Petitioner Alfredo D. respondent's motion.
Valmonte, who is a member of the Philippine bar, however,
practices his profession in the Philippines, commuting for this
purpose between his residence in the state of Washington and In its Order dated July 3, 1992, the trial court, denied private
Manila, where he holds office at S-304 Gedisco Centre, 1564 A. respondent's motion to declare petitioner Lourdes A. Valmonte in
Mabini Ermita, Manila. default. A motion for reconsideration was similarly denied on
September 23, 1992. Whereupon, private respondent filed a
petition for certiorari, prohibition and mandamus with the Court of
On March 9, 1992, private respondent Rosita Dimalanta, who is Appeals.
the sister of petitioner Lourdes A. Valmonte, filed a complaint for
partition of real property and accounting of rentals against
petitioners Lourdes A. Valmonte and Alfredo D. Valmonte before On December 29, 1992, the Court of Appeals rendered a decision
the Regional Trial Court of Manila, Branch 48. The subject of the granting the petition and declaring Lourdes A. Valmonte in
action is a three-door apartment located in Paco, Manila. default. A copy of the appellate court's decision was received by
petitioner Alfredo D. Valmonte on January 15, 1993 at his Manila
office and on January 21, 1993 in Seattle, Washington. Hence,
In her Complaint, private respondent alleged: this petition.

The plaintiff is of legal age, a widow and is at present a The issue at bar is whether in light of the facts set forth above,
resident of 14823 Conway Road, Chesterfield, Missouri, petitioner Lourdes A. Valmonte was validly served with summons.
U.S.A., while the defendants are spouses, of legal age
In holding that she had been, the Court of Appeals stated:1
and at present residents of 90222 Carkeek Drive, South
Seattle, Washington, U.S.A., but, for purposes of this
complaint may be served with summons at Gedisco [I]n her above-quoted reply, Mrs. Valmonte clearly and
Center, Unit 304, 1564 A. Mabini St., Ermita, Manila unequivocally directed the aforementioned counsel of Dimalanta
where defendant Alfredo D. Valmonte as defendant to address all communications (evidently referring to her
Lourdes Arreola Valmonte's spouse holds office and controversy with her sister Mrs. Dimalanta over the Paco
where he can be found. property, now the subject of the instant case) to her lawyer who
happens also to be her husband. Such directive was made
without any qualification just as was her choice/designation of her
Apparently, the foregoing averments were made on the basis of a
husband Atty. Valmonte as her lawyer likewise made without any
letter previously sent by petitioner Lourdes A. Valmonte to private qualification or reservation. Any disclaimer therefore on the part of
respondent's counsel in which, in regard to the partition of the Atty. Valmonte as to his being his wife's attorney (at least with
property in question, she referred private respondent's counsel to
regard to the dispute vis-a-vis (sic) the Paco property) would
her husband as the party to whom all communications intended appear to be feeble or trifling, if not incredible.
for her should be sent. The letter reads:

This view is bolstered by Atty. Valmonte's subsequent alleged


July 4, 1991 special appearance made on behalf of his wife. Whereas Mrs.
Valmonte had manifestly authorized her husband to serve as her
Dear Atty. Balgos: lawyer relative to her dispute with her sister over the Paco
property and to receive all communications regarding the same
and subsequently to appear on her behalf by way of a so-called
special appearance, she would nonetheless now insist that the In an action in personam, personal service of summons or, if this
same husband would nonetheless had absolutely no authority to is not possible and he cannot be personally served, substituted
receive summons on her behalf. In effect, she is asserting that service, as provided in Rule 14, §§7-82 is essential for the
representation by her lawyer (who is also her husband) as far as acquisition by the court of jurisdiction over the person of a
the Paco property controversy is concerned, should only be made defendant who does not voluntarily submit himself to the authority
by him when such representation would be favorable to her but of the court.3 If defendant cannot be served with summons
not otherwise. It would obviously be inequitable for this Court to because he is temporarily abroad, but otherwise he is a Philippine
allow private respondent Lourdes A. Valmonte to hold that her resident, service of summons may, by leave of court, be made by
husband has the authority to represent her when an advantage is publication.4 Otherwise stated, a resident defendant in an action in
to be obtained by her and to deny such authority when it would personam, who cannot be personally served with summons, may
turn out to be her disadvantage. If this be allowed, Our Rules of be summoned either by means of substituted service in
Court, instead of being an instrument to promote justice would be accordance with Rule 14, §8 or by publication as provided in §§
made use of to thwart or frustrate the same. 17 and 18 of the same Rule.5

xxx xxx xxx In all of these cases, it should be noted, defendant must be a
resident of the Philippines, otherwise an action in personam
cannot be brought because jurisdiction over his person is
Turning to another point, it would not do for Us to
essential to make a binding decision.
overlook the fact that the disputed summons was
served not upon just an ordinary lawyer of private
respondent Lourdes A. Valmonte, but upon her lawyer On the other hand, if the action is in rem or quasi in rem,
husband. But that is not all, the same lawyer/husband jurisdiction over the person of the defendant is not essential for
happens to be also her co-defendant in the instant case giving the court jurisdiction so long as the court acquires
which involves real property which, according to her jurisdiction over the res. If the defendant is a nonresident and he
lawyer/husband/co-defendant, belongs to the conjugal is not found in the country, summons may be served exterritorially
partnership of the defendants (the spouses Valmonte). in accordance with Rule 14, §17, which provides:
It is highly inconceivable and certainly it would be
contrary to human nature for the lawyer/husband/co-
§17. Extraterritorial service. - When the defendant does
defendant to keep to himself the fact that they (the
not reside and is not found in the Philippines and the
spouses Valmonte) had been sued with regard to a
action affects the personal status of the plaintiff or
property which, he claims to be conjugal.
relates to, or the subject of which is, property within the
Parenthetically, there is nothing in the records of the
Philippines, in which the defendant has or claims a lien
case before Us regarding any manifestation by private
or interest, actual or contingent, or in which the relief
respondent Lourdes A. Valmonte about her lack of
demanded consists, wholly or in part, in excluding the
knowledge about the case instituted against her and
defendant from any interest therein, or the property of
her lawyer/husband/co-defendant by her sister Rosita. .
the defendant has been attached within the Philippines,
..
service may, by leave of court, be effected out of the
Philippines by personal service as under section 7; or
PREMISES CONSIDERED, the instant petition by publication in a newspaper of general circulation in
for certiorari, prohibition and mandamus is given due such places and for such time as the court may order,
course. This Court hereby Resolves to nullify the orders in which case a copy of the summons and order of the
of the court a quo dated July 3, 1992 and September court shall be sent by registered mail to the last known
23, 1992 and further declares private respondent address of the defendant, or in any other manner the
Lourdes Arreola Valmonte as having been properly court may deem sufficient. Any order granting such
served with summons. leave shall specify a reasonable time, which shall not
be less than sixty (60) days after notice, within which
the defendant must answer..
Petitioners assail the aforequoted decision, alleging that the Court
of Appeals erred (1) in refusing to apply the provisions of Rule 14,
§17 of the Revised Rules of Court and applying instead Rule 14, In such cases, what gives the court jurisdiction in an action in
§8 when the fact is that petitioner Lourdes A. Valmonte is a rem or quasi in rem is that it has jurisdiction over the res, i.e. the
nonresident defendant; and (2) because even if Rule 14, §8 is the personal status of the plaintiff who is domiciled in the Philippines
applicable provision, there was no valid substituted service as or the property litigated or attached.
there was no strict compliance with the requirement by leaving a
copy of the summons and complaint with petitioner Alfredo D.
Service of summons in the manner provided in §17 is not for the
Valmonte. Private respondent, upon the other hand, asserts that
purpose of vesting it with jurisdiction but for complying with the
petitioners are invoking a technicality and that strict adherence to
requirements of fair play or due process, so that he will be
the rules would only result in a useless ceremony.
informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in
We hold that there was no valid service of process on Lourdes A. which he has an interest may be subjected to a judgment in favor
Valmonte. of the plaintiff and he can thereby take steps to protect his interest
if he is so minded.6
To provide perspective, it will be helpful to determine first the
nature of the action filed against petitioners Lourdes A. Valmonte Applying the foregoing rules to the case at bar, private
and Alfredo D. Valmonte by private respondent, whether it is an respondent's action, which is for partition and accounting under
action in personam, in rem or quasi in rem. This is because the Rule 69, is in the nature of an action quasi in rem. Such an action
rules on service of summons embodied in Rule 14 apply is essentially for the purpose of affecting the defendant's interest
according to whether an action is one or the other of these in a specific property and not to render a judgment against him.
actions.
As explained in the leading case of Banco Español Filipino v. summons (against the contention that it should be made in the
Palanca :7 foreign state where defendant was residing) sufficient,
nonetheless the service was considered insufficient because no
copy of the summons was sent to the last known correct address
[An action quasi in rem is] an action which while not strictly
in the Philippines..
speaking an action in rem partakes of that nature and is
substantially such. . . . The action quasi in rem differs from the
true action in rem in the circumstance that in the former an Private respondent cites the ruling in De Leon v. Hontanosas, 67
individual is named as defendant and the purpose of the SCRA 458,462-463 (1975), in which it was held that service of
proceeding is to subject his interest therein to the obligation or summons upon the defendant's husband was binding on her. But
lien burdening the property. All proceedings having for their sole the ruling in that case is justified because summons were served
object the sale or other disposition of the property of the upon defendant's husband in their conjugal home in Cebu City
defendant, whether by attachment, foreclosure, or other form of and the wife was only temporarily absent, having gone to
remedy, are in a general way thus designated. The judgment Dumaguete City for a vacation. The action was for collection of a
entered in these proceedings is conclusive only between the sum of money. In accordance with Rule 14, §8, substituted
parties. service could be made on any person of sufficient discretion in the
dwelling place of the defendant, and certainly defendant's
husband, who was there, was competent to receive the summons
As petitioner Lourdes A. Valmonte is a nonresident who is not
on her behalf. In any event, it appears that defendant in that case
found in the Philippines, service of summons on her must be in
submitted to the jurisdiction of the court by instructing her
accordance with Rule 14, §17. Such service, to be effective
husband to move for the dissolution of the writ of attachment
outside the Philippines, must be made either (1) by personal
issued in that case.
service; (2) by publication in a newspaper of general circulation in
such places and for such time as the court may order, in which
case a copy of the summons and order of the court should be On the other hand, in the case of Gemperle v. Schenker, 10 it was
sent by registered mail to the last known address of the held that service on the wife of a nonresident defendant was
defendant; or (3) in any other manner which the court may deem found sufficient because the defendant had appointed his wife as
sufficient. his attorney-in-fact. It was held that although defendant Paul
Schenker was a Swiss citizen and resident of Switzerland, service
of summons upon his wife Helen Schenker who was in the
Since in the case at bar, the service of summons upon petitioner
Philippines was sufficient because she was her husband's
Lourdes A. Valmonte was not done by means of any of the first
representative and attorney-in-fact in a civil case, which he had
two modes, the question is whether the service on her attorney,
earlier filed against William Gemperle. In fact Gemperle's action
petitioner Alfredo D. Valmonte, can be justified under the third
was for damages arising from allegedly derogatory statements
mode, namely, "in any . . . manner the court may deem sufficient."
contained in the complaint filed in the first case. As this Court
said, "[i]n other words, Mrs. Schenker had authority to sue, and
We hold it cannot. This mode of service, like the first two, must be had actually sued, on behalf of her husband, so that she was,
made outside the Philippines, such as through the Philippine also, empowered to represent him in suits filed against him,
Embassy in the foreign country where the defendant particularly in a case, like the one at bar, which is a consequence
resides.8 Moreover, there are several reasons why the service of of the action brought by her on his behalf" 11 Indeed, if instead of
summons on Atty. Alfredo D. Valmonte cannot be considered a filing an independent action Gemperle filed a counterclaim in the
valid service of summons on petitioner Lourdes A. Valmonte. In action brought by Mr. Schenker against him, there would have
the first place, service of summons on petitioner Alfredo D. been no doubt that the trial court could have acquired jurisdiction
Valmonte was not made upon the order of the court as required over Mr. Schenker through his agent and attorney-in-fact, Mrs.
by Rule 14, §17 and certainly was not a mode deemed sufficient Schenker.
by the court which in fact refused to consider the service to be
valid and on that basis declare petitioner Lourdes A. Valmonte in
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did
default for her failure to file an answer.
not appoint her husband as her attorney-in-fact. Although she
wrote private res- pondent's attorney that "all communications"
In the second place, service in the attempted manner on intended for her should be addressed to her husband who is also
petitioner was not made upon prior leave of the trial court as her lawyer at the latter's address in Manila, no power of attorney
required also in Rule 14, §17. As provided in §19, such leave to receive summons for her can be inferred therefrom. In fact the
must be applied for by motion in writing, supported by affidavit of letter was written seven months before the filing of this case
the plaintiff or some person on his behalf and setting forth the below, and it appears that it was written in connection with the
grounds for the application. negotiations between her and her sister, respondent Rosita
Dimalanta, concerning the partition of the property in question. As
is usual in negotiations of this kind, the exchange of
Finally, and most importantly, because there was no order correspondence was carried on by counsel for the parties. But the
granting such leave, petitioner Lourdes A. Valmonte was not authority given to petitioner's husband in these negotiations
given ample time to file her Answer which, according to the rules,
certainly cannot be construed as also including an authority to
shall be not less than sixty (60) days after notice. It must be noted represent her in any litigation.
that the period to file an Answer in an action against a resident
defendant differs from the period given in an action filed against a
nonresident defendant who is not found in the Philippines. In the For the foregoing reasons, we hold that there was no valid service
former, the period is fifteen (15) days from service of summons, on petitioner Lourdes A. Valmonte in this case.
while in the latter, it is at least sixty (60) days from notice.
WHEREFORE, the decision appealed from is REVERSED and
Strict compliance with these requirements alone can assure the orders dated July 3, 1992 and September 23, 1992 of the
observance of due process. That is why in one case, 9 although Regional Trial Court of Manila, Branch 48 are REINSTATED
the Court considered publication in the Philippines of the
G.R. No. 127692 March 10, 2004 After trial on the merits, the RTC rendered its decision on March
1993, with the following disposition:
FORTUNATO GOMEZ and AURORA GOMEZ, petitioners,
vs. WHEREFORE, premises considered, judgment is hereby
COURT OF APPEALS, ADOLFO TROCINO and MARIANO rendered in favor of the plaintiffs and against the defendants.
TROCINO, respondents.
The latter are hereby ordered to jointly and severally execute a
DECISION Deed of Sale in favor of the plaintiffs and to deliver the owner’s
duplicate copies of TCT Nos. 10616 and 31856, covering the
properties sold, to the plaintiffs within ten (10) days from the
AUSTRIA-MARTINEZ, J.:
finality of the judgment, after which plaintiffs shall pay in turn to
the defendants the balance of ₱2,000,000.00. Otherwise, the sale
Before the Court is a petition for review on certiorari under Rule is rescinded and revoked and the defendants are directed to
45 of the Rules of Court assailing the decision1 of the Court of return to the plaintiffs the amount of ₱500,000.00, with interest of
Appeals dated September 30, 1996, in CA-G.R. SP No. 40067, 12% per annum computed from December 6, 1989, until the full
nullifying the decision and orders of the Regional Trial Court of amount is paid.
Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of
jurisdiction.
In addition thereto, defendants are to pay jointly and severally to
the plaintiffs, the amount of ₱50,000.00 as moral damages;
Civil Case No. CEB-11103 is an action for specific performance ₱20,000.00 as exemplary damages; ₱40,000.00 by way of
and/or rescission filed by herein petitioners, spouses Fortunato attorney’s fees; and ₱10,000.00 as litigation expenses.
and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr.,
which include herein respondents and their mother Caridad
SO ORDERED.5
Trocino.2

Due to the defendants’ failure to deliver the owner’s duplicate of


Filed on December 16, 1991, the complaint alleges: Some time in
TCT Nos. 10616 and 31856, the RTC issued an order on August
1975, the spouses Jesus and Caridad Trocino mortgaged two
29, 1995 declaring said titles null and void, and ordering the
parcels of land covered by TCT Nos. 10616 and 31856 to Dr.
Register of Deeds of Cebu City to issue new titles in the name of
Clarence Yujuico. The mortgage was subsequently foreclosed
herein petitioners.6
and the properties sold at public auction on July 11, 1988, and
before the expiry of the redemption period, the spouses Trocino
sold the property to petitioners on December 12, 1989, who in Thereafter, or on March 13, 1996, respondents Adolfo and
turn, redeemed the same from Dr. Yujuico. The spouses Trocino, Mariano Trocino filed with the Court of Appeals, a petition for the
however, refused to convey ownership of the properties to annulment of the judgment rendered by the RTC-Cebu (Branch
petitioners, hence, the complaint. 10) in Civil Case No. CEB-11103. Private respondents alleged
that the trial court’s decision is null and void on the ground that it
did not acquire jurisdiction over their persons as they were not
On January 10, 1992, the trial court’s Process Server served
validly served with a copy of the summons and the complaint.
summons on respondents, in the manner described in his "Return
According to them, at the time summons was served on them,
of Service," to wit:
Adolfo Trocino was already in Ohio, U.S.A., and has been
residing there for 25 years, while Mariano Trocino was in Talibon,
Respectfully returned to the Branch Clerk of Court, Regional Trial Bohol, and has been residing there since 1986. They also refuted
Court of Cebu, Branch 10, the herein attached original summons the receipt of the summons by Caridad A. Trocino, and the
issued in the above-entitled case with the information that on representation made by Atty. Bugarin in their behalf. Respondents
January 8, 1992 summons and copies of the complaint were also contended that they have a meritorious defense. 7 Petitioners
served to the defendants Jacob, Jesus Jr., Adolfo, Mariano, filed their Comment/Answer to the petition.8
Consolacion, Alice, Racheal thru defendant Caridad Trocino at
their given address at Maria Cristina Extension (besides Sacred
On September 30, 1996, the Court of Appeals issued the assailed
Heart School for Girls), Cebu City, evidence by her signature
Decision granting the petition and annulling the decision of the
found at the lower portion of the original summons.3
RTC-Cebu (Branch 10). The decretal portion of the decision
reads:
WHEREFORE I, respectfully return the original summons duly
served to the court of origin.
WHEREFORE, the decision of the Regional Trial Court of Cebu
City, Branch 10, in Civil Case No. CEB-11103 as well as all
Cebu City, Philippines, January 10, 1992. Orders issued to implement the same are hereby ANNULLED
AND SET ASIDE. The Register of Deeds of Cebu City is hereby
ENJOINED from cancelling Transfer Certificates of Title Nos.
(signed) 10616 and 31856. No pronouncement as to costs.

DELFIN D. BARNIDO SO ORDERED.9


RTC Process Server

Their motion for reconsideration having been denied by the Court


On January 27, 1992, the defendants, through their counsel Atty. of Appeals, petitioners filed the present petition, setting forth the
Expedito P. Bugarin, filed their Answer. Defendant Caridad A. following assignment of errors:
Trocino, respondents’ mother, verified said pleading.4
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF if the defendant is not physically present in the country, and thus,
PRIOR KNOWLEDGE ON THE PART OF RESPONDENTS the court cannot acquire jurisdiction over his person and therefore
TROCINO, REGARDING THE PROCEEDINGS BEFORE THE cannot validly try and decide the case against him.17 An exception
RTC OF CEBU CITY AND IN NOT DISMISSING THE PETITION was accorded in Gemperle vs. Schenker wherein service of
FOR VIOLATION OF SUPREME COURT CIRCULAR 04-94. summons through the non-resident’s wife, who was a resident of
the Philippines, was held valid, as the latter was his
representative and attorney-in-fact in a prior civil case filed by the
II. THE COURT OF APPEALS ERRED IN DECLARING THE
non-resident, and the second case was merely an offshoot of the
NEED FOR PERSONAL AND/OR EXTRATERRITORIAL
first case.18
SERVICE OF SUMMONS, DESPITE THE NATURE OF THE
CAUSE OF ACTION BEING ONE IN REM.
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction
III. THE COURT OF APPEALS ERRED IN ANNULLING THE
on the court provided that the court acquires jurisdiction over the
JUDGMENT, CAUSING FURTHER USELESS LITIGATION AND
res, although summons must be served upon the defendant in
UNNECESSARY EXPENSE ON PETITIONERS AND
order to satisfy the due process requirements.19 Thus, where the
RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE
defendant is a non-resident who is not found in the Philippines,
NOT SHOWN ANY VALID DEFENSE AS GROUND FOR
and (1) the action affects the personal status of the plaintiff; (2)
REVERSAL OF JUDGMENT OF THE RTC.
the action relates to, or the subject matter of which is property in
the Philippines in which the defendant has or claims a lien or
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS interest; (3) the action seeks the exclusion of the defendant from
JUDGMENT IS APPLICABLE IN FAVOR OF CARIDAD any interest in the property located in the Philippines; or (4) the
TROCINO.10 property of the defendant has been attached in the Philippines,
summons may be served extraterritorially by (a) personal service
out of the country, with leave of court; (b) publication, also with
Summons is a writ by which the defendant is notified of the action leave of court; or (c) any other manner the court may deem
brought against him. Service of such writ is the means by which
sufficient.20
the court acquires jurisdiction over his person.11 Any judgment
without such service in the absence of a valid waiver is null and
void.12 In the present case, petitioners’ cause of action in Civil Case No.
CEB-11103 is anchored on the claim that the spouses Jesus and
Caridad Trocino reneged on their obligation to convey ownership
The resolution of the present petition hinges on the issue of of the two parcels of land subject of their sale. Thus, petitioners
whether or not summons was effectively served on respondents. pray in their complaint that the spouses Trocino be ordered to
If in the affirmative, the trial court had validly acquired jurisdiction execute the appropriate deed of sale and that the titles be
over their persons and therefore its judgment is valid.
delivered to them (petitioners); or in the alternative, that the sale
be revoked and rescinded; and spouses Trocino ordered to return
To resolve whether there was valid service of summons on to petitioners their down payment in the amount of P500,000.00
respondents, the nature of the action filed against them must first plus interests. The action instituted by petitioners affect the
be determined. As the Court explained in Asiavest Limited vs. parties alone, not the whole world. Hence, it is an action in
Court of Appeals, it will be helpful to determine first whether the personam, i.e., any judgment therein is binding only upon the
action is in personam, in rem, or quasi in rem because the rules parties properly impleaded.21
on service of summons under Rule 14 of the Rules of Court of the
Philippines apply according to the nature of the action. 13 Contrary to petitioners’ belief, the complaint they filed for specific
performance and/or rescission is not an action in rem. While it is a
In actions in personam, summons on the defendant must be real action because it affects title to or possession of the two
served by handing a copy thereof to the defendant in person, or, if parcels of land covered by TCT Nos. 10616 and 31856, it does
he refuses to receive it, by tendering it to him. This is specifically not automatically follow that the action is already one in rem. In
provided in Section 7, Rule 14 of the Rules of Court, 14 which Hernandez vs. Rural Bank of Lucena, Inc., the Court made the
states: following distinction:

SEC. 7. Personal service of summons.-- The summons shall be In a personal action, the plaintiff seeks the recovery of personal
served by handing a copy thereof to the defendant in person or, if property, the enforcement of a contract or the recovery of
he refuses to receive it, by tendering it to him. damages. In a real action, the plaintiff seeks the recovery of real
property, or, as indicated in section 2(a) of Rule 4, a real action is
an action affecting title to real property or for the recovery of
If efforts to find defendant personally makes prompt service possession, or for partition or condemnation of, or foreclosure of a
impossible, substituted service may be effected by leaving copies mortgage on, real property.
of the summons at the defendant's dwelling house or residence
with some person of suitable age and discretion then residing
therein, or by leaving the copies at the defendant's office or An action in personam is an action against a person on the basis
regular place of business with some competent person in charge of his personal liability, while an action in rem is an action against
thereof.15 In substituted service, it is mandated that the fact of the thing itself, instead of against the person. Hence, a real action
impossibility of personal service should be explained in the proof may at the same time be an action in personam and not
of service.16 necessarily an action in rem.22

When the defendant in an action in personam is a non-resident The objective sought in petitioners’ complaint was to establish a
who does not voluntarily submit himself to the authority of the claim against respondents for their alleged refusal to convey to
court, personal service of summons within the State is essential to them the title to the two parcels of land that they inherited from
the acquisition of jurisdiction over his person. This cannot be done their father, Jesus Trocino, who was one of the sellers of the
properties to petitioners. Hence, to repeat, Civil Case No. CEB- that it is binding on a co-defendant. Furthermore, Caridad Trocino
11103 is an action in personam because it is an action against represented herself as the principal defendant in her Motion to
persons, namely, herein respondents, on the basis of their Withdraw Appeal. (Rollo, p. 80)
personal liability. As such, personal service of summons upon
the defendants is essential in order for the court to acquire of
Since the defendant heirs are co-defendants, the trial court should
jurisdiction over their persons.23
have verified the extent of Atty. Bugarin’s authority when
petitioners failed to appear as early as the pre-trial stage, where
A distinction, however, must be made with regard to service of the parties are required to appear. The absence of the defendant
summons on respondents Adolfo Trocino and Mariano Trocino. heirs should have prompted the trial court to inquire from the
Adolfo Trocino, as records show, is already a resident of Ohio, lawyer whether he was also representing the other petitioners. As
U.S.A. for 25 years. Being a non-resident, the court cannot co-defendant and co-heirs over the disputed properties, the
acquire jurisdiction over his person and validly try and decide the defendant heirs had every right to be present during the trial. Only
case against him. Caridad Trocino appeared and testified on her own behalf. All the
defenses raised were her own, not the defendant heirs. 29
On the other hand, Mariano Trocino has been in Talibon, Bohol
since 1986. To validly acquire jurisdiction over his person, Consequently, the judgment sought to be executed against
summons must be served on him personally, or through respondents were rendered without jurisdiction as there was
substituted service, upon showing of impossibility of personal neither a proper service of summons nor was there any waiver or
service. Such impossibility, and why efforts exerted towards voluntary submission to the trial court’s jurisdiction. Hence, the
personal service failed, should be explained in the proof of same is void, with regard to private respondents except Caridad
service. The pertinent facts and circumstances attendant to the Trocino.
service of summons must be stated in the proof of service or
Officer’s Return. Failure to do so would invalidate all subsequent
It must be pointed out that while it was the spouses Jesus and
proceedings on jurisdictional grounds.24
Caridad Trocino who sold the properties to petitioners, their right
to proceed against Jesus Trocino when he died was passed on to
In the present case, the process server served the summons and his heirs, which includes respondents and Caridad Trocino. Such
copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo, transmission of right occurred by operation of law, more
Mariano, Consolacion, Alice and Racheal,25 through their mother, particularly by succession, which is a mode of acquisition by
Caridad Trocino.26 The return did not contain any particulars as to virtue of which the property, rights and obligations to the extent of
the impossibility of personal service on Mariano Trocino within a the value of the inheritance of a person are transmitted. 30 When
reasonable time. Such improper service renders the same the process server personally served the summons on Caridad
ineffective. Trocino, the trial court validly acquired jurisdiction over her person
alone. Hence, the trial court’s decision is valid and binding with
regard to her, but only in proportion to Caridad Trocino’s share.
Due process of law requires personal service to support a
As aptly stated by the Court of Appeals:
personal judgment, and, when the proceeding is strictly in
personam brought to determine the personal rights and
obligations of the parties, personal service within the state or a This Court’s decision is therefore applicable to all the defendant
voluntary appearance in the case is essential to the acquisition of heirs with the exception of defendant Caridad Trocino considering
jurisdiction so as to constitute compliance with the constitutional that it was the latter who entered into the alleged sale without the
requirement of due process.27 consent of her husband. She is therefore estopped from
questioning her own authority to enter into the questioned sale.
Moreover, Caridad Trocino was validly served with summons and
Moreover, inasmuch as the sheriff’s return failed to state the facts
was accorded due process.31
and circumstances showing the impossibility of personal service
of summons upon respondents within a reasonable time,
petitioners should have sought the issuance of an alias summons. WHEREFORE, the petition for review is DENIED. The decision of
Under Section 5, Rule 14 of the Rules of Court, alias summons the Court of Appeals in CA-G.R. SP No. 40067 is AFFIRMED.
may be issued when the original summons is returned without
being served on any or all of the defendants. 28 Petitioners,
Costs against petitioners.
however, did not do so, and they should now bear the
consequences of their lack of diligence.
SO ORDERED.
The fact that Atty. Expedito Bugarin represented all the
respondents without any exception does not transform the
ineffective service of summons into a valid one. It does not
constitute a valid waiver or even a voluntary submission to the
trial court’s jurisdiction. There was not even the slightest proof
showing that respondents authorized Atty. Bugarin’s appearance
for and in their behalf. As found by the Court of Appeals:

While Caridad Trocino may have engaged the services of Atty.


Bugarin, it did not necessarily mean that Atty. Bugarin also had
the authority to represent the defendant heirs. The records show
that in all the pleadings which required verification, only Caridad
Trocino signed the same. There was never a single instance
where defendant heirs signed the pleading. The fact that a
pleading is signed by one defendant does not necessarily mean
G.R. No. 158407 January 17, 2005 exemplary damages in the amount of TWENTY
THOUSAND (₱20,000.00) PESOS, and, costs.
FILOMENA DOMAGAS, petitioner,
vs. Plaintiff further prays for other reliefs and remedies just and
VIVIAN LAYNO JENSEN, respondent. equitable in the premises.4

DECISION 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
CALLEJO, SR., J.:
Sheriff by her (the respondent’s) brother, Oscar Layno, who was
then in the respondent’s house at No. 572 Barangay Buenlag,
This is a petition for review on certiorari, under Rule 45 of the Calasiao, Pangasinan. The Sheriff left the summons and
Rules of Court, of the Decision1 of the Court of Appeals (CA) in complaint with Oscar Layno, who received the same.5
CA-G.R. CV No. 73995, which affirmed the Decision2 of the
Regional Trial Court (RTC) of Dagupan City, Branch 44, in Civil
Nonetheless, on May 17, 1999, the court rendered judgment
Case No. 2000-0244-D, which declared null and void the decision
ordering the respondent and all persons occupying the property
of the Municipal Trial Court (MTC) of Calasiao, Pangasinan in
for and in the latter’s behalf to vacate the disputed area and to
Civil Case No. 879.3
pay monthly rentals therefor, including actual damages, attorney’s
fees, and exemplary damages. The fallo of the decision reads:
The antecedent facts follow.
1) Ordering the defendant, her representatives, agents
On February 19, 1999, petitioner Filomena Domagas filed a and persons acting under her, to vacate the 68-square
complaint for forcible entry against respondent Vivian Jensen meters which she encroached upon;
before the MTC of Calasiao, Pangasinan. The petitioner alleged
in her complaint that she was the registered owner of a parcel of
2) Ordering the defendant to pay a monthly rental of
land covered by Original Certificate of Title (OCT) No. P-30980,
₱1,000.00 to the plaintiff;
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 3) To pay plaintiff actual damages of ₱20,000.00;
petitioner’s property by excavating a portion thereof and thereafter attorney’s fees of ₱15,000.00 and exemplary damages
constructing a fence thereon. As such, the petitioner was deprived in the amount of ₱20,000.00 plus the costs.
of a 68-square meter portion of her property along the boundary
line. The petitioner prayed that, after due proceedings, judgment
SO ORDERED.6
be rendered in her favor, thus:

The respondent failed to appeal the decision. Consequently, a


3. And, after trial, judgment be rendered:
writ of execution was issued on September 27, 1999.

a) DECLARING the writ of Preliminary Mandatory


On August 16, 2000, the respondent filed a complaint against the
Injunction and Writ of Preliminary Injunction permanent;
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
b) ORDERING defendant, his representatives, agents due to the Sheriff’s failure to serve the complaint and summons
and persons acting under her, to vacate the portion of on her because she was in Oslo, Norway, the MTC never
the property of the plaintiff occupied by them and to acquired jurisdiction over her person. The respondent alleged
desist from entering, excavating and constructing in the therein that the service of the complaint and summons through
said property of the plaintiff described in paragraph 2 substituted service on her brother, Oscar Layno, was improper
hereof and/or from disturbing the peaceful ownership because of the following: (a) when the complaint in Civil Case No.
and possession of the plaintiff over the said land, 879 was filed, she was not a resident of Barangay Buenlag,
pending the final resolution of the instant action; 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)
c) ORDERING defendant to pay reasonable rental at
she was in Oslo, Norway, at the time the summons and the
FIVE THOUSAND (₱5,000.00) PESOS per month from
complaint were served; (c) her brother, Oscar Layno, was merely
January 9, 1999 up to the time she finally vacates and
visiting her house in Barangay Buenlag and was not a resident
removes all constructions made by her in the property
nor an occupant thereof when he received the complaint and
of the plaintiff and up to the time she finally restores the
summons; and (d) Oscar Layno was never authorized to receive
said property in the condition before her illegal entry,
the summons and the complaint for and in her behalf.7
excavation and construction in the property of the
plaintiff;
The respondent further alleged that the MTC had no jurisdiction
over the subject matter of the complaint in Civil Case No. 879
d) ORDERING defendant to pay actual damages in the
because the petitioner, the plaintiff therein, failed to show prior
amount of TWENTY THOUSAND (₱20,000.00)
possession of the property. She further claimed that the alleged
PESOS; moral damages in the amount of TWENTY
forcible entry was simply based on the result of the survey
THOUSAND (₱20,000.00) PESOS; attorney’s fees of
conducted by Geodetic Engineer Leonardo de Vera showing that
THIRTY THOUSAND (₱30,000.00) PESOS in retainer’s
the property of the respondent encroached on that of the
fee and ONE THOUSAND FIVE HUNDRED
petitioner.
(₱1,500.00) PESOS per court appearance fee;
The respondent filed a Manifestation dated August 31, 2000, and and void, for lack of jurisdiction over the person of the
appended thereto the following: (a) a copy8 of her passport plaintiff and the subject matter.
showing that she left the country on February 17, 1999; (b) a
copy9 of the Contract of Lease dated November 24, 1997,
2. Defendant Filomena Domagas is ordered to pay
executed by her and Eduardo D. Gonzales over her house for a
plaintiff, the following:
period of three (3) years or until November 24, 2000; (c) her
affidavit10 stating, inter alia, that she owned the house at
Barangay Buenlag, Calasiao, Pangasinan, which she leased to a.) Actual damages, representing litigation
Eduardo Gonzales; that she was married to Jarl Jensen, a citizen expenses in the amount of ₱50,000.00;
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 b.) Attorney’s fees in the amount of
to the Philippines on July 30, 2000 and learned, only then, of the ₱50,000.00;
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 c.) Moral Damages in the amount of
at Barangay Buenlag; and that she never received the complaint ₱50,000.00;
and summons in said case; (d) the affidavit 11 of Oscar Layno
declaring that sometime in April 1999, he was in the respondent’s
house to collect rentals from Eduardo Gonzales; that the Sheriff d.) Exemplary Damages in the amount of
arrived and served him with a copy of the summons and the ₱50,000.00; and
complaint in Civil Case No. 879; and that he never informed the
respondent of his receipt of the said summons and complaint; (e) e.) Costs of suit.
an affidavit12 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 SO ORDERED.17
the respondent to occupy a room therein whenever she returned
to the Philippines as a balikbayan; and that Oscar Layno was not The trial court declared that there was no valid service of the
residing therein but only collected the rentals. complaint and summons on the respondent, the defendant in Civil
Case No. 879, considering that she left the Philippines on
In her answer to the complaint, the petitioner alleged that the February 17, 1999 for Oslo, Norway, and her brother Oscar Layno
respondent was a resident of Barangay Buenlag, Calasiao, was never authorized to receive the said complaint and summons
Pangasinan and was the owner of the subject premises where for and in her behalf.
Oscar Layno was when the Sheriff served the summons and
complaint; that the service of the complaint and summons by The petitioner appealed the decision to the CA which, on May 6,
substituted service on the respondent, the defendant in Civil Case 2003, rendered judgment affirming the appealed decision with
No. 879, was proper since her brother Oscar Layno, a resident modifications. The CA ruled that the complaint in Civil Case No.
and registered voter of Barangay. Buenlag, Calasiao, 879 was one for ejectment, which is an action quasi in rem. The
Pangasinan, received the complaint and summons for and in her appellate court ruled that since the defendant therein was
behalf. temporarily out of the country, the summons and the complaint
should have been served via extraterritorial service under Section
The petitioner appended the following to her answer: (a) a 15 in relation to Section 16, Rule 14 of the Rules of Court, which
copy13 of the Deed of Absolute Sale executed by Jose Layno in likewise requires prior leave of court. Considering that there was
her favor, dated August 26, 1992, showing that the respondent no prior leave of court and none of the modes of service
was a resident of Barangay Buenlag, Calasiao, Pangasinan; (b) a prescribed by the Rules of Court was followed by the petitioner,
Real Estate Mortgage14 executed by the respondent, dated the CA concluded that there was really no valid service of
February 9, 1999 showing that she was a resident of Barangay summons and complaint upon the respondent, the defendant in
Buenlag, Calasiao, Pangasinan; (c) the Joint Affidavit 15 of Vicenta Civil Case No. 879.
Peralta and Orlando Macalanda, both residents of Barangay
Buenlag, Calasiao, Pangasinan, declaring that the respondent Hence, the present petition.
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 petitioner assails the decision of the CA, alleging that the
the country on several occasions, she returned to the Philippines appellate court erred in holding that the respondent’s complaint
and resided in her house at No. 572 located in the said barangay; for ejectment is an action quasi in rem. The petitioner insists that
and (d) the Voter’s Registration Record16 of Oscar Layno, the complaint for forcible entry is an action in personam;
approved on June 15, 1997. 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
After due proceedings, the trial court rendered a decision in favor Oscar Layno is a resident and a registered voter of Barangay
of the respondent. The dispositive portion reads: Buenlag, Calasiao, Pangasinan; hence, the service of the
complaint and summons on the respondent through him is valid.
WHEREFORE, judgment is rendered in favor of plaintiff Vivian
Layno Jensen and against defendant Filomena Domagas, as The respondent, on the other hand, asserts that the action for
follows: 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
1. The Decision of the Municipal Trial Court of Calasiao, Rule 14, which calls for extraterritorial service of summons.
Pangasinan in Civil Case No. 879, entitled Filomena
Domagas versus Vivian Layno Jensen is declared null
The sole issue is whether or not there was a valid service of the Under Section 15, Rule 70 of the said Rule, the plaintiff may be
summons and complaint in Civil Case No. 879 on the respondent granted a writ of preliminary prohibition or mandatory injunction:
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
Sec. 15. Preliminary Injunction. – The court may grant preliminary
the petitioner in the MTC against the respondent herein is an
injunction, in accordance with the provisions of Rule 58 hereof, to
action in personam or quasi in rem.
prevent the defendant from committing further acts of
dispossession against the plaintiff.
The ruling of the CA that the petitioner’s complaint for forcible
entry of the petitioner against the respondent in Civil Case No.
A possessor deprived of his possession through forcible entry or
879 is an action quasi in rem, is erroneous. The action of the
unlawful detainer may, within five (5) days from the filing of the
petitioner for forcible entry is a real action and one in personam.
complaint, present a motion in the action for forcible entry or
unlawful detainer for the issuance of a writ of preliminary
The settled rule is that the aim and object of an action determine mandatory injunction to restore him in his possession. The court
its character.18 Whether a proceeding is in rem, or in personam, shall decide the motion within thirty (30) days from the filing
or quasi in rem for that matter, is determined by its nature and thereof.
purpose, and by these only.19 A proceeding in personam is a
proceeding to enforce personal rights and obligations brought
If, after due proceedings, the trial court finds for the plaintiff, it
against the person and is based on the jurisdiction of the person,
shall then render judgment in his or her favor, thus:
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. 20The purpose of Sec. 17. Judgment. – If, after trial, the court finds that the
a proceeding in personam is to impose, through the judgment of a allegations of the complaint are true, it shall render judgment in
court, some responsibility or liability directly upon the person of favor of the plaintiff for the restitution of the premises, the sum
the defendant.21 Of this character are suits to compel a defendant justly due as arrears of rent or as reasonable compensation for
to specifically perform some act or actions to fasten a pecuniary the use and occupation of the premises, attorney’s fees and
liability on him.22 An action in personam is said to be one which costs. If it finds that said allegations are not true, it shall render
has for its object a judgment against the person, as distinguished judgment for the defendant to recover his costs. If a counterclaim
from a judgment against the propriety to determine its state. It has is established, the court shall render judgment for the sum found
been held that an action in personam is a proceeding to enforce in arrears from either party and award costs as justice requires.
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. From the aforementioned provisions of the Rules of Court and by
Combs,24 the appellate court held that proceedings to enforce its very nature and purpose, an action for unlawful detainer or
forcible entry is a real action and in personam because the
personal rights and obligations and in which personal judgments
are rendered adjusting the rights and obligations between the plaintiff seeks to enforce a personal obligation or liability on the
affected parties is in personam. Actions for recovery of real defendant under Article 539 of the New Civil Code, 29 for the latter
to vacate the property subject of the action, restore physical
property are in personam.25
possession thereof to the plaintiff, and pay actual damages by
way of reasonable compensation for his use or occupation of the
On the other hand, a proceeding quasi in rem is one brought property.30
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 As gleaned from the averments of the petitioner’s complaint in the
MTC, she sought a writ of a preliminary injunction from the MTC
proceeding is to subject his interests therein to the obligation or
loan burdening the property.27 Actions quasi in rem deal with the and prayed that the said writ be made permanent. Under its
status, ownership or liability of a particular property but which are decision, the MTC ordered the defendant therein (the respondent
in this case), to vacate the property and pay a "monthly rental" of
intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off ₱1,000.00 to the plaintiff therein (the petitioner in this case).
the rights or interests of all possible claimants. The judgments
therein are binding only upon the parties who joined in the On the issue of whether the respondent was validly served with
action.28 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
Section 1, Rule 70 of the Rules of Court provides:
may be served on the respondent, by substituted service, through
her brother, Oscar Layno, in accordance with Section 7, Rule 14
Section 1. Who may institute proceedings, and when. - Subject to of the Rules of Court. The petitioner avers that Oscar Layno, a
the provisions of the next succeeding section, a person deprived person of suitable age and discretion, was residing in the house
of the possession of any land or building in force, intimidation, of the respondent on April 5, 1999. She avers that the fact that the
threat, strategy, or stealth, or a lessor, vendor, vendee, or other house was leased to and occupied by Eduardo Gonzales was of
person against whom the possession of any land or building is no moment. Moreover, the Sheriff is presumed to have performed
unlawfully withheld after the expiration or termination of the right his duty of properly serving the summons on the respondent by
to hold possession by virtue of any contract, express or implied, substituted service.
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 The contention of the petitioner has no merit.
an action in the proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of possession, or any In Asiavest Limited v. Court of Appeals ,31 the Court had the
person or persons claiming under them, for the restitution of such occasion to state:
possession, together with damages and costs.
In an action in personam, jurisdiction over the person of the suitable age and discretion residing in the house of the defendant.
defendant is necessary for the court to validly try and decide the Compliance with the rules regarding the service of summons is as
case. Jurisdiction over the person of a resident defendant who much important as the issue of due process as of jurisdiction.39
does not voluntarily appear in court can be acquired by personal
service of summons as provided under Section 7, Rule 14 of the
The Return of Service filed by Sheriff Eduardo J. Abulencia on the
Rules of Court. If he cannot be personally served with summons
service of summons reads:
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 Respectfully returned to the court of origin the herein summons
resorted to: (a) substituted service set forth in Section 8; (2) and enclosures in the above-entitled case, the undersigned
personal service outside the country, with leave of court; (3) caused the service on April 5, 1999.
service by publication, also with leave of court; or (4) any other
manner the court may deem sufficient.32
Defendant Vivian Layno Jensen is out of the country as per
information from her brother Oscar Layno, however, copy of
Thus, any judgment of the court which has no jurisdiction over the summons and enclosures was received by her brother Oscar
person of the defendant is null and void.33 Layno on April 5, 1999 as evidenced by his signature appearing in
the original summons.
In the present case, the records show that the respondent, before
and after his marriage to Jarl Jensen on August 23, 1987, Calasiao, Pangasinan, April 6, 1999.
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 (Sgd.)
EDUARDO J. ABULENCIA
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 Junior Process Server40
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 As gleaned from the said return, there is no showing that as of
summons and complaint in Civil Case No. 879 may only be validly April 5, 1999, the house where the Sheriff found Oscar Layno was
served on her through substituted service under Section 7, Rule the latter’s residence or that of the respondent herein. Neither is
14 of the Rules of Court, which reads: 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,
SEC. 7. Substituted service. — If, for justifiable causes, the and that Oscar Layno was in the premises only to collect the
defendant cannot be served within a reasonable time as provided rentals from him. The service of the summons on a person at a
in the preceding section, service may be effected (a) by leaving place where he was a visitor is not considered to have been left at
copies of the summons at the defendant’s residence with some the residence or place or abode, where he has another place at
person of suitable age and discretion then residing therein, or (b) which he ordinarily stays and to which he intends to return.41
by leaving the copies at defendant’s office or regular place of
business with some competent person in charge thereof.
The Voter’s Registration Record of Oscar Layno dated June 15,
1997 wherein he declared that he was a resident of No. 572
Strict compliance with the mode of service is required in order that Barangay Buenlag, Calasiao, Pangasinan, as well as the Joint
the court may acquire jurisdiction over the person of the Affidavit of Vicenta Peralta and Orlando Macasalda cannot prevail
defendant.34 The statutory requirement of substituted service must over the Contract of Lease the respondent had executed in favor
be followed faithfully and strictly and any substituted service other of Eduardo Gonzales showing that the latter had resided and
than that authorized by the statute is rendered ineffective. 35 As the occupied the house of the respondent as lessee since November
Court held in Hamilton v. Levy :36 24, 1997, and the affidavit of Eduardo Gonzales that Oscar Layno
was not residing in the said house on April 5, 1999.
… The pertinent facts and circumstances attendant to the service
of summons must be stated in the proof of service or Officer’s In sum, then, the respondent was not validly served with
Return; otherwise, any substituted service made in lieu of summons and the complaint in Civil Case No. 879 on April 5,
personal service cannot be upheld. This is necessary because 1999, by substituted service. Hence, the MTC failed to acquire
substituted service is in derogation of the usual method of service. jurisdiction over the person of the respondent; as such, the
It is a method extraordinary in character and hence may be used decision of the MTC in Civil Case No. 879 is null and void.
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 IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
service renders said service ineffective.37 lack of merit. No costs.

In Keister v. Narcereo,38 the Court held that the term "dwelling SO ORDERED.
house" or "residence" are generally held to refer to the time of
service; hence, it is not sufficient to leave the summons at the
former’s 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
G.R. No. 130974 August 16, 2006 place; (3) the procedure prescribed by the Rules on personal and
substituted service of summons was ignored; (4) defendant was a
resident of Singapore; and (5) whatever judgment rendered in this
MA. IMELDA M. MANOTOC, Petitioner,
case would be ineffective and futile.
vs.
HONORABLE COURT OF APPEALS and AGAPITA TRAJANO
on behalf of the Estate of ARCHIMEDES During the hearing on the Motion to Dismiss, petitioner Manotoc
TRAJANO, Respondents. presented Carlos Gonzales, who testified that he saw defendant
Manotoc as a visitor in Alexandra Homes only two times. He also
identified the Certification of Renato A. de Leon, which stated that
DECISION
Unit E-2104 was owned by Queens Park Realty, Inc.; and at the
time the Certification was issued, the unit was not being leased by
VELASCO, JR., J.: The court’s jurisdiction over a defendant is anyone. Petitioner also presented her Philippine passport and the
founded on a valid service of summons. Without a valid service, Disembarkation/Embarkation Card 7 issued by the Immigration
the court cannot acquire jurisdiction over the defendant, unless Service of Singapore to show that she was a resident of
the defendant voluntarily submits to it. The defendant must be Singapore. She claimed that the person referred to in plaintiff’s
properly apprised of a pending action against him and assured of Exhibits "A" to "EEEE" as "Mrs. Manotoc" may not even be her,
the opportunity to present his defenses to the suit. Proper service but the mother of Tommy Manotoc, and granting that she was the
of summons is used to protect one’s right to due process. one referred to in said exhibits, only 27 out of 109 entries referred
to Mrs. Manotoc. Hence, the infrequent number of times she
allegedly entered Alexandra Homes did not at all establish
The Case
plaintiff’s position that she was a resident of said place.

This Petition for Review on Certiorari 1 under Rule 45 presents the


On the other hand, Agapita Trajano, for plaintiffs’ estate,
core issue whether there was a valid substituted service of presented Robert Swift, lead counsel for plaintiffs in the Estate of
summons on petitioner for the trial court to acquire jurisdiction. Ferdinand Marcos Human Rights Litigation, who testified that he
Petitioner Manotoc claims the court a quo should have annulled
participated in the deposition taking of Ferdinand R. Marcos, Jr.;
the proceedings in the trial court for want of jurisdiction due to and he confirmed that Mr. Marcos, Jr. testified that petitioner’s
irregular and ineffective service of summons. residence was at the Alexandra Apartment, Greenhills. 8 In
addition, the entries 9 in the logbook of Alexandra Homes from
The Facts August 4, 1992 to August 2, 1993, listing the name of petitioner
Manotoc and the Sheriff’s Return, 10 were adduced in evidence.
Petitioner is the defendant in Civil Case No. 63337 entitled
Agapita Trajano, pro se, and on behalf of the Estate of On October 11, 1994, the trial court rejected Manotoc’s Motion to
Archimedes Trajano v. Imelda ‘Imee’ R. Marcos-Manotoc 2 for Dismiss on the strength of its findings that her residence, for
Filing, Recognition and/or Enforcement of Foreign Judgment. purposes of the Complaint, was Alexandra Homes, Unit E-2104,
Respondent Trajano seeks the enforcement of a foreign court’s No. 29 Meralco Avenue, Pasig, Metro Manila, based on the
judgment rendered on May 1, 1991 by the United States District documentary evidence of respondent Trajano. The trial court
Court of Honolulu, Hawaii, United States of America, in a case relied on the presumption that the sheriff’s substituted service was
entitled Agapita Trajano, et al. v. Imee Marcos-Manotoc a.k.a. made in the regular performance of official duty, and such
Imee Marcos, Civil Case No. 86-0207 for wrongful death of presumption stood in the absence of proof to the contrary. 11
deceased Archimedes Trajano committed by military intelligence
officials of the Philippines allegedly under the command, direction, On December 21, 1994, the trial court discarded Manotoc’s plea
authority, supervision, tolerance, sufferance and/or influence of
for reconsideration for lack of merit. 12
defendant Manotoc, pursuant to the provisions of Rule 39 of the
then Revised Rules of Court.
Undaunted, Manotoc filed a Petition for Certiorari and
Prohibition 13 before the Court of Appeals (CA) on January 20,
Based on paragraph two of the Complaint, the trial court issued a 1995, docketed as CA-G.R. SP No. 36214 seeking the annulment
Summons 3 on July 6, 1993 addressed to petitioner at Alexandra of the October 11, 1994 and December 21, 1994 Orders of Judge
Condominium Corporation or Alexandra Homes, E2 Room 104, at
Aurelio C. Trampe.
No. 29 Meralco Avenue, Pasig City.

Ruling of the Court of Appeals


On July 15, 1993, the Summons and a copy of the Complaint
were allegedly served upon (Mr.) Macky de la Cruz, an alleged
caretaker of petitioner at the condominium unit mentioned On March 17, 1997, the CA rendered the assailed
earlier. 4 When petitioner failed to file her Answer, the trial court Decision, 14 dismissing the Petition for Certiorari and Prohibition.
declared her in default through an Order 5 dated October 13, The court a quo adopted the findings of the trial court that
1993. petitioner’s residence was at Alexandra Homes, Unit E-2104, at
No. 29 Meralco Avenue, Pasig, Metro Manila, which was also the
residence of her husband, as shown by the testimony of Atty.
On October 19, 1993, petitioner, by special appearance of Robert Swift and the Returns of the registered mails sent to
counsel, filed a Motion to Dismiss 6 on the ground of lack of petitioner. It ruled that the Disembarkation/Embarkation Card and
jurisdiction of the trial court over her person due to an invalid
the Certification dated September 17, 1993 issued by Renato A.
substituted service of summons. The grounds to support the De Leon, Assistant Property Administrator of Alexandra Homes,
motion were: (1) the address of defendant indicated in the were hearsay, and that said Certification did not refer to July
Complaint (Alexandra Homes) was not her dwelling, residence, or
1993—the month when the substituted service was effected.
regular place of business as provided in Section 8, Rule 14 of the
Rules of Court; (2) the party (de la Cruz), who was found in the
unit, was neither a representative, employee, nor a resident of the
In the same Decision, the CA also rejected petitioner’s Philippine Jurisdiction over the defendant is acquired either upon a valid
passport as proof of her residency in Singapore as it merely service of summons or the defendant’s voluntary appearance in
showed the dates of her departure from and arrival in the court. When the defendant does not voluntarily submit to the
Philippines without presenting the boilerplate’s last two (2) inside court’s jurisdiction or when there is no valid service of summons,
pages where petitioner’s residence was indicated. The CA "any judgment of the court which has no jurisdiction over the
considered the withholding of those pages as suppression of person of the defendant is null and void." 18 In an action strictly in
evidence. Thus, according to the CA, the trial court had acquired personam, personal service on the defendant is the preferred
jurisdiction over petitioner as there was a valid substituted service mode of service, that is, by handing a copy of the summons to the
pursuant to Section 8, Rule 14 of the old Revised Rules of Court. defendant in person. If defendant, for excusable reasons, cannot
be served with the summons within a reasonable period, then
substituted service can be resorted to. While substituted service
On April 2, 1997, petitioner filed a Motion for
of summons is permitted, "it is extraordinary in character and in
Reconsideration 15 which was denied by the CA in its
derogation of the usual method of service." 19 Hence, it must
Resolution 16dated October 8, 1997.
faithfully and strictly comply with the prescribed requirements and
circumstances authorized by the rules. Indeed, "compliance with
Hence, petitioner has come before the Court for review on the rules regarding the service of summons is as much important
certiorari. as the issue of due process as of jurisdiction." 20

The Issues Requirements for Substituted Service

Petitioner raises the following assignment of errors for the Court’s Section 8 of Rule 14 of the old Revised Rules of Court which
consideration: applies to this case provides:

I. RESPONDENT COURT OF APPEALS COMMITTED [A] SEC. 8. 21 Substituted service. – If the defendant cannot be
SERIOUS ERROR IN RENDERING THE DECISION AND served within a reasonable time as provided in the preceding
RESOLUTION IN QUESTION (ANNEXES A AND B) IN section [personal service on defendant], service may be effected
DEFIANCE OF LAW AND JURISPRUDENCE IN RULING THAT (a) by leaving copies of the summons at the defendant’s
THE TRIAL COURT ACQUIRED JURISDICTION OVER THE residence with some person of suitable age and discretion then
PERSON OF THE PETITIONER THROUGH A SUBSTITUTED residing therein, or (b) by leaving the copies at defendant’s office
SERVICE OF SUMMONS IN ACCORDANCE WITH SECTION 8, or regular place of business with some competent person in
RULE 14 OF THE REVISED RULES OF COURT. charge thereof.

II. RESPONDENT COURT OF APPEALS COMMITTED [A] We can break down this section into the following requirements to
SERIOUS ERROR WHEN IT RULED THAT THERE WAS A effect a valid substituted service:
VALID SERVICE OF SUMMONS ON AN ALLEGED
CARETAKER OF PETITIONER’S RESIDENCE IN COMPLETE
(1) Impossibility of Prompt Personal Service
DEFIANCE OF THE RULING IN CASTILLO VS. CFI OF
BULACAN, BR. IV, G.R. NO. L-55869, FEBRUARY 20, 1984, 127
SCRA 632 WHICH DEFINES THE PROPRIETY OF SUCH The party relying on substituted service or the sheriff must show
SERVICE UPON MERE OVERSEERS OF PREMISES WHERE A that defendant cannot be served promptly or there is impossibility
PARTY SUPPOSEDLY RESIDES. of prompt service. 22 Section 8, Rule 14 provides that the plaintiff
or the sheriff is given a "reasonable time" to serve the summons
to the defendant in person, but no specific time frame is
III. RESPONDENT COURT OF APPEALS COMMITTED [A]
mentioned. "Reasonable time" is defined as "so much time as is
SERIOUS ERROR IN CONCLUDING THAT THE RESIDENCE
necessary under the circumstances for a reasonably prudent and
OF THE HUSBAND IS ALSO THE RESIDENCE OF HIS WIFE
diligent man to do, conveniently, what the contract or duty
CONTRARY TO THE RULING IN THE BANK OF THE
requires that should be done, having a regard for the rights and
PHILIPPINE ISLANDS VS. DE COSTER, G.R. NO. 23181,
possibility of loss, if any[,] to the other party." 23 Under the Rules,
MARCH 16, 1925, 47 PHIL. 594.
the service of summons has no set period. However, when the
court, clerk of court, or the plaintiff asks the sheriff to make the
IV. RESPONDENT COURT OF APPEALS COMMITTED [A] return of the summons and the latter submits the return of
SERIOUS ERROR IN FAILING TO APPLY THE RULE ON summons, then the validity of the summons lapses. The plaintiff
EXTRA-TERRITORIAL SERVICE OF SUMMONS UNDER may then ask for an alias summons if the service of summons has
SECTIONS 17 AND 18, RULE 14 OF THE REVISED RULES OF failed. 24 What then is a reasonable time for the sheriff to effect a
COURT. 17 personal service in order to demonstrate impossibility of prompt
service? To the plaintiff, "reasonable time" means no more than
seven (7) days since an expeditious processing of a complaint is
The assigned errors bring to the fore the crux of the what a plaintiff wants. To the sheriff, "reasonable time" means 15
disagreement—the validity of the substituted service of summons
to 30 days because at the end of the month, it is a practice for the
for the trial court to acquire jurisdiction over petitioner. branch clerk of court to require the sheriff to submit a return of the
summons assigned to the sheriff for service. The Sheriff’s Return
The Court’s Ruling provides data to the Clerk of Court, which the clerk uses in the
Monthly Report of Cases to be submitted to the Office of the
Court Administrator within the first ten (10) days of the succeeding
We GRANT the petition. month. Thus, one month from the issuance of summons can be
considered "reasonable time" with regard to personal service on
Acquisition of Jurisdiction the defendant.
Sheriffs are asked to discharge their duties on the service of competent person in charge of the place. Thus, the person on
summons with due care, utmost diligence, and reasonable whom the substituted service will be made must be the one
promptness and speed so as not to prejudice the expeditious managing the office or business of defendant, such as the
dispensation of justice. Thus, they are enjoined to try their best president or manager; and such individual must have sufficient
efforts to accomplish personal service on defendant. On the other knowledge to understand the obligation of the defendant in the
hand, since the defendant is expected to try to avoid and evade summons, its importance, and the prejudicial effects arising from
service of summons, the sheriff must be resourceful, persevering, inaction on the summons. Again, these details must be contained
canny, and diligent in serving the process on the defendant. For in the Return.
substituted service of summons to be available, there must be
several attempts by the sheriff to personally serve the summons
Invalid Substituted Service in the Case at Bar
within a reasonable period [of one month] which eventually
resulted in failure to prove impossibility of prompt service.
"Several attempts" means at least three (3) tries, preferably on at Let us examine the full text of the Sheriff’s Return, which reads:
least two different dates. In addition, the sheriff must cite why
such efforts were unsuccessful. It is only then that impossibility of
service can be confirmed or accepted. THIS IS TO CERTIFY that on many occasions several
attempts were made to serve the summons with complaint and
annexes issued by this Honorable Court in the above entitled
(2) Specific Details in the Return case, personally upon the defendant IMELDA ‘IMEE’ MARCOS-
MANOTOC located at Alexandra Condominium Corpration [sic] or
Alexandra Homes E-2 Room 104 No. 29 Merlaco [sic] Ave.,
The sheriff must describe in the Return of Summons the facts and
Pasig, Metro-Manila at reasonable hours of the day but to no avail
circumstances surrounding the attempted personal service. 25 The
for the reason that said defendant is usually out of her place
efforts made to find the defendant and the reasons behind the
and/or residence or premises. That on the 15th day of July, 1993,
failure must be clearly narrated in detail in the Return. The date
substituted service of summons was resorted to in accordance
and time of the attempts on personal service, the inquiries made
with the Rules of Court in the Philippines leaving copy of said
to locate the defendant, the name/s of the occupants of the
summons with complaint and annexes thru [sic] (Mr) Macky de la
alleged residence or house of defendant and all other acts done,
Cruz, caretaker of the said defendant, according to (Ms) Lyn
though futile, to serve the summons on defendant must be
Jacinto, Receptionist and Telephone Operator of the said
specified in the Return to justify substituted service. The form on
building, a person of suitable age and discretion, living with the
Sheriff’s Return of Summons on Substituted Service prescribed in
said defendant at the given address who acknowledged the
the Handbook for Sheriffs published by the Philippine Judicial
receipt thereof of said processes but he refused to sign
Academy requires a narration of the efforts made to find the
(emphases supplied).
defendant personally and the fact of failure. 26 Supreme Court
Administrative Circular No. 5 dated November 9, 1989 requires
that "impossibility of prompt service should be shown by stating WHEREFORE, said summons is hereby returned to this
the efforts made to find the defendant personally and the failure of Honorable Court of origin, duly served for its record and
such efforts," which should be made in the proof of service. information.

(3) A Person of Suitable Age and Discretion 29


Pasig, Metro-Manila July 15, 1993.

If the substituted service will be effected at defendant’s house or A meticulous scrutiny of the aforementioned Return readily
residence, it should be left with a person of "suitable age and reveals the absence of material data on the serious efforts to
discretion then residing therein." 27 A person of suitable age and serve the Summons on petitioner Manotoc in person. There is no
discretion is one who has attained the age of full legal capacity clear valid reason cited in the Return why those efforts proved
(18 years old) and is considered to have enough discernment to inadequate, to reach the conclusion that personal service has
understand the importance of a summons. "Discretion" is defined become impossible or unattainable outside the generally couched
as "the ability to make decisions which represent a responsible phrases of "on many occasions several attempts were made to
choice and for which an understanding of what is lawful, right or serve the summons x x x personally," "at reasonable hours during
wise may be presupposed". 28 Thus, to be of sufficient discretion, the day," and "to no avail for the reason that the said defendant is
such person must know how to read and understand English to usually out of her place and/or residence or premises." Wanting in
comprehend the import of the summons, and fully realize the detailed information, the Return deviates from the ruling—in
need to deliver the summons and complaint to the defendant at Domagas v. Jensen 30 and other related cases 31—that the
the earliest possible time for the person to take appropriate pertinent facts and circumstances on the efforts exerted to serve
action. Thus, the person must have the "relation of confidence" to the summons personally must be narrated in the Return. It cannot
the defendant, ensuring that the latter would receive or at least be be determined how many times, on what specific dates, and at
notified of the receipt of the summons. The sheriff must therefore what hours of the day the attempts were made. Given the fact that
determine if the person found in the alleged dwelling or residence the substituted service of summons may be assailed, as in the
of defendant is of legal age, what the recipient’s relationship with present case, by a Motion to Dismiss, it is imperative that the
the defendant is, and whether said person comprehends the pertinent facts and circumstances surrounding the service of
significance of the receipt of the summons and his duty to summons be described with more particularity in the Return or
immediately deliver it to the defendant or at least notify the Certificate of Service.
defendant of said receipt of summons. These matters must be
clearly and specifically described in the Return of Summons.
Besides, apart from the allegation of petitioner’s address in the
Complaint, it has not been shown that respondent Trajano or
(4) A Competent Person in Charge Sheriff Cañelas, who served such summons, exerted
extraordinary efforts to locate petitioner. Certainly, the second
paragraph of the Complaint only states that respondents were
If the substituted service will be done at defendant’s office or
"informed, and so [they] allege" about the address and
regular place of business, then it should be served on a
whereabouts of petitioner. Before resorting to substituted service, Even American case law likewise stresses the principle of strict
a plaintiff must demonstrate an effort in good faith to locate the compliance with statute or rule on substituted service, thus:
defendant through more direct means. 32 More so, in the case in
hand, when the alleged petitioner’s residence or house is doubtful
The procedure prescribed by a statute or rule for substituted or
or has not been clearly ascertained, it would have been better for
constructive service must be strictly pursued. 35There must be
personal service to have been pursued persistently.
strict compliance with the requirements of statutes authorizing
substituted or constructive service. 36
In the case Umandap v. Sabio, Jr., 33 it may be true that the Court
held that a Sheriff’s Return, which states that "despite efforts
Where, by the local law, substituted or constructive service is in
exerted to serve said process personally upon the defendant on
certain situations authorized in the place of personal service when
several occasions the same proved futile," conforms to the
the latter is inconvenient or impossible, a strict and literal
requirements of valid substituted service. However, in view of the
compliance with the provisions of the law must be shown in order
numerous claims of irregularities in substituted service which
to support the judgment based on such substituted or constructive
have spawned the filing of a great number of unnecessary special
service. 37 Jurisdiction is not to be assumed and exercised on the
civil actions of certiorari and appeals to higher courts, resulting in
general ground that the subject matter of the suit is within the
prolonged litigation and wasteful legal expenses, the Court rules
power of the court. The inquiry must be as to whether the
in the case at bar that the narration of the efforts made to find the
requisites of the statute have been complied with, and such
defendant and the fact of failure written in broad and imprecise
compliance must appear on the record. 38 The fact that the
words will not suffice. The facts and circumstances should be
defendant had actual knowledge of attempted service does not
stated with more particularity and detail on the number of
render the service effectual if in fact the process was not served
attempts made at personal service, dates and times of the
in accordance with the requirements of the statute.39
attempts, inquiries to locate defendant, names of occupants of the
alleged residence, and the reasons for failure should be included
in the Return to satisfactorily show the efforts undertaken. That Based on the above principles, respondent Trajano failed to
such efforts were made to personally serve summons on demonstrate that there was strict compliance with the
defendant, and those resulted in failure, would prove impossibility requirements of the then Section 8, Rule 14 (now Section 7, Rule
of prompt personal service. 14 of the 1997 Rules of Civil Procedure).

Moreover, to allow sheriffs to describe the facts and Due to non-compliance with the prerequisites for valid substituted
circumstances in inexact terms would encourage routine service, the proceedings held before the trial court perforce must
performance of their precise duties relating to substituted be annulled.
service—for it would be quite easy to shroud or conceal
carelessness or laxity in such broad terms. Lastly, considering
The court a quo heavily relied on the presumption of regularity in
that monies and properties worth millions may be lost by a
defendant because of an irregular or void substituted service, it is the performance of official duty. It reasons out that "[t]he
but only fair that the Sheriff’s Return should clearly and certificate of service by the proper officer is prima facie evidence
of the facts set out herein, and to overcome the presumption
convincingly show the impracticability or hopelessness of
personal service. arising from said certificate, the evidence must be clear and
convincing." 40

Granting that such a general description be considered adequate,


there is still a serious nonconformity from the requirement that the The Court acknowledges that this ruling is still a valid doctrine.
summons must be left with a "person of suitable age and However, for the presumption to apply, the Sheriff’s Return must
show that serious efforts or attempts were exerted to personally
discretion" residing in defendant’s house or residence. Thus,
there are two (2) requirements under the Rules: (1) recipient must serve the summons and that said efforts failed. These facts must
be a person of suitable age and discretion; and (2) recipient must be specifically narrated in the Return. To reiterate, it must clearly
show that the substituted service must be made on a person of
reside in the house or residence of defendant. Both requirements
were not met. In this case, the Sheriff’s Return lacks information suitable age and discretion living in the dwelling or residence of
as to residence, age, and discretion of Mr. Macky de la Cruz, defendant. Otherwise, the Return is flawed and the presumption
cannot be availed of. As previously explained, the Return of
aside from the sheriff’s general assertion that de la Cruz is the
"resident caretaker" of petitioner as pointed out by a certain Ms. Sheriff Cañelas did not comply with the stringent requirements of
Lyn Jacinto, alleged receptionist and telephone operator of Rule 14, Section 8 on substituted service.
Alexandra Homes. It is doubtful if Mr. de la Cruz is residing with
petitioner Manotoc in the condominium unit considering that a In the case of Venturanza v. Court of Appeals, 41 it was held that
married woman of her stature in society would unlikely hire a male "x x x the presumption of regularity in the performance of official
caretaker to reside in her dwelling. With the petitioner’s allegation functions by the sheriff is not applicable in this case where it is
that Macky de la Cruz is not her employee, servant, or patent that the sheriff’s return is defective (emphasis supplied)."
representative, it is necessary to have additional information in While the Sheriff’s Return in the Venturanza case had no
the Return of Summons. Besides, Mr. Macky de la Cruz’s refusal statement on the effort or attempt to personally serve the
to sign the Receipt for the summons is a strong indication that he summons, the Return of Sheriff Cañelas in the case at bar merely
did not have the necessary "relation of confidence" with petitioner. described the efforts or attempts in general terms lacking in
To protect petitioner’s right to due process by being accorded details as required by the ruling in the case of Domagas v. Jensen
proper notice of a case against her, the substituted service of and other cases. It is as if Cañelas’ Return did not mention any
summons must be shown to clearly comply with the rules. effort to accomplish personal service. Thus, the substituted
service is void.
It has been stated and restated that substituted service of
summons must faithfully and strictly comply with the prescribed On the issue whether petitioner Manotoc is a resident of
requirements and in the circumstances authorized by the rules. 34 Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig
City, our findings that the substituted service is void has rendered
the matter moot and academic. Even assuming that Alexandra
Homes Room 104 is her actual residence, such fact would not
make an irregular and void substituted service valid and
effective.IN VIEW OF THE FOREGOING, this Petition for Review
is hereby GRANTED and the assailed March 17, 1997 Decision
and October 8, 1997 Resolution of the Court of Appeals and the
October 11, 1994 and December 21, 1994 Orders of the Regional
Trial Court, National Capital Judicial Region, Pasig City, Branch
163 are hereby REVERSEDand SET ASIDE.No costs.SO
ORDERED.
G.R. No. 155488 December 6, 2006 THIS IS TO CERTIFY, that after several failed attempts
to serve the copy of summons and complaint issued in
the above-entitled case at the given addresses of
ERLINDA R. VELAYO-FONG, petitioner,
defendant Erlinda Velayo as mentioned in the Order of
vs.
this Court dated September 13, 1993, finally, on the
SPOUSES RAYMOND and MARIA HEDY
23rd day of September, 1993, at the instance of herein
VELAYO, respondents.
plaintiffs through counsel, undersigned was able to
SERVED (sic) personally upon defendant Erlinda
DECISION Velayo the copy of summons together with the thereto
attached copy of the complaint, not at her two (2) given
addresses, but at the lobby of Intercontinental Hotel,
Makati, Metro Manila, right in the presence of lobby
AUSTRIA-MARTINEZ, J.:
counter personnel by the name of Ms. A. Zulueta, but
said defendant refused to sign in receipt thereof.
Before the Court is a petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure seeking the reversal of I FURTHER CERTIFY, that on the 27th day of
the Decision1 of the Court of Appeals (CA) dated May 14, 2002 in
September, 1993, copy of the same WAS SERVED
CA-G.R. CV No. 54434 which affirmed the Decision of the personally upon the other defendant Rodolfo R. Velayo,
Regional Trial Court, Branch 105, Quezon City (RTC) in Civil Jr., at No. Block 57, Lots 17 and 19, G. Sanchez Street,
Case No. Q-93-17133; and the CA Resolution2 dated October 1,
BF Resort Village, Las Piñas, Metro Manila, but who
2002 which denied petitioner's motion for reconsideration. also refused to sign in receipt thereof.

The procedural antecedents and factual background of the case


WHEREFORE, original copy of the summons is now
are as follows: being respectfully returned to the Honorable Court
DULY SERVED.
On August 9, 1993, Raymond Velayo (Raymond) and his wife,
Maria Hedy Velayo (respondents) filed a complaint for sum of Quezon City, Philippines, September 30, 1993.6
money and damages with prayer for preliminary attachment
against Erlinda R. Velayo-Fong (petitioner), Rodolfo R. Velayo, Jr.
(Rodolfo Jr.) and Roberto R. Velayo (Roberto).3 Raymond is the Upon ex-parte motions7 of respondents, the RTC in its Order
half-brother of petitioner and her co-defendants. dated November 23, 1993 and January 5, 1994, declared
petitioner and her co-defendant in default for failure to file an
answer and ordered the ex-parte presentation of respondents'
In their Complaint, respondents allege that petitioner, a resident of evidence.8
1860 Alamoana Boulevard, Honolulu, Hawaii, USA, and her co-
defendants, who are residents of the Philippines, made it appear
that their common father, Rodolfo Velayo, Sr. (Rodolfo Sr.) and On June 15, 1994, the RTC rendered its Decision in respondents'
petitioner had filed a complaint against Raymond before the favor, the dispositive portion of which reads:
National Bureau of Investigation (NBI), accusing Raymond of the
crimes of estafa and kidnapping a minor; that petitioner and her
WHEREFORE, premises considered, judgment is
co-defendants also requested that respondents be included in the
hereby rendered ordering the defendants to pay the
Hold Departure List of the Bureau of Immigration and Deportation
plaintiffs:
(BID) which was granted, thereby preventing them from leaving
the country and resulting in the cancellation of respondents' trips
abroad and caused all of respondents' business transactions and 1. the amount of P65,000.00 as actual damages;
operations to be paralyzed to their damage and prejudice; that
petitioner and her co-defendants also filed a petition before the
2. the amount of P200,000.00 as moral damages;
Securities and Exchange Commission (SEC) docketed as Case
No. 4422 entitled "Rodolfo Velayo Sr. et al. v. Raymond Velayo et
al." which caused respondents' funds to be frozen and paralyzed 3. Attorney's fees in the amount of P5,000,00 it being a
the latters' business transactions and operations to their damage judgment by default; and
and prejudice. Since petitioner was a non-resident and not found
in the Philippines, respondents prayed for a writ of preliminary
attachment against petitioner's properties located in the 4. cost of suit.
Philippines.
SO ORDERED.9
Before respondents' application for a writ of preliminary
attachment can be acted upon by the RTC, respondents filed on On September 1, 1994, petitioner filed a Motion to Set Aside
September 10, 1993 an Urgent Motion praying that the summons Order of Default claiming that she was prevented from filing a
addressed to petitioner be served to her at Suite 201, Sunset responsive pleading and defending herself against respondents'
View Towers Condominium, Roxas Boulevard, Pasay City and at complaint because of fraud, accident or mistake; that contrary to
No. 5040 P. Burgos Street, T. Towers Condominium, Makati.4 In the Officer's Return, no summons was served upon her; that she
its Order dated September 13, 1993, the RTC granted the said has valid and meritorious defenses to refute respondents' material
motion.5 allegations.10 Respondents opposed said Motion.11

The Process Server submitted the Officer's Return, to wit: In its Order dated May 29, 1995, the RTC denied petitioner's
Motion ruling that the presumption of regularity in the discharge of
the function of the Process Server was not sufficiently overcome
by petitioner's allegation to the contrary; that there was no evident THE COURT OF APPEALS PATENTLY ERRED IN
reason for the Process Server to make a false narration regarding NOT RULING THAT PETITIONER WAS NOT VALIDLY
the service of summons to defaulting defendant in the Officer's SERVED WITH SUMMONS.
Return.12
II
On September 4, 1995, respondents filed a Motion for
Execution.13 On September 22, 1995, petitioner filed an
THE COURT OF APPEALS PATENTLY ERRED IN
Opposition to Motion for Execution contending that she has not
NOT RULING THAT PETITIONER WAS PREVENTED
yet received the Decision and it is not yet final and executory as
FROM FILING RESPONSIVE PLEADING AND
against her.14
DEFENDING AGAINST RESPONDENTS' COMPLAINT
BECAUSE OF FRAUD, ACCIDENT AND MISTAKE.21
In its Order dated January 3, 1996, the RTC, finding that the
Decision dated June 15, 1994 and the Order dated May 29, 1995
Parties filed their respective Memoranda on September 8 and 9,
were indeed not furnished or served upon petitioner, denied
2005.
respondents' motion for execution against petitioner and ordered
that petitioner be furnished the said Decision and Order. 15
Petitioner argues that summons should have been served through
extraterritorial service since she is a non-resident; that the RTC
On March 28, 1996, the RTC issued an Order directing the
should have lifted the order of default since a default judgment is
issuance of the writ of execution against petitioner's co-
frowned upon and parties should be given their day in court; that
defendant.16
she was prevented from filing a responsive pleading and
defending against respondents' complaint
On May 23, 1996, petitioner, through her counsel, finally received
the Decision dated June 15, 1994 and the Order dated May 29,
through fraud, accident or mistake considering that the statement
1995.17
in the Officer's Return that she was personally served summons is
inaccurate; that
Petitioner filed an appeal with the CA questioning the propriety
and validity of the service of summons made upon her.
she does not remember having been served with summons
Respondents opposed the appeal, arguing that the petition should
during the said date but remembers that a man hurled some
be dismissed since it raised pure questions of law, which is not
papers at her while she was entering the elevator and, not
within the CA's jurisdiction to resolve under Section 2 (c) of Rule
knowing what the papers were all about, she threw back the
41 of the Revised Rules of Court; that, in any case, petitioner's
papers to the man before the elevator closed; that she has a valid
reliance on the rule of extraterritorial service is misplaced; that the
and meritorious defense to refute the material allegations of
judgment by default has long been final and executory since as
respondents' complaint.
early as August 1994 petitioner became aware of the judgment by
default when she verified the status of the case; that petitioner
should have filed a motion for new trial or a petition for relief from On the other hand, respondents contend that petitioner was
judgment and not a motion to set aside the order of default since validly served with summons since the rules do not require that
there was already a judgment by default. service be made upon her at her place of residence as alleged in
the complaint or stated in the summons; that extraterritorial
service applies only when the defendant does not reside and is
On May 14, 2002, the CA rendered its Decision affirming the
not found in the Philippines; that petitioner erred in filing a motion
Decision and Order of the RTC18 ruling that it (CA) has jurisdiction
to set aside the order of default at the time when a default
since the petition raised a question of fact, that is, whether
judgment was already rendered by the RTC since the proper
petitioner was properly served with summons; that the judgment
remedy is a motion for new trial or a petition for relief from
by default was not yet final and executory against petitioner since
judgment under Rule 38; that the issue on summons is a pure
the records reveal and the RTC Order dated January 3, 1996
question of law which the CA does not have jurisdiction to resolve
confirmed that she was not furnished or served a copy of the
under Section 2 (c) of Rule 41 of the 1997 Rules of Civil
decision; that petitioner was validly served with summons since
Procedure.22
the complaint for damages is an action in personam and only
personal, not extraterritorial service, of summons, within the
forum, is essential for the acquisition of jurisdiction over her The Court finds it proper to resolve first whether the issue
person; that petitioner's allegations that involved in the appeal filed with the CA is a question of law and
therefore not within the jurisdiction of the CA to resolve.
she did not know what was being served upon her and that
somebody just hurled papers at her were not substantiated by In Murillo v. Consul,23 which was later adopted by the 1997 Rules
competent evidence and cannot overcome the presumption of of Civil Procedure, the Court clarified the three modes of appeal
regularity of performance of official functions in favor of the from decisions of the RTC, namely: (a) ordinary appeal or appeal
Officer's Return. by writ of error, where judgment was rendered in a civil or criminal
action by the RTC in the exercise of original jurisdiction; (b)
petition for review, where judgment was
Petitioner filed a Motion for Reconsideration19 but the CA denied it
in its Resolution dated October 1, 2002.20
rendered by the RTC in the exercise of appellate jurisdiction; and
(c) petition for review to the Supreme Court.
Hence, the present petition anchored on the following grounds:

The first mode of appeal, governed by Rule 41, is taken to the


I
Court of Appeals on questions of fact or mixed questions of fact
and law. The second mode of appeal, covered by Rule 42, is the action affects the personal status of the plaintiffs; (b) when the
brought to the Court of Appeals on questions of fact, of law, or action relates to, or the subject of which is property, within the
mixed questions of fact and law. The third mode of appeal, Philippines, in which the defendant claims a lien or interest, actual
provided for by Rule 45, is elevated to the Supreme Court only on or contingent; (c) when the relief demanded in such action
questions of law. consists, wholly or in part, in excluding the defendant from any
interest in property located in the Philippines; and (d) when the
defendant's property has been attached within the Philippines. In
A question of law arises when there is doubt as to what the law is
these instances, service of summons may be effected by (a)
on a certain state of facts, while there is a question of fact when
personal service out of the country, with leave of court; (b)
the doubt arises as to the truth or falsity of the alleged facts.24 For
publication, also with leave of court; or (c) any other manner the
a question to be one of law, the same must not involve an
court may deem sufficient.
examination of the probative value of the evidence presented by
the litigants or any of them.25 The resolution of the issue must rest
solely on what the law provides on the given set of circumstances. Thus, extrajudicial service of summons apply only where the
Once it is clear that the issue invites a review of the evidence action is in rem, that is, an action against the thing itself instead of
presented, the question posed is one of fact.26 Thus, the test of against the person, or in an action quasi in rem, where an
whether a question is one of law or of fact is not the appellation individual is named as defendant and the purpose of the
given to such question by the party raising the same; rather, it is proceeding is to subject his interest therein to the obligation or
whether the appellate court can loan burdening the property. The rationale for this is that in in
rem and quasi in rem actions, jurisdiction over the person of the
defendant is
determine the issue raised without reviewing or evaluating the
evidence, in which case, it is a question of law; otherwise it is a
question of fact.27 not a prerequisite to confer jurisdiction on the court provided that
the court acquires jurisdiction over the res.29
Respondents' claim that the issues raised by petitioner before the
CA are pure legal questions is not tenable. Where the action is in personam, that is, one brought against a
person on the basis of her personal liability, jurisdiction over the
person of the defendant is necessary for the court to validly try
A scrutiny of petitioner's petition before the CA reveals that it
and decide the case. When the defendant is a non-resident,
raised two issues: (a) the propriety of the service effected on a
personal service of summons within the state is essential to the
non-resident; and (b) the validity of the service made upon her.
acquisition of jurisdiction over the person.30 Summons on the
The first is a question of law. There is indeed a question as to
defendant must be served by handing a copy thereof to the
what and how the law should be applied. The second is a
defendant in person, or, if he refuses to receive it, by tendering it
question of fact. The resolution of said issue entails a review of
to him.31 This cannot be done, however, if the defendant is not
the factual circumstances that led the RTC to conclude that
physically present in the country, and thus, the court cannot
service was validly effected upon petitioner. Therefore, petitioner
acquire jurisdiction over his person and therefore cannot validly
properly brought the case to the CA via the first mode of appeal
try and decide the case against him.32
under the aegis of Rule 41.

In the present case, respondents' cause of action in Civil Case


How may service of summons be effected on a non-resident?
No. Q-93-17133 is anchored on the claim that petitioner and her
co-defendants maliciously instituted a criminal complaint before
Section 17,28 Rule 14 of the Rules of Court provides: the NBI and a petition before the SEC which prevented the
respondents from leaving the country and paralyzed the latters'
business transactions. Respondents pray that actual and moral
Section 17. Extraterritorial service – When the damages, plus attorney's fees, be awarded in their favor. The
defendant does not reside and is not found in the action instituted by respondents affect the parties alone, not the
Philippines and the action affects the personal status of
whole world. Any judgment therein is binding only upon the
the plaintiff or relates to, or the subject of which, is parties properly impleaded.33 Thus, it is an action in personam. As
property within the Philippines, in which the defendant such, personal service of summons upon the defendants is
has or claims a lien or interest, actual or contingent, or
essential in order for the court to acquire jurisdiction over their
in which relief demanded consists, wholly or in part, in persons.34
excluding the defendant from any interest therein, or
the property of the defendant has been attached in the
Philippines, service may, by leave of court, be effected The Court notes that the complaint filed with the RTC alleged that
out of the Philippines by personal service as under petitioner is a non-resident who is not found in the Philippines for
section 7; or by publication in a newspaper of general which reason respondents initially prayed that a writ of preliminary
circulation in such places and for such time as the court attachment be issued against her properties within the Philippines
may order, in which case a copy of the summons and to confer jurisdiction upon the RTC. However, respondents did not
order of the court shall be sent by registered mail to the pursue its application for said writ when petitioner was
last known address of the defendant, or in any other subsequently found physically present in the Philippines and
manner the court may deem sufficient. Any order personal service of summons was effected on her.
granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice,
Was there a valid service of summons on petitioner? The answer
within which the defendant must answer.
is in the affirmative.

Under this provision, when the defendant is a nonresident and he


Petitioner's bare allegation that the statement in the "Officer's
is not found in the country, summons may be served
Return that she was personally served summons is inaccurate" is
extraterritorially. There are only four instances when
not sufficient. A process server's certificate of service is prima
extraterritorial service of summons is proper, namely: (a) when
facie evidence of the facts as set out in the certificate. 35 Between Thus, since petitioner failed to show that her failure file an answer
the claim of non-receipt of summons by a party against the was not due to fraud, accident, mistake, or excusable neglect;
assertion of an official whose duty is to send notices, the latter and that she had a valid and meritorious defense, there is no
assertion is fortified by the presumption that official duty has been merit to her prayer for a liberal interpretation of procedural rules.
regularly performed.36 To overcome the presumption of regularity
of performance of official functions in favor of such Officer's
WHEREFORE, the instant petition is DENIED. The assailed
Return, the evidence against it must be clear and convincing.
Decision and Resolution of the Court of Appeals are AFFIRMED.
Petitioner having been unable to come forward with the requisite
quantum of proof to the contrary, the presumption of regularity of
performance on the part of the process server stands. Costs against petitioner.

The Court need not make a long discussion on the propriety of SO ORDERED.
the remedy adopted by petitioner in the RTC of filing a motion to
set aside the order of default at a time when there was already a
judgment by default. As aptly held by the CA, since petitioner was
not furnished or served a copy of the judgment of default, there
was no notice yet of such judgment as against her. Thus, the
remedy of filing a motion to set aside the order of default in the
RTC was proper.

Petitioner's argument that the RTC should have set aside the
order of default and applied the liberal interpretation of rules with
a view of affording parties their day in court is not tenable. While
indeed default orders are not viewed with favor, the party seeking
to have the order of default lifted must

first show that her failure to file an answer or any other responsive
pleading was due to fraud, accident, mistake, or excusable
neglect and then she must show that she has a valid and
meritorious defense.37

In this case, petitioner failed to show that her failure to file an


answer was due to fraud, accident, mistake or excusable neglect.
Except for her bare unsupported allegation that the summons
were only thrown to her at the elevator, petitioner did not present
any competent evidence to justify the setting aside of the order of
default.

Moreover, when a party files a motion to lift order of default, she


must also show that she has a meritorious defense or that
something would be gained by having the order of default set
aside.38 The term meritorious defense implies that the applicant
has the burden of proving such a defense in order to have the
judgment set aside. The cases usually do not require such a
strong showing. The test employed appears to be essentially the
same as used in considering summary judgment, that is, whether
there is enough evidence to present an issue for submission to
the trier of fact, or a showing that on the undisputed facts it is not
clear that the judgment is warranted as a matter of law. 39 The
defendant must show that she has a meritorious defense
otherwise the grant of her motion will prove to be a useless
exercise. Thus, her motion must be accompanied by a statement
of the evidence which she intends to present if the motion is
granted and which is such as to warrant a reasonable belief that
the result of the case would probably be otherwise if a new trial is
granted.40

In the present case, petitioner contented herself with stating in her


affidavit of merit that the cases against respondent Raymond
were filed at the instance of her father. 41 Such allegation is a
conclusion rather than a statement of facts showing a meritorious
defense. The affidavit failed to controvert the facts alleged by the
respondents. Petitioner has not shown

that she has a meritorious defense.


G.R. No. 172242 August 14, 2007 Respondent then filed Ex-Parte Motions for Issuance of
Summons and for Leave of Court to Deputize Respondent’s
General Manager, Richard A. Tee, to Serve Summons Outside of
PERKIN ELMER SINGAPORE PTE LTD., Petitioner,
the Philippines,9 which the RTC granted in its Order, dated 27
vs.
April 2000.10 Thus, an Alias Summons, dated 4 September 2000,
DAKILA TRADING CORPORATION, Respondent.
was issued by the RTC to PEIA. But the said Alias Summons was
served on 28 September 2000 and received by Perkinelmer Asia,
DECISION a Singaporean based sole proprietorship, owned by the petitioner
and, allegedly, a separate and distinct entity from PEIA.
CHICO-NAZARIO, J.:
PEIP moved to dismiss11 the Complaint filed by respondent on the
1 ground that it states no cause of action. Perkinelmer Asia, on the
The case before this Court is a Petition for Review on Certiorari other hand, through its counsel, sent letters, dated 12 October
under Rule 45 of the 1997 Revised Rules of Civil Procedure
200012 and 15 November 2000,13 to the respondent and to the
seeking to annul and set aside the Decision,2 dated 4 April 2006, RTC, respectively, to inform them of the wrongful service of
of the Court of Appeals in CA-G.R. SP No. 78981, which affirmed summons upon Perkinelmer Asia.
the Orders, dated 4 November 20023 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 Accordingly, respondent filed an Ex-Parte Motion to Admit
Dismiss and subsequent Motion for Reconsideration of herein Amended Complaint, together with the Amended Complaint
petitioner Perkin Elmer Singapore Pte Ltd. claiming that PEIA had become a sole proprietorship14 owned by
the petitioner, and subsequently changed its name to Perkinelmer
Asia. Being a sole proprietorship of the petitioner, a change in
Petitioner is a corporation duly organized and existing under the
PEIA’s name and juridical status did not detract from the fact that
laws of Singapore. It is not considered as a foreign corporation all its due and outstanding obligations to third parties were
"doing business" in the Philippines. Herein respondent Dakila assumed by the petitioner. Hence, in its Amended
Trading Corporation is a corporation organized and existing under
Complaint15 respondent sought to change the name of PEIA to
Philippine laws, and engaged in the business of selling and that of the petitioner. In an Order, dated 24 July 2001, 16 the RTC
leasing out laboratory instrumentation and process control admitted the Amended Complaint filed by the respondent.
instrumentation, and trading of laboratory chemicals and supplies. Respondent then filed another Motion17 for the Issuance of
Summons and for Leave of Court to Deputize Respondent’s
The antecedents of the present case are as follows: General Manager, Richard A. Tee, to Serve Summons Outside
the Philippines. In another Order, dated 4 March 2002, 18 the RTC
deputized respondent’s General Manager to serve summons on
Respondent entered into a Distribution Agreement 5 on 1 June petitioner in Singapore. The RTC thus issued summons19 to the
1990 with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a petitioner. Acting on the said Order, respondent’s General
corporation duly organized and existing under the laws of Manager went to Singapore and served summons on the
Singapore and engaged in the business of manufacturing, petitioner.
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 Meanwhile, in an Order, dated 10 October 2001, the RTC denied
Philippines. The respondent was likewise granted the right to the Motion to Dismiss filed by PEIP, compelling the latter to file its
purchase and sell the products of PEIA subject to the terms and Answer to the Amended Complaint.
conditions set forth in the Distribution Agreement. PEIA, on the
other hand, shall give respondent a commission for the sale of its
Petitioner subsequently filed with the RTC a Special Appearance
products in the Philippines. and Motion to Dismiss20 respondent’s Amended Complaint on 30
May 2002 based on the following grounds: (1) the RTC did not
Under the same Distribution Agreement, respondent shall order acquire jurisdiction over the person of the petitioner; (2) the
the products of PEIA, which it shall sell in the Philippines, either respondent failed to state a cause of action against the petitioner
from PEIA itself or from Perkin-Elmer Instruments (Philippines) because it is not the real party-in-interest; (3) even assuming
Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation arguendo that the respondent correctly filed the case against the
duly organized and existing under Philippine laws, and involved in petitioner, the Distribution Agreement which was the basis of its
the business of wholesale trading of all kinds of scientific, claim grants PEIA the right to terminate the contract at any time;
biotechnological, and analytical instruments and appliances. PEIA and (4) the venue was improperly laid. The RTC in its Order,
allegedly owned 99% of the shares of PEIP. dated 4 November 2002, denied petitioner’s Motion to Dismiss,
ratiocinating as follows:
On 2 August 1997, however, PEIA unilaterally terminated the
Distribution Agreement, prompting respondent to file before the Prescinding from the above arguments of both parties, the [RTC]
RTC of Mandaluyong City, Branch 212, a Complaint6 for is inclined to DENY the Motion to Dismiss.
Collection of Sum of Money and Damages with Prayer for
Issuance of a Writ of Attachment against PEIA and PEIP, A careful scrutiny on (sic) the allegation in the (Amended)
docketed as Civil Case No. MC99-605. Complaint would show that [herein respondent] alleges ownership
by the [herein petitioner] of shares of stocks in the [PEIP]. Such
The RTC issued an Order,7 dated 26 March 1999, denying allegation of ownership of shares of stocks by the [petitioner]
respondent’s prayer for the issuance of a writ of attachment. The would reveal that there is an allegation of personal property in the
respondent moved for the reconsideration of the said Order but it Philippines. Shares of stocks represent personal property of the
was denied in another Order, dated 11 January 2000.8 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 a Decision affirming the RTC Orders of 4 November 2002 and 20
requisite (sic) for extraterritorial service under Section 15, Rule June 2003.
14, of the Rules of Court. Thus, it could be gainfully said that the
summons had been validly served for [RTC] to acquire jurisdiction
This brings us to the present Petition before this Court wherein
over the [petitioner].
petitioner raised the following issues.

The [petitioner] hinges its dismissal on the failure of the


I.
[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. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT THE SERVICE
OF SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT
When the ground for dismissal is that the complaint states no
THE TRIAL COURT THUS FAILED TO ACQUIRE
cause of action, such fact can be determined only from the facts
JURISDICTION OVER THE PERSON OF THE PETITIONER.
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 II.
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. 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
The three (3) essential elements of a cause of action are the QUESTION OF WHETHER THE TRIAL COURT ACQUIRED
following: JURISDICTION OVER THE PERSON OF THE PETITIONER
THROUGH THE EXTRATERRITORIAL SERVICE OF
SUMMONS.
a) The plaintiff’s legal rights;

A.
b) A correlative obligation of the defendant;

WHETHER OR NOT THE COURT OF APPEALS


c) The omission of the defendant in violation of the legal
SHOULD HAVE GRANTED THE PETITION FOR
rights.
CERTIORARI AND REVERSED THE RTC ORDERS
ON THE GROUND THAT THE AMENDED
A cursory reading of the Amended Complaint would reveal that all COMPLAINT FAILED TO STATE A CAUSE OF
of the essential elements of a cause of action are attendant in the ACTION AGAINST PETITIONER.
Amended Complaint.
1. BASED ON THE ALLEGATIONS IN THE
As for the contention that venue was improperly laid, x x x, the EX-PARTE MOTION TO ADMIT AMENDED
[RTC] in its ultimate desire that the ends of justice could be COMPLAINT, AMENDED COMPLAINT, AND
served in its fullest, cannot rule that venue was improperly laid. ALL DOCUMENTS ATTACHED AND/OR
RELATED THERETO, PETITIONER IS NOT
THE REAL PARTY-IN-INTEREST
xxxx
DEFENDANT IN THE CASE BELOW.

The stipulation as to the venue of a prospective action does not


2. ASSUMING ARGUENDO THAT
preclude the filing of the suit in the residence of the [respondent]
RESPONDENT DAKILA FILED THIS CASE
under Section 2, Rule 4, Rules of Court, especially where the
AGAINST THE CORRECT [PARTY],
venue stipulation was imposed by the [petitioner] for its own
INASMUCH AS THE DISTRIBUTION
benefits.
AGREEMENT DATED 1 JUNE 1990
GRANTS [PEIA] THE RIGHT TO
xxxx TERMINATE THE CONTRACT AT ANY
TIME, RESPONDENT DAKILA FAILS TO
STATE A CAUSE OF ACTION IN THE CASE
The [RTC] further believes that it is imperative that in order to BELOW.
ferret out the truth, a full-blown trial is necessary for parties to be
able to prove or disprove their allegations.21
B.
Petitioner moved for the reconsideration of the aforesaid Order
but, it was denied by the RTC in its Order, dated 20 June 2003. WHETHER OR NOT THE COURT OF APPEALS
SHOULD HAVE GRANTED THE PETITION FOR
CERTIORARI AND REVERSED THE RTC ORDERS
Consequently, petitioner filed a Petition for Certiorari under Rule
ON THE GROUND OF IMPROPER VENUE.
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 III.
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
WHETHER OR NOT PETITIONER IS ENTITLED TO A of jurisdiction in refusing to dismiss Civil Case No. MC99-605 for
TEMPORARY RESTRAINING ORDER AND/OR WRIT OF having been filed in an improper venue. Petitioner asserts that in
INJUNCTION. 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
The foregoing issues raised by petitioner essentially requires this
PEIA. Absent any waiver by PEIA of its right to choose the venue
Court to make a determination of the (1) proper service of
of the dispute, the Complaint filed by the respondent before the
summons and acquisition of jurisdiction by the RTC over the
RTC in the Philippines should have been dismissed on the ground
person of the petitioner; (2) existence of a cause of action against
of improper venue.
petitioner in respondent’s Amended Complaint; and (3) proper
venue for respondent’s civil case against petitioner.
The Petition is meritorious.
Petitioner contends that Civil Case No. MC99-605 involves an
action for collection of sum of money and damages arising from Jurisdiction is the power with which courts are invested for
the alleged breach of the Distribution Agreement. The action is administering justice; that is, for hearing and deciding cases. In
one in personam, or an action against a person based on his order for the court to have authority to dispose of the case on the
personal liability; and for the court a quo to acquire jurisdiction merits, it must acquire jurisdiction over the subject matter and the
over the person of the petitioner, personal service of summons, parties.22
and not extraterritorial service of summons, must be made within
the state even if the petitioner is a non-resident. Petitioner avers
Jurisdiction of the court over the subject matter is conferred only
that extraterritorial service of summons stated under Section 15,
by the Constitution or by law. It is determinable on the basis of
Rule 14 of the 1997 Revised Rules of Civil Procedure, is only
allegations in the complaint.23
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 Courts acquire jurisdiction over the plaintiffs upon the filing of the
respondent’s Amended Complaint that the petitioner has personal complaint, while jurisdiction over the defendants in a civil case is
properties within the Philippines does not make the present case acquired either through the service of summons upon them in the
one that relates to, or the subject of which is, property within the manner required by law or through their voluntary appearance in
Philippines warranting the extraterritorial service of summons court and their submission to its authority. If the defendants have
under Section 15, Rule 14 of the 1997 Revised Rules of Civil not been summoned, unless they voluntarily appear in court, the
Procedure. Petitioner states that for an action to be considered as court acquires no jurisdiction over their persons and a judgment
one that relates to, or the subject of which is, property within the rendered against them is null and void. To be bound by a
Philippines, the main subject matter of the action must be the decision, a party should first be subjected to the court’s
property within the Philippines itself, and such was not the jurisdiction.24
situation in this case. Likewise, the prayer in respondent’s
Amended Complaint for the issuance of a writ of attachment over
the personal property of PEIP, which is 99% owned by petitioner Thus, one of the modes of acquiring jurisdiction over the person
of the defendant or respondent in a civil case is through service of
(as the supposed successor of PEIA), did not convert the action
from one in personam to one that is quasi in rem. Also, the summons. It is intended to give notice to the defendant or
petitioner points out that since the respondent’s prayer for the respondent that a civil action has been commenced against him.
The defendant or respondent is thus put on guard as to 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. demands of the plaintiff or the petitioner.25
MC99-605 remains in personam, contrary to the ruling of the
Court of Appeals that by the attachment of the petitioner’s interest The proper service of summons differs depending on the nature
in PEIP the action in personam was converted to an action quasi of the civil case instituted by the plaintiff or petitioner: whether it is
in rem. Resultantly, the extraterritorial service of summons on the in personam, in rem, or quasi in rem. Actions in personam, are
petitioner was not validly effected, and did not give the RTC those actions brought against a person on the basis of his
jurisdiction over the petitioner. 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
Petitioner further argues that the appellate court should have
granted its Petition for Certiorari on the ground that the RTC proceeding is to subject his or her interest in a property to the
committed grave abuse of discretion amounting to lack or excess obligation or loan burdening the property.26
of jurisdiction in refusing to dismiss respondent’s Amended
Complaint for failure to state a cause of action against petitioner Under Section 15, Rule 14 of the 1997 Revised Rules of Civil
which was not the real party-in-interest in Civil Case No. MC99- Procedure, there are only four instances wherein a defendant who
605. Petitioner claims that it had never used the name PEIA as its is a non-resident and is not found in the country may be served
corporate name, and neither did it change its name from that of with summons by extraterritorial service, to wit: (1) when the
PEIA. Petitioner stresses that PEIA is an entirely different action affects the personal status of the plaintiff; (2) when the
corporate entity that is not connected in whatever manner to the action relates to, or the subject of which is property, within the
petitioner. Even assuming arguendo that petitioner is the real Philippines, in which the defendant claims a lien or an interest,
party-in-interest in Civil Case No. MC99-605 or that petitioner and actual or contingent; (3) when the relief demanded in such action
PEIA are one and the same entity, petitioner still avows that the consists, wholly or in part, in excluding the defendant from any
respondent failed to state a cause of action against it because the interest in property located in the Philippines; and (4) when the
Distribution Agreement expressly grants PEIA the right to defendant non-resident’s property has been attached within the
terminate the said contract at any time. Philippines. In these instances, service of summons may be
effected by (a) personal service out of the country, with leave of
Lastly, it is the contention of the petitioner that the appellate court court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.27
should have granted its Petition for Certiorari because the RTC
committed grave abuse of discretion amounting to lack or excess
Undoubtedly, extraterritorial service of summons applies only allegation in its Amended Complaint that petitioner had personal
where the action is in rem or quasi in rem, but not if an action is in property within the Philippines in the form of shares of stock in
personam. 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
When the case instituted is an action in rem or quasi in rem,
quasi in rem and, subsequently, make the extraterritorial service
Philippine courts already have jurisdiction to hear and decide the
of summons upon the petitioner valid.
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 It is incorrect for the RTC to have ruled that the allegations made
jurisdiction over the res.28 Thus, in such instance, extraterritorial by the respondent in its Amended Complaint, which is primarily
service of summons can be made upon the defendant. The said for collection of a sum of money and damages, that the petitioner
extraterritorial service of summons is not for the purpose of owns shares of stock within the Philippines to which the petitioner
vesting the court with jurisdiction, but for complying with the claims interest, or an actual or contingent lien, would make the
requirements of fair play or due process, so that the defendant will case fall under one of the aforesaid instances wherein
be informed of the pendency of the action against him and the extraterritorial service of summons under Section 15, Rule 14 of
possibility that property in the Philippines belonging to him or in the 1997 Revised Rules of Civil Procedure, would be valid. The
which he has an interest may be subjected to a judgment in favor RTC in arriving at such conclusions relied on the second instance,
of the plaintiff, and he can thereby take steps to protect his mentioned under Section 15, Rule 14 of the 1997 Revised Rules
interest if he is so minded.29 On the other hand, when the of Civil Procedure (i.e., when the action relates to, or the subject
defendant or respondent does not reside and is not found in the of which is property, within the Philippines, in which the defendant
Philippines,30 and the action involved is in personam, Philippine claims a lien or interest, actual or contingent), where
courts cannot try any case against him because of the extraterritorial service of summons can be properly made.
impossibility of acquiring jurisdiction over his person unless he However, the aforesaid second instance has no application in the
voluntarily appears in court.31 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
In the case at bar, this Court sustains the contention of the
connected to any property of the petitioner to which it claims a lien
petitioner that there can never be a valid extraterritorial service of
or interest. The action for collection of a sum of money and
summons upon it, because the case before the court a quo
damages was purely based on the personal liability of the
involving collection of a sum of money and damages is, indeed,
petitioner towards the respondent. The petitioner is correct in
an action in personam, as it deals with the personal liability of the
saying that "mere allegations of personal property within the
petitioner to the respondent by reason of the alleged unilateral
Philippines does not necessarily make the action as one that
termination by the former of the Distribution Agreement. Even the
relates to or the subject of which is, property within the Philippines
Court of Appeals, in its Decision dated 4 April 2004, upheld the
as to warrant the extraterritorial service of summons. For the
nature of the instant case as an action in personam. In the said
action to be considered one that relates to, or the subject of
Decision the appellate court ruled that:
which, is the property within the Philippines, the main subject
matter of the action must be the property itself of the petitioner in
In the instant petition, [respondent’s] cause of action in Civil Case the Philippines." By analogy, an action involving title to or
No. MC99-605 is anchored on the claim that petitioner unilaterally possession of real or personal property -- such as the foreclosure
terminated the Distribution Agreement. Thus, [respondent] prays of real estate or chattel mortgage where the mortgagor does not
in its [C]omplaint that "Upon the filing of the Complaint, issue an reside or is not found in the Philippines -- can be considered as
Order fixing the amount of the bond and issue a writ of an action which relates to, or the subject of which is, property
attachment requiring the sheriff to attach the properties of [Perkin- within the Philippines, in which the defendant claims a lien or
Elmer Philippines], which are not exempt from execution, and as interest, actual or contingent; and in such instance, judgment will
much as may be sufficient to satisfy [respondent’s] demands." be limited to the res.33

The action instituted by [respondent] affects the parties alone, not Moreover, the allegations made by the respondent that the
the whole world. Hence, it is an action in personam, i.e., any petitioner has property within the Philippines were in support of its
judgment therein is binding only upon the parties properly application for the issuance of a writ of attachment, which was
impleaded. 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
xxxx Philippines of the petitioner.

The objective sought in [respondent’s] [C]omplaint was to


This Court also finds error in the Decision of the Court of Appeals.
establish a claim against petitioner for its alleged unilateral It is provided for in the said Decision, thus:
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 However, let it be emphasized that in the [C]omplaint filed before
its personal liability. As such, personal service of summons upon the trial court, [respondent] prayed that "Upon the filing of the
the [petitioner] is essential in order for the court to acquire of (sic) Complaint, issue an Order fixing the amount of the bond and
jurisdiction over [its person].32 (Emphasis supplied.) 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
Thus, being an action in personam, personal service of summons
[respondent’s] demands.
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- In other words, although the [C]omplaint before the trial court
resident and is not found within the Philippines. Respondent’s does not involve the personal status of the [respondent],
nevertheless, the case involves property within the Philippines in It is settled that a party who makes a special appearance in court
which the [petitioner] has or claim an interest, or which the for the purpose of challenging the jurisdiction of said court, based
[respondent] has attached, which is one of the instances where on the invalidity of the service of summons, cannot be considered
extraterritorial service of summons is proper. 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
xxxx
jurisdiction of the RTC over its person. Thus, the petitioner cannot
be declared in estoppel when it filed an Answer ad cautelam with
Hence, it is submitted that one of the instances when exterritorial compulsory counterclaim before the RTC while the instant Petition
service of summons under Section 15, Rule 14 of the Rules of was still pending before this Court. The petitioner was in a
Court is proper may be considered to have been met. This is situation wherein it had no other choice but to file an Answer;
because the [C]omplaint for collection of sum of money which is otherwise, the RTC would have already declared that petitioner
an action in personam was converted into an action quasi in rem had waived its right to file responsive pleadings.37 Neither can the
by the attachment of [petitioner’s] interest in [Perkin-Elmer compulsory counterclaim contained in petitioner’s Answer ad
Philippines].34 (Emphasis supplied.) cautelam be considered as voluntary appearance of petitioner
before the RTC. Petitioner seeks to recover damages and
attorney’s fees as a consequence of the unfounded suit filed by
Respondent’s allegation in its Amended Complaint that petitioner respondent against it. Thus, petitioner’s compulsory counterclaim
had personal property within the Philippines in the form of shares is only consistent with its position that the respondent wrongfully
of stock in PEIP does not convert Civil Case No. MC99-605 from
filed a case against it and the RTC erroneously exercised
an action in personam to one quasi in rem, so as to qualify said jurisdiction over its person.
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 defendant’s property has been attached within the Distinction must be made in Civil Case No. MC99-605 as to the
Philippines), wherein extraterritorial service of summons upon the jurisdiction of the RTC over respondent’s complaint and over
petitioner would have been valid. It is worthy to note that what is petitioner’s counterclaim -- while it may have no jurisdiction over
required under the aforesaid provision of the Revised Rules of the former, it may exercise jurisdiction over the latter. The
Civil Procedure is not a mere allegation of the existence of compulsory counterclaim attached to petitioner’s Answer ad
personal property belonging to the non-resident defendant within cautelam can be treated as a separate action, wherein petitioner
the Philippines but, more precisely, that the non-resident is the plaintiff while respondent is the defendant.38 Petitioner could
defendant’s personal property located within the Philippines must have instituted a separate action for the very same claims but, for
have been actually attached. This Court in the case of Venturanza the sake of expediency and to avoid multiplicity of suits, it chose
v. Court of Appeals35 ruled that when the attachment was void to demand the same in Civil Case No. MC99-605.39 Jurisdiction of
from the beginning, the action in personam which required the RTC over the subject matter and the parties in the
personal service of summons was never converted into an action counterclaim must thus be determined separately and
in rem where service by publication would have been valid. independently from the jurisdiction of the same court in the same
Hence, the appellate court erred in declaring that the present case over the subject matter and the parties in respondent’s
case, which is an action in personam, was converted to an action complaint.
quasi in rem because of respondent’s allegations in its Amended
Complaint that petitioner had personal property within the
Moreover, even though the petitioner raised other grounds in its
Philippines.
Motion to Dismiss aside from lack of jurisdiction over its person,
the same is not tantamount to its voluntary appearance or
Glaringly, respondent’s prayer in its Amended Complaint for the submission to the authority of the court a quo. While in De
issuance of a writ of attachment over petitioner’s purported shares Midgely v. Ferandos,40 it was held that, in a Motion to Dismiss, the
of stock in PEIP located within the Philippines was denied by the allegation of grounds other than lack of jurisdiction over the
court a quo in its Order dated 26 March 1999. Respondent’s person of the defendant, including a prayer "for such other reliefs
Motion for Reconsideration of the said Order was likewise denied as" may be deemed "appropriate and proper" amounted to
by the RTC in its subsequent Order, dated 11 January 2000. voluntary appearance, such ruling must be deemed superseded
Evidently, petitioner’s alleged personal property within the by the declaration of this Court in La Naval Drug Corporation v.
Philippines, in the form of shares of stock in PEIP, had not been Court of Appeals41 that estoppel by jurisdiction must be
attached; hence, Civil Case No. MC99-605, for collection of sum unequivocal and intentional. It would be absurd to hold that
of money and damages, remains an action in personam. As a petitioner unequivocally and intentionally submitted itself to the
result, the extraterritorial service of summons was not validly jurisdiction of the court by seeking other reliefs to which it might
effected by the RTC against the petitioner, and the RTC thus be entitled when the only relief that it could properly ask from the
failed to acquire jurisdiction over the person of the petitioner. The trial court is the dismissal of the complaint against it. 42 Thus, the
RTC is therefore bereft of any authority to act upon the Complaint allegation of grounds other than lack of jurisdiction with a prayer
filed before it by the respondent insofar as the petitioner is "for such other reliefs" as may be deemed "appropriate and
concerned. proper" cannot be considered as unequivocal and intentional
estoppel. Most telling is Section 20, Rule 14 of the Rules of Court,
which expressly provides:
If there was no valid summons served upon petitioner, could RTC
have acquired jurisdiction over the person of the petitioner by the
latter’s voluntary appearance? As a rule, even if the service of SEC. 20. Voluntary appearance. - The defendant’s voluntary
summons upon the defendant or respondent in a civil case is appearance in the action shall be equivalent to service of
defective, the court can still acquire jurisdiction over his person summons. The inclusion in a motion to dismiss of other grounds
when he voluntary appears in court or submits himself to its aside from lack of jurisdiction over the person of the defendant
authority. Nonetheless, voluntary appearance, as a mode of shall not be deemed a voluntary appearance.43 (Emphasis
acquiring jurisdiction over the person of the defendant, is likewise supplied.)
inapplicable in this case.
In sum, this Court finds that the petitioner did not submit itself petitioner within the Philippines is essential for the RTC to validly
voluntarily to the authority of the court a quo; and in the absence acquire jurisdiction over the person of the petitioner. Having failed
of valid service of summons, the RTC utterly failed to acquire to do so, the RTC can never subject petitioner to its jurisdiction.
jurisdiction over the person of the petitioner. 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
Anent the existence of a cause of action against petitioner and the
rem, for petitioner’s purported personal property was never
proper venue of the case, this Court upholds the findings of the
attached; thus, the extraterritorial service of summons upon the
RTC on these issues.
petitioner remains invalid. In light of the foregoing findings, this
Court concludes that the RTC has no power to hear and decide
Dismissal of a Complaint for failure to state a cause of action is the case against the petitioner, because the extraterritorial service
provided for by the Rules of Court.44 When a Motion to Dismiss is of summons was not validly effected upon the petitioner and the
grounded on the failure to state a cause of action, a ruling thereon RTC never acquired jurisdiction over its person.
should be based only on the facts alleged in the complaint. The
court must pass upon this issue based solely on such allegations,
Finally, as regards the petitioner’s counterclaim, which is purely
assuming them to be true. For it to do otherwise would be a
for damages and attorney’s fees by reason of the unfounded suit
procedural error and a denial of plaintiff’s right to due
filed by the respondent against it, it has long been settled that the
process.45 While, truly, there are well-recognized exceptions46 to
same truly falls under the classification of compulsory
the rule that the allegations are hypothetically admitted as true
counterclaim and it must be pleaded in the same action,
and inquiry is confined to the face of the complaint, 47 none of the
otherwise, it is barred.49 In the case at bar, this Court orders the
exceptions apply in this case. Hence, the general rule applies.
dismissal of the Complaint filed by the respondent against the
The defense of the petitioner that it is not the real party-in-interest
petitioner because the court a quo failed to acquire jurisdiction
is evidentiary in nature which must be proven in trial. The
over the person of the latter. Since the Complaint of the
appellate court, then, cannot be faulted for not granting
respondent was dismissed, what will happen then to the
petitioner’s Motion to Dismiss on the ground of failure to state a
counterclaim of the petitioner? Does the dismissal of the
cause of action.
complaint carry with it the dismissal of the counterclaim?

In the same way, the appellate court did not err in denying
In the cases of Metal Engineering Resources Corp. v. Court of
petitioner’s Motion to Dismiss Civil Case No. MC99-605 on the
Appeals,50 International Container Terminal Services, Inc. v. Court
ground of improper venue. In arriving at such conclusion, this
of Appeals,51 and BA Finance Corporation v. Co.,52 the Court
Court quotes with approval the following ratiocination of the RTC:
ruled that if the court does not have jurisdiction to entertain the
main action of the case and dismisses the same, then the
As for the contention that venue was improperly laid, x x x, the compulsory counterclaim, being ancillary to the principal
[trial court] in its ultimate desire that the ends of justice could be controversy, must likewise be dismissed since no jurisdiction
served in its fullest, cannot rule that venue was improperly laid. 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
xxxx compulsory in nature must also be dismissed together with the
Complaint. However, in the case of Pinga vs. Heirs of German
The stipulation as to the venue of a prospective action does not Santiago,54 the Court explicitly expressed that:
preclude the filing of the suit in the residence of the [respondent]
under Section 2, Rule 4, Rules of Court, especially where the Similarly, Justice Feria notes that "the present rule reaffirms the
venue stipulation was imposed by the [petitioner] for its own
right of the defendant to move for the dismissal of the complaint
benefits.48 (Emphasis supplied.) and to prosecute his counterclaim, as stated in the separate
opinion [of Justice Regalado in BA Finance]. Retired Court of
Despite the venue stipulation found in the Distribution Agreement Appeals Justice Hererra pronounces that the amendment to
stipulating that the exclusive jurisdiction over disputes arising from Section 3, Rule 17 [of the 1997 Revised Rules of Civil Procedure]
the same shall lie in the courts of Singapore or of the Territory settles that "nagging question "whether the dismissal of the
(referring to the Philippines), whichever is elected by PEIA (or complaint carries with it the dismissal of the counterclaim, and
petitioner, as PEIA’s alleged successor), the RTC of the opines that by reason of the amendments, the rulings in Metals
Philippines cannot be considered as an improper venue. Truly, Engineering, International Container, and BA Finance "may be
the venue stipulation used the word "exclusive," however, a closer deemed abandoned." x x x.
look on the Distribution Agreement would reveal that the venue
stipulation was really in the alternative i.e., courts of Singapore or x x x, when the Court promulgated the 1997 Rules of Civil
of the Territory, meaning, the Philippines; thus, the court a quo is
Procedure, including the amended Rule 17, those previous jural
not an improper venue for the present case. doctrines that were inconsistent with the new rules incorporated in
the 1997 Rules of Civil Procedure were implicitly abandoned
Nonetheless, it bears to emphasize that despite our findings that insofar as incidents arising after the effectivity of the new
based on the allegations in respondent’s Complaint in Civil Case procedural rules on 1 July 1997. BA Finance, or even the doctrine
No. MC99-605, respondent appears to have a cause of action that a counterclaim may be necessarily dismissed along with the
against the petitioner and that the RTC is the proper venue for the complaint, clearly conflicts with the 1997 Rules of Civil Procedure.
said case, Civil Case No. MC99-605 is still dismissible, for the The abandonment of BA Finance as doctrine extends as far back
RTC never acquired jurisdiction over the person of the petitioner. as 1997, when the Court adopted the new Rules of Civil
The extraterritorial service of summons upon the petitioner Procedure. If, since then, abandonment has not been affirmed in
produces no effect because it can only be done if the action is in jurisprudence, it is only because no proper case has arisen that
rem or quasi in rem. The case for collection of sum of money and would warrant express confirmation of the new rule. That
damages filed by the respondent against the petitioner being an opportunity is here and now, and we thus rule that the dismissal
action in personam, then personal service of summons upon the of a complaint due to fault of the plaintiff is without prejudice to the
right of the defendant to prosecute any pending counterclaims of It may also do well to remember that it is this Court which
whatever naturein the same or separate action. We confirm that mandated that claims for damages and attorney’s fees based on
BA Finance and all previous rulings of the Court that are unfounded suit constitute compulsory counterclaim which must be
inconsistent with this present holding are now pleaded in the same action or, otherwise, it shall be barred. It will
abandoned.55 [Emphasis supplied]. 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
It is true that the aforesaid declaration of the Court refers to
court, yet make his right totally dependent on the fate of the
instances covered by Section 3, Rule 17 of the 1997 Revised
respondent’s complaint.
Rules of Civil Procedure56 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 If indeed the Court dismisses petitioner’s counterclaim solely on
dismissal of respondent’s Complaint was upon the instance of the the basis of the dismissal of respondent’s Complaint, then what
petitioner who correctly argued lack of jurisdiction over its person. remedy is left for the petitioner? It can be said that he can still file
a separate action to recover the damages and attorney’s fees
based on the unfounded suit for he cannot be barred from doing
Also in the case of Pinga v. Heirs of German Santiago, the Court
so since he did file the compulsory counterclaim in the present
discussed the situation wherein the very filing of the complaint by
action, only that it was dismissed when respondent’s Complaint
the plaintiff against the defendant caused the violation of the
was dismissed. However, this reasoning is highly flawed and
latter’s rights. As to whether the dismissal of such a complaint
irrational considering that petitioner, already burdened by the
should also include the dismissal of the counterclaim, the Court
damages and attorney’s fees it may have incurred in the present
acknowledged that said matter is still debatable, viz:
case, must again incur more damages and attorney’s fees in
pursuing a separate action, when, in the first place, it should not
Whatever the nature of the counterclaim, it bears the same have been involved in any case at all.
integral characteristics as a complaint; namely a cause (or
causes) of action constituting an act or omission by which a party
Since petitioner’s counterclaim is compulsory in nature and its
violates the right of another. The main difference lies in that the
cause of action survives that of the dismissal of respondent’s
cause of action in the counterclaim is maintained by the
complaint, then it should be resolved based on its own merits and
defendant against the plaintiff, while the converse holds true with
evidentiary support.WHEREFORE, premises considered, the
the complaint. Yet, as with a complaint, a counterclaim without a
instant Petition is hereby GRANTED. The Decision of the Court of
cause of action cannot survive.
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
x x x if the dismissal of the complaint somehow eliminates the Regional Trial Court of Mandaluyong City, Branch 212, in Civil
cause(s) of the counterclaim, then the counterclaim cannot Case No. MC99-605, is hereby REVERSED AND SET ASIDE.
survive. Yet that hardly is the case, especially as a general rule. Respondent’s Amended Complaint in Civil Case No. MC99-605
More often than not, the allegations that form the counterclaim are as against the petitioner is hereby ordered DISMISSED, and all
rooted in an act or omission of the plaintiff other than the plaintiff’s the proceedings against petitioner in the court a quo by virtue
very act of filing the complaint. Moreover, such acts or omissions thereof are hereby DECLARED NULL AND VOID. The Regional
imputed to the plaintiff are often claimed to have occurred prior to Trial Court of Mandaluyong City, Branch 212, is DIRECTED to
the filing of the complaint itself. The only apparent exception to proceed without further delay with the resolution of respondent’s
this circumstance is if it is alleged in the counterclaim that the very Complaint in Civil Case No. MC99-605 as to defendant PEIP, as
act of the plaintiff in filing the complaint precisely causes the well as petitioner’s counterclaim. No costs.SO ORDERED.
violation of the defendant’s 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.571awphi1

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 petitioner’s counterclaim against


respondent is for damages and attorney’s fees arising from the
unfounded suit. While respondent’s Complaint against petitioner
is already dismissed, petitioner may have very well already
incurred damages and litigation expenses such as attorney’s 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 petitioner’s
counterclaim is not eliminated by the mere dismissal of
respondent’s complaint.
G.R. No. 156848 October 11, 2007 Otherwise, I could have charged your company with a much
higher fee."
PIONEER INTERNATIONAL, LTD., petitioner,
vs. Annex "B"9 shows that on 4 September 1996, Lindsay, under the
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding letterhead of Pioneer Concrete (Hong Kong) Limited, responded
Judge of Regional Trial Court, Branch 147, Makati City, and by fax to Todaro’s faxed letter to McDonald and proposed that
ANTONIO D. TODARO, respondents. Todaro "join Pioneer on a retainer basis for 2 to 3 months on the
understanding that [Todaro] would become a permanent
employee if as we expect, our entry proceeds." The faxed letter to
DECISION
McDonald referred to by Lindsay is not found in the rollo and was
not attached to Todaro’s complaint.
CARPIO, J.:
Annex "C"10 shows that on the same date as that of Annex "B,"
The Case Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
another letter to Lindsay of Pioneer Concrete (Hong Kong)
Limited. Todaro asked for a formal letter addressed to him about
This is a petition for review on certiorari1 of the Decision2 dated 27
the proposed retainer. Todaro requested that the letter contain a
September 2001 and of the Resolution3 dated 14 January 2003 of statement on his remuneration package and on his permanent
the Court of Appeals (appellate court) in CA-G.R. SP No. 54062. employment "with PIONEER once it has established itself on a
The Decision affirmed the Orders4 dated 4 January 19995 and 3
permanent basis in the Philippines."
June 19996 of Branch 147 of the Regional Trial Court of Makati
City (trial court) in Civil Case No. 98-124. The trial court denied
the motion to dismiss filed by Pioneer International, Ltd. (PIL)7in Annex "D"11 shows that Todaro, under the letterhead of Ital Tech
its special appearance. Distributors, Inc., sent a letter to McDonald of PIL. Todaro
confirmed the following to McDonald:
The Facts
1. That I am accepting the proposal of PIONEER INT’L.
as a consultant for three (3) months, starting October 1,
On 16 January 1998, Antonio D. Todaro (Todaro) filed a 1996, with a retainer fee of U.S. $15,000.00 per month;
complaint for sum of money and damages with preliminary
attachment against PIL, Pioneer Concrete Philippines, Inc.
(PCPI), Pioneer Philippines Holdings, Inc. (PPHI), John G. 2. That after three (3) months consultancy, I should be
McDonald (McDonald), and Philip J. Klepzig (Klepzig). PIL and its employed by PIONEER INT’L., on a permanent basis,
co-defendants were served copies of the summons and of the as its Managing Director or CEO in the Philippines.
complaint at PPHI and PCPI’s office in Alabang, Muntinlupa, Remuneration package will be mutually agreed upon by
through Cecille L. De Leon (De Leon), who was Klepzig’s PIONEER and the undersigned;
Executive Assistant.
3. That Gino Martinel and the Sales Manager – Jun
Todaro alleged that PIL is a corporation duly organized under Ong, will be hired as well, on a permanent basis, by
Australian laws, while PCPI and PPHI are corporations duly PIONEER as soon as the company is established.
organized under Philippine laws. PIL is engaged in the ready-mix Salary, likewise, will be accepted by both PIONEER
and concrete aggregates business and has established a and the respective parties.
presence worldwide. PIL established PPHI as the holding
company of the stocks of its operating company in the Philippines,
Annex "E"12 is a faxed letter dated 18 November 1996 of
PCPI. McDonald is the Chief Executive Officer of PIL’s Hong
McDonald, under the letterhead of Pioneer Concrete Group HK,
Kong office while Klepzig is the President and Managing Director
to Todaro of Ital Tech Distributors, Inc. The first three paragraphs
of PPHI and PCPI. For his part, Todaro further alleged that he
of McDonald’s letter read:
was the managing director of Betonval Readyconcrete, Inc.
(Betonval) from June 1975 up to his resignation in February
1996. Further to our recent meeting in Hong Kong, I am now
able to confirm my offer to engage you as a consultant
to Pioneer International Ltd. Should Pioneer proceed
Before Todaro filed his complaint, there were several meetings
with an investment in the Philippines, then Pioneer
and exchanges of letters between Todaro and the officers of
would offer you a position to manage the premixed
Pioneer Concrete (Hong Kong) Limited, Pioneer Concrete Group
concrete operations.
HK, PPHI, and PIL. According to Todaro, PIL contacted him in
May 1996 and asked if he could join it in establishing a pre-mixed
concrete plant and in overseeing its operations in the Philippines. Pioneer will probably be in a position to make a
Todaro confirmed his availability and expressed interest in joining decision on proceeding with an investment by mid
PIL. Todaro met with several of PIL’s representatives and even January ‘97.
gave PIL the names of three of his subordinates in Betonval
whom he would like to join him in PIL.
The basis for your consultancy would be:

Todaro attached nine letters, marked as Annexes "A" to "I," to his


complaint. Annex "A"8 shows that on 15 July 1996, Todaro, under  Monthly fee USD 15,000 per month
the letterhead of Ital Tech Distributors, Inc., sent a letter to Max billed on monthly basis and
Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited. payable 15 days from billing date.
Todaro wrote that "[m]y aim is to run again a ready-mix concrete  Additional pre-approved expenses
company in the Philippines and not to be a part-time consultant. to be reimbursed.
 Driver and secretarial support-basis The employment conditions you specified in your letter
for reimbursement of this to be to John McDonald dated 11th September are well
agreed. beyond our expectations.
 Arrangement to commence from
1st November ‘96, reflecting your Mr. Todaro, I regret that we do not wish to pursue our
contributions so far and to continue association with you any further. Mr. Klepzig was
until Pioneer makes a decision. authorized to terminate this association and the letter
he sent to you dated 18th September has my support.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead of
Ital Tech Distributors, Inc., to McDonald of Pioneer Concrete Thank you for your involvement with Pioneer. I wish you
Group HK dated 19 November 1996. Todaro confirmed all the best for the future. (Emphasis added)
McDonald’s package concerning the consultancy and reiterated
his desire to be the manager of Pioneer’s Philippine business
PIL filed, by special appearance, a motion to dismiss Todaro’s
venture.
complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
separate motion to dismiss.17 PIL asserted that the trial court has
Annex "G"14 shows Todaro’s faxed reply, under the letterhead of no jurisdiction over PIL because PIL is a foreign corporation not
Ital Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997. doing business in the Philippines. PIL also questioned the service
Todaro informed McDonald that he was willing to extend of summons on it. Assuming arguendo that Klepzig is PIL’s agent
assistance to the Pioneer representative from Queensland. The in the Philippines, it was not Klepzig but De Leon who received
tenor of the letter revealed that Todaro had not yet occupied his the summons for PIL. PIL further stated that the National Labor
expected position. Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that
assuming that the trial court has jurisdiction over the subject
Annex "H"15 shows Klepzig’s letter, under the letterhead of PPHI,
matter of the action, the complaint should be dismissed on the
to Todaro dated 18 September 1997. Klepzig’s message reads:
ground of forum non-conveniens. Finally, PIL maintained that the
complaint does not state a cause of action because there was no
It has not proven possible for this company to meet with perfected contract, and no personal judgment could be rendered
your expectations regarding the conditions of your by the trial court against PIL because PIL is a foreign corporation
providing Pioneer with consultancy services. This, and not doing business in the Philippines and there was improper
your refusal to consider my terms of offer of permanent service of summons on PIL.
employment, leave me no alternative but to withdraw
these offers of employment with this company.
Todaro filed a Consolidated Opposition dated 26 August 1998 to
refute PIL’s assertions. PIL filed, still by special appearance, a
As you provided services under your previous Reply on 2 October 1998.
agreement with our Pioneer Hong Kong office during
the month of August, I will see that they pay you at the The Ruling of the Trial Court
previous rates until the end of August. They have
authorized me on behalf of Pioneer International Ltd. to
formally advise you that the agreement will cease from On 4 January 1999, the trial court issued an order18 which ruled in
August 31stas per our previous discussions. favor of Todaro. The trial court denied the motions to dismiss filed
by PIL, PCPI, PPHI, and Klepzig.
Annex "I"16 shows the letter dated 20 October 1997 of K.M.
Folwell (Folwell), PIL’s Executive General Manager of Australia The trial court stated that the merits of a motion to dismiss a
and Asia, to Todaro. Folwell confirmed the contents of Klepzig’s complaint for lack of cause of action are tested on the strength of
18 September 1997 letter. Folwell’s message reads: the allegation of facts in the complaint. The trial court found that
the allegations in the complaint sufficiently establish a cause of
action. The trial court declared that Todaro’s cause of action is
Thank you for your letter to Dr. Schubert dated
based on an alleged breach of a contractual obligation and an
29th September 1997 regarding the alleged breach of
alleged violation of Articles 19 and 21 of the Civil Code.
contract with you. Dr. Schubert has asked me to
Therefore, the cause of action does not lie within the jurisdiction
investigate this matter.
of the NLRC but with the trial court.

I have discussed and examined the material regarding


The trial court also asserted its jurisdiction over PIL, holding that
your association with Pioneer over the period from mid
PIL did business in the Philippines when it entered into a contract
1996 through to September 1997.
with Todaro. Although PIL questions the service of summons on
Klepzig, whom PIL claims is not its agent, the trial court ruled that
Clearly your consultancy services to Pioneer Hong PIL failed to adduce evidence to prove its contention. Finally, on
Kong are well documented and have been the issue of forum non-conveniens, the trial court found that it is
appropriately rewarded. However, in regard to your more convenient to hear and decide the case in the Philippines
request and expectation to be given permanent because Todaro resides in the Philippines and the contract
employment with Pioneer Philippines Holdings, Inc. allegedly breached involves employment in the Philippines.
I am informed that negotiations to reach agreement on
appropriate terms and conditions have not been
PIL filed an urgent omnibus motion for the reconsideration of the
successful.
trial court’s 4 January 1999 order and for the deferment of filing its
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus
motion. Todaro filed a consolidated opposition, to which PIL,
PCPI, PPHI, and Klepzig filed a joint reply. The trial court issued D. Pursuant to the principle of forum non-conveniens,
an order19on 3 June 1999 denying the motions of PIL, PCPI, [the trial court] committed grave abuse of discretion
PPHI, and Klepzig. The trial court gave PIL, PCPI, PPHI, and when it took cognizance of the case.22
Klepzig 15 days within which to file their respective answers.
The Ruling of the Court
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
The Ruling of the Appellate Court service of summons, the rulings of the trial and appellate courts
on the issues raised by PIL are correct.
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate Cause of Action
court’s decision reads:
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that
WHEREFORE, premises considered, the present a cause of action is the act or omission by which a party violates a
petition for certiorari is hereby DENIED DUE COURSE right of another.
and accordingly DISMISSED. The assailed Orders
dated January 4, 1999 and June 3, 1999 of the
The general rule is that the allegations in a complaint
Regional Trial Court of Makati City, Branch 147, in Civil
are sufficient to constitute a cause of action against the
Case No, 98-124 are hereby AFFIRMED in toto.
defendants if, admitting the facts alleged, the court can
render a valid judgment upon the same in accordance
SO ORDERED.20 with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in
favor of the plaintiff by whatever means and under
On 14 January 2003, the appellate court dismissed21 PIL’s motion
whatever law it arises or is created; (2) an obligation on
for reconsideration for lack of merit. The appellate court stated
the part of the named defendant to respect or not to
that PIL’s motion raised no new substantial or weighty arguments
violate such right; and (3) an act or omission on the part
that could impel the appellate court from departing or overturning
of such defendant violative of the right of the plaintiff or
its previous decision. PIL then filed a petition for review on
constituting a breach of the obligation of the defendant
certiorari before this Court.
to the plaintiff for which the latter may maintain an
action for recovery of damages.23
The Issues
In the present case, the summary of Todaro’s allegations states
PIL raised the following issues before this Court: that PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
PIL’s Philippine office. Todaro’s allegations are thus sufficient to
A. [The trial court] did not and cannot acquire establish a cause of action. We quote with approval the trial
jurisdiction over the person of [PIL] considering that: court’s ruling on this matter:

A.1. [PIL] is a foreign corporation "not doing


On the issue of lack of cause of action – It is well-
business" in the Philippines. settled that the merits of a motion to dismiss a
complaint for lack of cause of action is tested on the
A.2. Moreover, the complaint does not strength of the allegations of fact contained in the
contain appropriate allegations of ultimate complaint and no other (De Jesus, et al. vs. Belarmino,
facts showing that [PIL] is doing or et al., 95 Phil. 366 [1954]). This Court finds that the
transacting business in the Philippines. allegations of the complaint, specifically paragraphs 13-
33 thereof, paragraphs 30-33 alleging as follows:
A.3. Assuming arguendo that jurisdiction may
be acquired over the person of [PIL], [the trial "30. All of the acts set forth in the foregoing
court] still failed to acquire jurisdiction since have been done with the knowledge, consent
summons was improperly served on [PIL]. and/or approval of the defendants who acted
in concert and/or in conspiracy with one
another.
B. [Todaro] does not have a cause of action and the
complaint fails to state a cause of action. Jurisprudence
is settled in that in resolving a motion to dismiss, a court 31. Under the circumstances, there is a valid
can consider all the pleadings filed in the case, contract entered into between [Todaro] and
including annexes, motions and all evidence on record. the Pioneer Group, whereby, among others,
the Pioneer Group would employ [Todaro], on
a permanent basis, to manage and operate
C. [The trial court] did not and cannot acquire the ready-mix concrete operations, if the
jurisdiction over the subject matter of the complaint Pioneer Group decides to invest in the
since the allegations contained therein indubitably show Philippines.
that [Todaro] bases his claims on an alleged breach of
an employment contract. Thus, exclusive jurisdiction is
vested with the [NLRC]. 32. The Pioneer Group has decided to invest
in the Philippines. The refusal of the
defendants to comply with the Pioneer The first level has two sub-issues: PIL’s transaction of business in
Group’s undertaking to employ [Todaro] to the Philippines and the service of summons on PIL. Section 12,
manage their Philippine ready-mix Rule 14 of the 1997 Rules of Civil Procedure provides the manner
operations, on a permanent basis, is a direct by which summons may be served upon a foreign juridical entity
breach of an obligation under a valid and which has transacted business in the Philippines. Thus:
perfected contract.
Service upon foreign private juridical entity. — When
33. Alternatively, assuming without the defendant is a foreign juridical entity which has
conceding, that there was no contractual transacted business in the Philippines, service may be
obligation on the part of the Pioneer Group to made on its resident agent designated in accordance
employ [Todaro] on a permanent basis, in with law for that purpose, or, if there be no such agent,
their Philippine operations, the Pioneer Group on the government official designated by law to that
and the other defendants did not act with effect, or any of its officers or agents within the
justice, give [Todaro] his due and observe Philippines.
honesty and good faith and/or they have
willfully caused injury to [Todaro] in a manner
As to the first sub-issue, PIL insists that its sole act of
that is contrary to morals, good customs, and
"transacting" or "doing business" in the Philippines consisted of its
public policy, as mandated under Arts. 19
investment in PPHI. Under Philippine law, PIL’s mere investment
and 21 of the New Civil Code."
in PPHI does not constitute "doing business." However, we affirm
the lower courts’ ruling and declare that, based on the allegations
sufficiently establish a cause of action for breach of in Todaro’s complaint, PIL was doing business in the Philippines
contract and/or violation of Articles 19 and 21 of the when it negotiated Todaro’s employment with PPHI. Section 3(d)
New Civil Code. Whether or not these allegations are of Republic Act No. 7042, Foreign Investments Act of 1991,
true is immaterial for the court cannot inquire into the states:
truth thereof, the test being whether, given the
allegations of fact in the complaint, a valid judgment
The phrase "doing business" shall include
could be rendered in accordance with the prayer in the
soliciting orders, service contracts, opening offices,
complaint.24
whether called "liaison" offices or branches; appointing
representatives or distributors domiciled in the
It should be emphasized that the presence of a cause of action Philippines or who in any calendar year stay in the
rests on the sufficiency, and not on the veracity, of the allegations country for a period or periods totaling one hundred
in the complaint. The veracity of the allegations will have to be eighty [180] days or more; participating in the
examined during the trial on the merits. In resolving a motion to management, supervision or control of any domestic
dismiss based on lack of cause of action, the trial court is limited business, firm, entity or corporation in the
to the four corners of the complaint and its annexes. It is not yet Philippines; and any other act or acts that imply a
necessary for the trial court to examine the truthfulness of the continuity of commercial dealings or arrangements
allegations in the complaint. Such examination is proper during and contemplate to that extent the performance of
the trial on the merits. acts or works, or the exercise of some of the
functions normally incident to, and in progressive
prosecution of commercial gain or of the purpose
Forum Non-Conveniens
and object of the business organization: Provided,
however, That the phrase "doing business" shall not be
The doctrine of forum non-conveniens requires an examination of deemed to include mere investment as a shareholder
the truthfulness of the allegations in the complaint. Section 1, by a foreign entity in domestic corporations duly
Rule 16 of the 1997 Rules of Civil Procedure does not registered to do business, and/or the exercise of rights
mention forum non-conveniens as a ground for filing a motion to as such investor; nor having a nominee director or
dismiss. The propriety of dismissing a case based on forum non- officer to represent its interests in such corporation; nor
conveniens requires a factual determination; hence, it is more appointing a representative or distributor domiciled in
properly considered a matter of defense. While it is within the the Philippines which transacts business in its own
discretion of the trial court to abstain from assuming jurisdiction name and for its own account; (Emphases added)
on this ground, the trial court should do so only after vital facts are
established to determine whether special circumstances require
PIL’s alleged acts in actively negotiating to employ Todaro to run
the court’s desistance.25
its pre-mixed concrete operations in the Philippines, which acts
are hypothetically admitted in PIL’s motion to dismiss, are not
Jurisdiction over PIL mere acts of a passive investor in a domestic corporation. Such
are managerial and operational acts in directing and establishing
commercial operations in the Philippines. The annexes that
PIL questions the trial court’s exercise of jurisdiction over it on two
Todaro attached to his complaint give us an idea on the extent of
levels. First, that PIL is a foreign corporation not doing business in PIL’s involvement in the negotiations regarding Todaro’s
the Philippines and because of this, the service of summons on employment. In Annex "E," McDonald of Pioneer Concrete Group
PIL did not follow the mandated procedure. Second, that Todaro’s
HK confirmed his offer to engage Todaro as a consultant of PIL.
claims are based on an alleged breach of an employment contract In Annex "F," Todaro accepted the consultancy. In Annex "H,"
so Todaro should have filed his complaint before the NLRC and Klepzig of PPHI stated that PIL authorized him to tell Todaro
not before the trial court.
about the cessation of his consultancy. Finally, in Annex "I,"
Folwell of PIL wrote to Todaro to confirm that "Pioneer" no longer
Transacting Business in the Philippines and wishes to be associated with Todaro and that Klepzig is
Service of Summons authorized to terminate this association. Folwell further referred to
a Dr. Schubert and to Pioneer Hong Kong. These confirmations
and references tell us that, in this instance, the various officers When summons is served on a foreign juridical entity, there are
and companies under the Pioneer brand name do not work three prescribed ways: (1) service on its resident agent
independently of each other. It cannot be denied that PIL had designated in accordance with law for that purpose, (2) service on
knowledge of and even authorized the non-implementation of the government official designated by law to receive summons if
Todaro’s alleged permanent employment. In fact, in the letters to the corporation does not have a resident agent, and (3) service on
Todaro, the word "Pioneer" was used to refer not just to PIL alone any of the corporation’s officers or agents within the Philippines. 30
but also to all corporations negotiating with Todaro under the
Pioneer name.
In the present case, service of summons on PIL failed to follow
any of the prescribed processes. PIL had no resident agent in the
As further proof of the interconnection of the various Pioneer Philippines. Summons was not served on the Securities and
corporations with regard to their negotiations with Todaro, Exchange Commission (SEC), the designated government
McDonald of Pioneer Concrete Group HK confirmed Todaro’s agency,31 since PIL is not registered with the SEC. Summons for
engagement as consultant of PIL (Annex "E") while Folwell of PIL PIL was served on De Leon, Klepzig’s Executive Assistant.
stated that Todaro rendered consultancy services to Pioneer HK Klepzig is PIL’s "agent within the Philippines" because PIL
(Annex "I"). In this sense, the various Pioneer corporations were authorized Klepzig to notify Todaro of the cessation of his
not acting as separate corporations. The behavior of the various consultancy (Annexes "H" and "I").32 The authority given by PIL to
Pioneer corporations shoots down their defense that the Klepzig to notify Todaro implies that Klepzig was likewise
corporations have separate and distinct personalities, authorized to receive Todaro’s response to PIL’s notice. Todaro
managements, and operations. The various Pioneer corporations responded to PIL’s notice by filing a complaint before the trial
were all working in concert to negotiate an employment contract court.
between Todaro and PPHI, a domestic corporation.
However, summons was not served personally on Klepzig as
Finally, the phrase "doing business in the Philippines" in the agent of PIL. Instead, summons was served on De Leon,
former version of Section 12, Rule 14 now reads "has transacted Klepzig’s Executive Assistant. In this instance, De Leon was not
business in the Philippines." The scope is thus broader in that it is PIL’s agent but a mere employee of Klepzig. In effect, the
enough for the application of the Rule that the foreign private sheriff33 resorted to substituted service. For symmetry, we apply
juridical entity "has transacted business in the Philippines."26 the rule on substituted service of summons on a natural person
and we find that no reason was given to justify the service of PIL’s
summons on De Leon.
As to the second sub-issue, the purpose of summons is not only
to acquire jurisdiction over the person of the defendant, but also
to give notice to the defendant that an action has been Thus, we rule that PIL transacted business in the Philippines and
commenced against it and to afford it an opportunity to be heard Klepzig was its agent within the Philippines. However, there was
on the claim made against it. The requirements of the rule on improper service of summons on PIL since summons was not
summons must be strictly followed; otherwise, the trial court will served personally on Klepzig.
not acquire jurisdiction over the defendant.
NLRC Jurisdiction
When summons is to be served on a natural person, service of
summons should be made in person on the
As to the second level, Todaro prays for payment of damages due
defendant.27 Substituted service is resorted to only upon the
him because of PIL’s non-implementation of Todaro’s alleged
concurrence of two requisites: (1) when the defendant cannot be
employment agreement with PPHI. The appellate court stated its
served personally within a reasonable time and (2) when there is
ruling on this matter, thus:
impossibility of prompt service as shown by the statement in the
proof of service in the efforts made to find the defendant
personally and that such efforts failed.28 It could not be denied that there was no existing
contract yet to speak of between PIONEER INTL. and
[Todaro]. Since there was an absence of an
The statutory requirements of substituted service must be
employment contract between the two parties, this
followed strictly, faithfully, and fully, and any substituted service
Court is of the opinion and so holds that no employer-
other than by the statute is considered ineffective. Substituted
employee relationship actually exists. Record reveals
service is in derogation of the usual method of service. It is a
that all that was agreed upon by [Todaro] and the
method extraordinary in character and may be used only as
Pioneer Concrete, acting in behalf of PIONEER INTL.,
prescribed and in the circumstances authorized by the
was the confirmation of the offer to engage the services
statute.29 The need for strict compliance with the requirements of
of the former as consultant of PIONEER INTL. (Rollo, p.
the rule on summons is also exemplified in the exclusive
132). The failure on the part of PIONEER INTL. to
enumeration of the agents of a domestic private juridical entity
abide by the said agreement, which was duly confirmed
who are authorized to receive summons.
by PIONEER INTL., brought about a breach of an
obligation on a valid and perfected agreement. There
At present, Section 11 of Rule 14 provides that when the being no employer-employee relationship established
defendant is a domestic private juridical entity, service may be between [PIL] and [Todaro], it could be said that the
made on the "president, managing partner, general manager, instant case falls within the jurisdiction of the regular
corporate secretary, treasurer, or in-house counsel." The previous courts of justice as the money claim of [Todaro] did not
version of Section 11 allowed for the service of summons on the arise out of or in connection with [an] employer-
"president, manager, secretary, cashier, agent, or any of its employee relationship.34
directors." The present Section 11 qualified "manager" to "general
manager" and "secretary" to "corporate secretary." The present
Todaro’s employment in the Philippines would not be with PIL but
Section 11 also removed "cashier, agent, or any of its directors"
with PPHI as stated in the 20 October 1997 letter of Folwell.
from the exclusive enumeration.
Assuming the existence of the employment agreement, the
employer-employee relationship would be between PPHI and
Todaro, not between PIL and Todaro. PIL’s liability for the non-
implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes
of action as stated in his complaint are, in addition to breach of
contract, based on "violation of Articles 19 and 21 of the New Civil
Code" for the "clear and evident bad faith and malice"35 on the
part of defendants. The NLRC’s jurisdiction is limited to those
enumerated under Article 217 of the Labor Code.36

WHEREFORE, the petition is PARTIALLY GRANTED. The


Decision dated 27 September 2001 and the Resolution dated 14
January 2003 of the appellate court are AFFIRMED with
the MODIFICATION that there was improper service of summons
on Pioneer International, Ltd. The case is remanded to the trial
court for proper service of summons and trial. No costs.

SO ORDERED.
G.R. No. 168747 October 19, 2007 executed earlier by lifting his hand to affix his thumbmark on the
said affidavit.
VICTORIA REGNER, Petitioner,
vs. Sheriff Melchor A. Solon served the summonses on Cynthia and
CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU Teresa at the Borja Family Clinic in Tagbilaran City wherein
COUNTRY CLUB, Inc., Respondents. Melinda worked as a doctor, but Melinda refused to receive the
summonses for her sisters and informed the sheriff that their
lawyer, Atty. Francis Zosa, would be the one to receive the same.
DECISION

Upon her arrival in the Philippines, on 1 June 2000, Teresa was


CHICO-NAZARIO, J.:
personally served the summons at Room 304, Regency Crest
Condominium, Banilad, Cebu City. She filed her Answer4 with
This Petition for Review on Certiorari seeks to reverse the counterclaim with the RTC on 6 June 2000.
Decision1 dated 6 May 2005 of the Court of Appeals in CA-G.R.
CV No. 71028 entitled, "Victoria Regner v. Cynthia Logarta,
Subsequently, on 12 September 2002, Teresa filed a motion to
Teresa R. Tormis and Cebu Country Club, Inc.," which affirmed
dismiss Civil Case No. CEB 23927 because of petitioner’s failure
the Order dated 9 November 2000 of the Regional Trial Court
to prosecute her action for an unreasonable length of time.
(RTC) of Cebu, granting herein respondents’ motion to dismiss
Civil Case No. CEB 23927. The Order dated 9 November 2000 of
the RTC dismissed herein petitioner’s complaint for declaration of Petitioner opposed5 the motion and filed her own motion to set the
nullity of a deed of donation, for failure to serve summons on case for pre-trial, to which Teresa filed her rejoinder on the
Cynthia Logarta, an indispensable party therein. ground that their sister, Cynthia, an indispensable party, had not
yet been served a summons. Thus, Teresa prayed for the
dismissal of petitioner’s complaint, as the case would not proceed
Civil Case No. CEB. 23927 arose from the following factual
without Cynthia’s presence.
antecedents:

On 9 November 2000, the RTC issued an Order6 granting


Luis Regner (Luis) had three daughters with his first wife, Anicita
respondent Teresa’s motion to dismiss, pertinent portions of
C. Regner, namely, Cynthia Logarta (Cynthia) and Teresa Tormis
which read:
(Teresa), the respondents herein, and Melinda Regner-Borja
(Melinda).
Considering that the donees in the Deed of Donation are Cynthia
R. Logarta and Teresa R. Tormis, they are therefore an (sic)
Herein petitioner Victoria Regner (Victoria) is the second wife of
indispensable party (sic). In the case of Quisumbing vs. Court of
Luis.
Appeals, 189 SCRA 325, indispensable parties are those with
such an interest in the controversy that a final decree would
During the lifetime of Luis, he acquired several properties, among necessarily affect their rights so that the court could not proceed
which is a share at Cebu Country Club Inc., evidenced by without their presence
Proprietary Ownership Certificate No. 0272. On 15 May 1998,
Luis executed a Deed2 of Donation in favor of respondents
Wherefore, in view of the foregoing, the instant case is hereby
Cynthia and Teresa covering Proprietary Ownership Certificate
dismissed without prejudice.
No. 0272 of the Cebu Country Club, Inc.

A motion for reconsideration was filed by petitioner, but the same


Luis passed away on 11 February 1999.
was denied in an Order dated 14 February 2001.

On 15 June 1999, Victoria filed a Complaint3 for Declaration of


Aggrieved, petitioner appealed to the Court of Appeals. On 6 May
Nullity of the Deed of Donation with Prayer for Issuance of a Writ
2005, the Court of Appeals rendered a Decision denying the
of Preliminary Injunction and Temporary Restraining Order
appeal and affirming in toto the order of dismissal of the complaint
against Cynthia and Teresa with the RTC, docketed as Civil Case
by the RTC and the denial of the motion for reconsideration
No. CEB. 23927. Victoria alleged in her complaint that: on 17
thereof. The Court of Appeals ratiocinated that petitioner’s failure
March 1997, Luis made a written declaration wherein he stated
to move for an extraterritorial service of summons constitutes
that due to his illness and forgetfulness, he would not sign any
failure to prosecute for an unreasonable length of time, thus:
document without the knowledge of his lawyer, Atty. Francis
Zosa; on 15 May 1998, when Luis was already very ill and no
longer of sound and disposing mind, Cynthia and Teresa , [T]he plaintiff-appellant [Victoria Regner] should have moved for
conspiring and confederating with each other, fraudulently made the extraterritorial service of summons for both defendants-
or caused to be fraudulently made a Deed of Donation whereby appellees Teresa R. Tormis and Cynthia R. Logarta as they were
they made it appear that Luis donated to them Proprietary not residing and were not found in the Philippines when plaintiff-
Ownership Certificate No. 0272; since Luis no longer had the appellant [Victoria Regner] filed this case below. Although
ability to write or affix his signature, Melinda, acting under the defendant-appellant Teresa Tormis was personally served with
influence of her sisters, Cynthia and Teresa, fraudulently summons on June 1, 2000 when she came to the Philippines but
manipulated the hand of Luis so that he could affix his thumbmark the same was only effected after a long wait or after the lapse of
on the assailed Deed of Donation; on 8 February 1998, or three almost one year from the date the complaint was filed on June 15,
days before the death of Luis, and when he was already in 1999. To allow this practice would be to make the continuation of
comatose condition at the Cebu Doctors’ Hospital, Melinda, like proceedings before the courts dependent on when the
Teresa, and Cynthia caused the preparation of an affidavit to the defendants would be personally served with summons by the time
effect that Luis affirmed the Deed of Donation he allegedly they would come to the Philippines, which would only
unnecessarily delay the proceedings and clog the court dockets
as well. The afore-cited rule was precisely crafted to meet null and void for want of authority to act, not only as to the absent
situations similar to the present case to avoid unnecessary parties but even as to those present.14
delays.
As we ruled in Alberto v. Mananghala15 :
It has to be emphasized that it is incumbent upon the plaintiff
[Victoria Regner] to move with leave of court for the extraterritorial
In an action for recovery of property against a person who
service of summons. Taking into account the considerable time
purchased it from another who in turn acquired it from others by
that had elapsed from the filing of the complaint on June 15, 1999
the same means or by donation or otherwise, the predecessors of
until defendant-appellee Teresa R. Tormis, through counsel, filed
defendants are indispensable parties if the transfers, if not voided,
a motion to dismiss on September 12, 2000, or approximately
may bind plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter
fifteen (15) months, without any act on the part of plaintiff-
case, this Court held:
appellant [Victoria Regner] to move for extraterritorial service of
summons upon the person of defendant-appellee Cynthia Logarta
renders plaintiff-appellant’s [Victoria Regner] complaint In order to bring this suit duly to a close, it is imperative to
dismissible for failure to prosecute her action for unreasonable determine the only question raised in connection with the pending
length of time under Section 3, Rule 17, Revised Rules of Court, x appeal, to wit, whether all the persons who intervened in the
x x.7 matter of the transfers and donation herein referred to, are or are
not necessary parties to this suit, since it is asked in the complaint
that the said transfers and donation be declared null and void –
Hence, this appeal via petition8 for review on certiorari filed by
an indispensable declaration for the purpose, in a proper case, of
petitioner raising the following assignment of errors:
concluding the plaintiff to be the sole owner of the house in
dispute.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
DELAY IN SERVING SUMMONS ON ONE OF THE
If such a declaration of annulment can directly affect the persons
DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE
who made and who were concerned in the said transfers, nothing
NOTWITHSTANDING THAT THE REST OF THE CO-
could be more proper and just than to hear them in the litigation,
DEFENDANTS WERE DULY SERVED WITH SUMMONSES
as parties interested in maintaining the validity of those
transactions, and therefore, whatever be the nature of the
THE COURT OF APPEALS ERRED IN NOT CONSIDERING judgment rendered, Francisco Reyes, Dolores Carvajal, Alfredo
THAT THE ANSWER FILED BY ONE INDIVIDUAL DEFENDANT Chicote, Vicente Miranda, and Rafael Sierra, besides the said
REDOUNDS TO THE BENEFIT OF THE OTHER DEFENDANT minors, must be included in the case as defendants." (Garcia vs.
WHO HAS NOT BEEN SERVED WITH SUMMONS, THE Reyes, 17 Phil., 130-131.)
NATURE OF ACTION BEING ADMITTEDLY COMMON AMONG
ALL DEFENDANTS.9
It takes no great degree of legal sophistication to realize that
Cynthia and Teresa are indispensable parties to Civil Case No.
From the foregoing, this Court identifies the issues to be resolved CEB 23927. Cynthia and Teresa allegedly derived their rights to
in this petition as: (1) Whether a co-donee is an indispensable the subject property by way of donation from their father Luis. The
party in an action to declare the nullity of the deed of donation, central thrust of the petitioner’s complaint in Civil Case No. CEB
and (2) whether delay in the service of summons upon one of the 23927 was that Luis could not have donated Proprietary
defendants constitutes failure to prosecute that would warrant Ownership Certificate No. 0272 to his daughters Cynthia and
dismissal of the complaint. Teresa, as Luis was already very ill and no longer of sound and
disposing mind at the time of donation on 15 May 1997.
Accordingly, the prayer in petitioner’s complaint was for the trial
A Court must acquire jurisdiction over the persons of
court to declare null and void the Deed of Donation and to restrain
indispensable parties before it can validly pronounce judgments
the Cebu Country Club, Inc. from transferring title and ownership
personal to the parties. Courts acquire jurisdiction over a party
of Proprietary Ownership Certificate No. 0272 to Cynthia and
plaintiff upon the filing of the complaint. On the other hand,
Teresa.
jurisdiction over the person of a party defendant is assured upon
the service of summons in the manner required by law or
otherwise by his voluntary appearance. As a rule, if a defendant Thus, based on the Deed of Donation, Teresa and Cynthia are
has not been summoned, the court acquires no jurisdiction over co-owners of Proprietary Membership Certificate No. 0272 of
his person, and a personal judgment rendered against such Cebu Country Club, Inc. The country club membership certificate
defendant is null and void.10 A decision that is null and void for is undivided and it is impossible to pinpoint which specific portion
want of jurisdiction on the part of the trial court is not a decision in of the property belongs to either Teresa or Cynthia. Indeed, both
the contemplation of law and, hence, it can never become final Teresa and Cynthia are indispensable parties in Civil Case No.
and executory.11 CEB 23927.

Rule 3, Section 7 of the Rules of Court, defines indispensable An indispensable party has been defined as follows:
parties as parties-in-interest without whom there can be no final
determination of an action. As such, they must be joined either as
An indispensable party is a party who has such an interest in the
plaintiffs or as defendants. The general rule with reference to the
controversy or subject matter that a final adjudication cannot be
making of parties in a civil action requires, of course, the joinder
made, in his absence, without injuring or affecting that interest, a
of all necessary parties where possible, and the joinder of all
party who has not only an interest in the subject matter of the
indispensable parties under any and all conditions, their presence
controversy, but also has an interest of such nature that a final
being a sine qua non for the exercise of judicial power. 12 It is
decree cannot be made without affecting his interest or leaving
precisely "when an indispensable party is not before the court
the controversy in such a condition that its final determination may
[that] the action should be dismissed."13 The absence of an
be wholly inconsistent with equity and good conscience. It has
indispensable party renders all subsequent actions of the court
also been considered that an indispensable party is a person in
whose absence there cannot be a determination between the Based on the foregoing disquisitions, the issue of whether the
parties already before the court which is effective, complete, or answer filed by Teresa should benefit Cynthia who was not
equitable. Further, an indispensable party is one who must be served summons need not be discussed.
included in an action before it may properly go forward.
As to determine whether Cynthia was properly served a
A person is not an indispensable party, however, if his interest in summons, it will be helpful to determine first the nature of the
the controversy or subject matter is separable from the interest of action filed against Cynthia and Teresa by petitioner Victoria,
the other parties, so that it will not necessarily be directly or whether it is an action in personam, in rem or quasi in rem. This is
injuriously affected by a decree which does complete justice because the rules on service of summons embodied in Rule 14
between them. Also, a person is not an indispensable party if his apply according to whether an action is one or the other of these
presence would merely permit complete relief between him and actions.
those already parties to the action, or if he has no interest in the
subject matter of the action. It is not a sufficient reason to declare
In a personal action, the plaintiff seeks the recovery of personal
a person to be an indispensable party that his presence will avoid
property, the enforcement of a contract or the recovery of
multiple litigation.16
damages.20 In contrast, in a real action, the plaintiff seeks the
recovery of real property; or, as indicated in Section 2(a), Rule 4
In Servicewide Specialists, Incorporated v. Court of of the then Rules of Court, a real action is an action affecting title
Appeals,17 this Court held that no final determination of a case to real property or for the recovery of possession, or for partition
could be made if an indispensable party is not legally present or condemnation of, or foreclosure of mortgage on, real property.
therein: An action in personam is an action against a person on the basis
of his personal liability, while an action in rem is an action against
the thing itself, instead of against the person.21
An indispensable party is one whose interest will be affected by
the court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the In an action in personam, personal service of summons or, if this
subject matter of the suit and in the relief sought are so is not possible and he cannot be personally served, substituted
inextricably intertwined with the other parties that his legal service, as provided in Section 7, Rule 14 of the Rules of
presence as a party to the proceeding is an absolute necessity. In Court,22 is essential for the acquisition by the court of jurisdiction
his absence there cannot be a resolution of the dispute of the over the person of a defendant who does not voluntarily submit
parties before the court which is effective, complete, or equitable. himself to the authority of the court.23 If defendant cannot be
served a summons because he is temporarily abroad, but is
otherwise a Philippine resident, service of summons may, by
The rationale for treating all the co-owners of a property as
leave of court, be made by publication.24 Otherwise stated, a
indispensable parties in a suit involving the co-owned property is
resident defendant in an action in personam, who cannot be
explained in Arcelona v. Court of Appeals18 :
personally served a summons, may be summoned either by
means of substituted service in accordance with Section 7, Rule
As held by the Supreme Court, were the courts to permit an 14 of the Rules of Court, or by publication as provided in Sections
action in ejectment to be maintained by a person having merely 15 and 16 of the same Rule.
an undivided interest in any given tract of land, a judgment in
favor of the defendants would not be conclusive as against the
In all of these cases, it should be noted, defendant must be a
other co-owners not parties to the suit, and thus the defendant in
resident of the Philippines; otherwise an action in personam
possession of the property might be harassed by as many
cannot be brought because jurisdiction over his person is
succeeding actions of ejectment, as there might be co-owners of
essential to make a binding decision.
the title asserted against him. The purpose of this provision was
to prevent multiplicity of suits by requiring the person asserting a
right against the defendant to include with him, either as co- On the other hand, if the action is in rem or quasi in rem,
plaintiffs or as co-defendants, all persons standing in the same jurisdiction over the person of the defendant is not essential for
position, so that the whole matter in dispute may be determined giving the court jurisdiction so long as the court acquires
once and for all in one litigation. jurisdiction over the res. If the defendant is a nonresident and he
is not found in the country, summons may be served
extraterritorially in accordance with Section 15, Rule 14 of the
Applying the foregoing definitions and principles to the present
Rules of Court, which provides:
case, this Court finds that any decision in Civil Case No. CEB
23927 cannot bind Cynthia, and the Court cannot nullify the
donation of the property she now co-owns with Teresa, even if Section 15. Extraterritorial service. - When the defendant does not
limited only to the portion belonging to Teresa, to whom summons reside and is not found in the Philippines, and the action affects
was properly served, since ownership of the property is still pro the personal status of the plaintiff or relates to, or the subject of
indiviso. Obviously, Cynthia is an indispensable party in Civil which is, property within the Philippines, in which the defendant
Case No. CEB 23927 without whom the lower court is barred from has or claims a lien or interest, actual or contingent, or in which
making a final adjudication as to the validity of the entire donation. the relief demanded consists, wholly or in part, in excluding the
Without the presence of indispensable parties to a suit or defendant from any interest therein, or the property of the
proceeding, a judgment therein cannot attain finality.19 defendant has been attached within the Philippines, service may,
by leave of court, be effected out of the Philippines by personal
service as under Section 6; or by publication in a newspaper of
Being an indispensable party in Civil Case No. CEB 23927, the
general circulation in such places and for such time as the court
trial court must also acquire jurisdiction over Cynthia’s person
may order, in which case a copy of the summons and order of the
through the proper service of summons.
court shall be sent by registered mail to the last known address of
the defendant, or in any other manner the court may deem
sufficient. Any order granting such leave shall specify a
reasonable time, which shall not be less than sixty (60) days after Being an action in personam, the general rule requires the
notice, within which the defendant must answer. personal service of summons on Cynthia within the Philippines,
but this is not possible in the present case because Cynthia is a
non-resident and is not found within the Philippines.
As stated above, there are only four instances wherein a
defendant who is a non-resident and is not found in the country
may be served a summons by extraterritorial service, to wit: (1) As Cynthia is a nonresident who is not found in the Philippines,
when the action affects the personal status of the plaintiff; (2) service of summons on her must be in accordance with Section
when the action relates to, or the subject of which is property 15, Rule 14 of the Rules of Court. Such service, to be effective
within the Philippines, on which the defendant claims a lien or an outside the Philippines, must be made either (1) by personal
interest, actual or contingent; (3) when the relief demanded in service; (2) by publication in a newspaper of general circulation in
such action consists, wholly or in part, in excluding the defendant such places and for such time as the court may order, in which
from any interest in property located in the Philippines; and (4) case a copy of the summons and order of the court should be
when the defendant non-resident’s property has been attached sent by registered mail to the last known address of the
within the Philippines. In these instances, service of summons defendant; or (3) in any other manner which the court may deem
may be effected by (a) personal service out of the country, with sufficient. The third mode, like the first two, must be made outside
leave of court; (b) publication, also with leave of court; or (c) any the Philippines, such as through the Philippine Embassy in the
other manner the court may deem sufficient.25 foreign country where Cynthia resides.

In such cases, what gives the court jurisdiction in an action in rem Since in the case at bar, the service of summons upon Cynthia
or quasi in rem is that it has jurisdiction over the res, i.e., the was not done by any of the authorized modes, the trial court was
personal status of the plaintiff who is domiciled in the Philippines correct in dismissing petitioner’s complaint.
or the property litigated or attached. Service of summons in the
manner provided in Section 15, Rule 14 of the Rules of Court is
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states –
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 SEC. 3. Dismissal due to fault of plaintiff. – If, for no justifiable
against him; and the possibility that property in the Philippines cause, the plaintiff fails to appear on the date of the presentation
belonging to him, or in which he has an interest, might be of his evidence in chief on the complaint, or to prosecute his
subjected to a judgment in favor of the plaintiff and he can thereby action for an unreasonable length of time, or to comply with these
take steps to protect his interest if he is so minded.26 Rules or any order of the court, the complaint may be dismissed
upon motion of the defendant or upon the court's own motion,
without prejudice to the right of the defendant to prosecute his
In petitioner’s Complaint in Civil Case No. CEB No. 23427, she
counterclaim in the same or in a separate action. This dismissal
alleged that Cynthia is residing at 462 West Vine No. 201,
shall have the effect of an adjudication upon the merits, unless
Glendale, California, 912041, U.S.A.; while Teresa is residing at
otherwise declared by the court.
2408 South Hacienda Boulevard, Hacienda Heights, California,
but they usually visit here in the Philippines and can be served
summonses and other processes at the Borja Family Clinic, As can be gleaned from the rule, there are three instances when
Bohol. Pertinent portions of the Complaint read: the complaint may be dismissed due to the plaintiff's fault: (1) if he
fails to appear during a scheduled trial, especially on the date for
the presentation of his evidence in chief; (2) if he fails to
2. Defendant Cynthia R. Logarta is a Filipino, of legal
prosecute his action for an unreasonable length of time; and (3) if
age, married to Ramon Logarta, resident (sic) 463 West
he fails to comply with the rules or any order of the court.28
Vine No.201, Glendale, California, 912041, USA. She
however usually visits in the Philippines and can be
served with summons and other processes of this Considering the circumstances of the case, it can be concluded
Honorable Court at Borja Family Clinic, Tagbilaran, that the petitioner failed to prosecute the case for an
Bohol; unreasonable length of time. There is failure to prosecute when
the plaintiff, being present, is not ready or is unwilling to proceed
with the scheduled trial or when postponements in the past were
3. Defendant Teresa R. Tormis is likewise a Filipino, of
due to the plaintiff's own making, intended to be dilatory or caused
legal age, married to Antonio Tormis, and a resident of
substantial prejudice on the part of the defendant.29
2408 South Hacienda Heights, California, 19745,
U.S.A. She however usually visits in the Philippines and
can be served with summons and other processes of While a court can dismiss a case on the ground of failure to
this Honorable Court at Borja Family Clinic, Tagbilaran, prosecute, the true test for the exercise of such power is whether,
Bohol.27 under the prevailing circumstances, the plaintiff is culpable for
want of due diligence in failing to proceed with reasonable
promptitude.30 As to what constitutes an "unreasonable length of
Petitioner prayed for a declaration of nullity of the deed of
time," within the purview of the above-quoted provision, the Court
donation, to restrain Cebu Country Club, Inc. from transferring title
has ruled that it "depends upon the circumstances of each
and ownership of Proprietary Ownership Certificate No. 0272 to
particular case," and that "the sound discretion of the court" in the
Cynthia and Teresa, and for moral and exemplary damages. Civil
determination of said question "will not be disturbed, in the
Case No. CEB 23927 is evidently an action against Cynthia and
absence of patent abuse"; and that "the burden of showing abuse
Teresa on the basis of their personal liability for the alleged
of judicial discretion is upon the appellant since every
fraudulent transfer of the subject Country Club membership from
presumption is in favor of the correctness of the court's
Luis to their name. In this sense, petitioner questions the
action."31 Likewise, the concept of promptness is a relative term
participation and shares of Cynthia and Teresa in the transferred
and must not unnecessarily be an inflexible one. It connotes an
Country Club membership. Moreover, the membership certificate
action without hesitation and loss of time. As to what constitutes
from the Cebu Country Club, Inc. is a personal property. Thus, the
the term is addressed to the consideration of the trial court,
action instituted by petitioner before the RTC is in personam.
bearing in mind that while actions must be disposed of with in the Philippines for a visit. However, the summons for Cynthia
dispatch, the essential ingredient is the administration of justice was never served upon her.1âwphi1
and not mere speed.32
Although Section 1, Rule 14 of the Rules, imposes upon the clerk
It is well to quote the doctrine laid in Padua v. Ericta, 33 as of court the duty to serve summons, this does not relieve the
accentuated in the subsequent case Marahay v. Melicor34: petitioner of her own duty as the plaintiff in a civil case to
prosecute the case diligently. If the clerk had been negligent, it
was petitioner’s duty to call the court’s attention to that fact. It
Courts should not brook undue delays in the ventilation and
must be noted that it was not even petitioner who called the
determination of causes. It should be their constant effort to
court’s attention that summons had not been served on Cynthia,
assure that litigations are prosecuted and resolved with dispatch.
but Teresa. This despite the fact that petitioner was aware, as
Postponements of trials and hearings should not be allowed
early as 15 June 1999, when she filed her complaint, that the
except on meritorious grounds; and the grant or refusal thereof
summonses could not be served on Teresa and Cynthia, as she
rests entirely in the sound discretion of the Judge. It goes without
admitted therein that Teresa and Cynthia were residing abroad.
saying, however, that discretion must be reasonably and wisely
Petitioner as plaintiff should have asked that Cynthia and Teresa
exercised, in the light of the attendant circumstances. Some
be summoned by publication at the earliest possible time. She
reasonable deferment of the proceedings may be allowed or
cannot idly sit by and wait till this is done. She cannot afterwards
tolerated to the end that cases may be adjudged only after full
wash her hands and say that the delay was not her fault. She
and free presentation of evidence by all the parties, especially
cannot simply "fold [her] hands" and say that it is the duty of the
where the deferment would cause no substantial prejudice to any
clerk of court to have the summonses served on Cynthia and
part. The desideratum of a speedy disposition of cases should
Teresa for the prompt disposition of her case. If there were no
not, if at all possible, result in the precipitate loss of a party’s right
means of summoning any of the defendants, petitioner should
to present evidence and either in plaintiff's being non-suited or the
have so informed the court within a reasonable period of time, so
defendant's being pronounced liable under an ex parte judgment.
that the case could be disposed of one way or another and the
administration of justice would not suffer delay. The non-
"[T]rial courts have x x x the duty to dispose of controversies after performance of that duty by petitioner as plaintiff is an express
trial on the merits whenever possible. It is deemed an abuse of ground for dismissing an action. For, indeed, this duty imposed
discretion for them, on their own motion, ‘to enter a dismissal upon her was precisely to spur on the slothful.
which is not warranted by the circumstances of the case’
(Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While
For failure to diligently pursue the complaint, petitioner trifled with
it is true that the dismissal of an action on grounds specified
the right of the respondents to speedy trial. It also sorely tried the
under Section 3, Rule 17 of the Revised Rules of Court is
patience of the court and wasted its precious time and attention.
addressed to their discretion (Flores v. Phil. Alien Property
To allow petitioner to wait until such time that summonses were
Administrator, 107 Phil. 778 [1960]; Montelibano v. Benares, 103
served on respondents would frustrate the protection against
Phil. 110 [1958]; Adorable v. Bonifacio, 105 Phil. 1269 [1959];
unreasonable delay in the prosecution of cases and violate the
Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October
constitutional mandate of speedy dispensation of justice which
19, 1966, 18 SCRA 390), such discretion must be exercised
would in time erode the people’s confidence in the judiciary. We
soundly with a view to the circumstances surrounding each
take a dim view of petitioner’s complacent attitude. Ex nihilo nihil
particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April
fit.35
28, 1962, 4 SCRA 1209). If facts obtain that serve as mitigating
circumstances for the delay, the same should be considered and
dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Likewise, petitioner’s counsel inexplicably failed to diligently
Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), pursue the service of summonses on respondents. These were
especially where the suit appears to be meritorious and the acts of negligence, laxity and truancy which the court could have
plaintiff was not culpably negligent and no injury results to very easily avoided or timely remedied. Petitioner and her counsel
defendant (27 C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. could not avail themselves of this Court’s sympathy, considering
Court of First Instance of Zamboanga City, Br. I, 70 SCRA 590, their apparent complacency, if not delinquency, in the conduct of
595). their litigation.

"It is true that the allowance or denial of petitions for Considering the foregoing, we sustain the dismissal by the trial
postponement and the setting aside of orders previously issued, court of the petitioner’s complaint for failure to prosecute for a
rest principally upon the sound discretion of the judge to whom period of more than one year (from the time of filing thereof on 15
they are addressed, but always predicated on the consideration June 1997 until Teresa’s filing of a motion to dismiss).
that more than the mere convenience of the courts or of the
parties of the case, the ends of justice and fairness would be
WHEREFORE, premises considered, the instant petition is
served thereby (Camara Vda. de Zubiri v. Zubiri, et al., L-16745,
DENIED for lack of merit and the assailed Decision dated 6 May
December 17, 1966). When no substantial rights are affected and
2005 of the Court of Appeals in CA-G.R. CV No. 71028 is hereby
the intention to delay is not manifest, the corresponding motion to
AFFIRMED. Costs against petitioner.
transfer the hearing having been filed accordingly, it is sound
judicial discretion to allow them (Rexwell Corp. v. Canlas, L-
16746, December 30, 1961)." x x x. SO ORDERED.

This Court recalls that the complaint herein was filed on 15 June
1999. The summonses for Cynthia and Teresa were served on
their sister Melinda at the Borja Family Clinic in Tagbilaran City,
but the latter refused to receive the same. It was only on 1 June
2000 that summons was served on Teresa at Room 304,
Regency Crest Condominium, Banilad, Cebu City, when she was
G.R. No. 165273 March 10, 2010 On May 7, 2004, the RTC issued its assailed Order granting
private respondent's motion to dismiss. It found that while the
summons was served at private respondent's house and received
LEAH PALMA, Petitioner,
by respondent's husband, such service did not qualify as a valid
vs.
service of summons on her as she was out of the country at the
HON. DANILO P. GALVEZ, in his capacity as PRESIDING
time the summons was served, thus, she was not personally
JUDGE of the REGIONAL TRIAL COURT OF ILOILO CITY,
served a summons; and even granting that she knew that a
BRANCH 24; and PSYCHE ELENA AGUDO, Respondents.
complaint was filed against her, nevertheless, the court did not
acquire jurisdiction over her person as she was not validly served
DECISION with summons; that substituted service could not be resorted to
since it was established that private respondent was out of the
country, thus, Section 16, Rule 14 provides for the service of
PERALTA, J.:
summons on her by publication.

Assailed in this petition for certiorari under Rule 65 of the Rules of Petitioner filed a motion for reconsideration, which the RTC
Court are the Orders dated May 7, 20041 and July 21, 20042 of denied in its Order dated July 21, 2004.
the Regional Trial Court (RTC) of Iloilo City, Branch 24, granting
the motion to dismiss filed by private respondent Psyche Elena
Agudo and denying reconsideration thereof, respectively. Petitioner is now before us alleging that the public respondent
committed a grave abuse of discretion amounting to lack or
excess of jurisdiction when he ruled that:
On July 28, 2003, petitioner Leah Palma filed with the RTC an
action for damages against the Philippine Heart Center (PHC), Dr.
Danilo Giron and Dr. Bernadette O. Cruz, alleging that the I. Substituted service of summons upon private
defendants committed professional fault, negligence and omission respondent, a defendant residing in the Philippines but
for having removed her right ovary against her will, and losing the temporarily outside the country is invalid;
same and the tissues extracted from her during the surgery; and
that although the specimens were subsequently found, petitioner
II. Section 16, Rule 14, of the 1997 Rules of Civil
was doubtful and uncertain that the same was hers as the label
Procedure limits the mode of service of summons upon
therein pertained that of somebody else. Defendants filed their
a defendant residing in the Philippines, but temporarily
respective Answers. Petitioner subsequently filed a Motion for
outside the country, exclusively to extraterritorial
Leave to Admit Amended Complaint, praying for the inclusion of
service of summons under section 15 of the same rule;
additional defendants who were all nurses at the PHC, namely,
Karla Reyes, Myra Mangaser and herein private respondent
Agudo. Thus, summons were subsequently issued to them. III. In not ruling that by filing two (2) motions for
extension of time to file Answer, private respondent had
voluntarily submitted herself to the jurisdiction of
On February 17, 2004, the RTC's process server submitted his
respondent court, pursuant to Section 20, Rule 14 of
return of summons stating that the alias summons, together with a
the 1997 Rules of Civil Procedure, hence, equivalent to
copy of the amended complaint and its annexes, were served
having been served with summons;
upon private respondent thru her husband Alfredo Agudo, who
received and signed the same as private respondent was out of
the country.3 IV. The cases cited in his challenged Order of May 7,
2004 constitute stare decisis despite his own admission
that the factual landscape in those decided cases are
On March 1, 2004, counsel of private respondent filed a Notice of
entirely different from those in this case.10
Appearance and a Motion for Extension of Time to File
Answer4 stating that he was just engaged by private respondent's
husband as she was out of the country and the Answer was Petitioner claims that the RTC committed a grave abuse of
already due. discretion in ruling that Section 16, Rule 14, limits the service of
summons upon the defendant-resident who is temporarily out of
the country exclusively by means of extraterritorial service, i.e., by
On March 15, 2004, private respondent's counsel filed a Motion
personal service or by publication, pursuant to Section 15 of the
for Another Extension of Time to File Answer,5 and stating that
same Rule. Petitioner further argues that in filing two motions for
while the draft answer was already finished, the same would be
extension of time to file answer, private respondent voluntarily
sent to private respondent for her clarification/verification before
submitted to the jurisdiction of the court.
the Philippine Consulate in Ireland; thus, the counsel prayed for
another 20 days to file the Answer.
In her Comment, private respondent claims that
petitioner's certiorari under Rule 65 is not the proper remedy but a
On March 30, 2004, private respondent filed a Motion to
petition for review under Rule 45, since the RTC ruling cannot be
Dismiss6 on the ground that the RTC had not acquired jurisdiction
considered as having been issued with grave abuse of discretion;
over her as she was not properly served with summons, since she
that the petition was not properly verified because while the
was temporarily out of the country; that service of summons on
verification was dated September 15, 2004, the petition was dated
her should conform to Section 16, Rule 14 of the Rules of Court.
September 30, 2004. She insists that since she was out of the
Petitioner filed her Opposition7 to the motion to dismiss, arguing
country at the time the service of summons was made, such
that a substituted service of summons on private respondent's
service should be governed by Section 16, in relation to Section
husband was valid and binding on her; that service of summons
15, Rule 14 of the Rules of Court; that there was no voluntary
under Section 16, Rule 14 was not exclusive and may be effected
appearance on her part when her counsel filed two motions for
by other modes of service, i.e., by personal or substituted service.
extension of time to file answer, since she filed her motion to
Private respondent filed a Comment8 on petitioner's Opposition,
dismiss on the ground of lack of jurisdiction within the period
and petitioner filed a Reply9 thereto.
provided under Section 1, Rule 16 of the Rules of Court.
In her Reply, petitioner claims that the draft of the petition and the explanation. While Section 1, Rule 65 requires that the petition
verification and certification against forum shopping were sent to for certiorari be verified, this is not an absolute necessity where
her for her signature earlier than the date of the finalized petition, the material facts alleged are a matter of record and the questions
since the petition could not be filed without her signed verification. raised are mainly of law.15 In this case, the issue raised is purely
Petitioner avers that when private respondent filed her two of law.
motions for extension of time to file answer, no special
appearance was made to challenge the validity of the service of
Now on the merits, the issue for resolution is whether there was a
summons on her.
valid service of summons on private respondent.

The parties subsequently filed their respective memoranda as


In civil cases, the trial court acquires jurisdiction over the person
required.
of the defendant either by the service of summons or by the
latter’s voluntary appearance and submission to the authority of
We shall first resolve the procedural issues raised by private the former.16 Private respondent was a Filipino resident who was
respondent. temporarily out of the Philippines at the time of the service of
summons; thus, service of summons on her is governed by
Section 16, Rule 14 of the Rules of Court, which provides:
Private respondent's claim that the petition for certiorari under
Rule 65 is a wrong remedy thus the petition should be dismissed,
is not persuasive. A petition for certiorari is proper when any Sec. 16. Residents temporarily out of the Philippines. – When an
tribunal, board or officer exercising judicial or quasi-judicial action is commenced against a defendant who ordinarily resides
functions has acted without or in excess of jurisdiction, or with within the Philippines, but who is temporarily out of it,
grave abuse of discretion amounting to lack or excess of service may, by leave of court, be alsoeffected out of the
jurisdiction and there is no appeal, or any plain, speedy, and Philippines, as under the preceding section. (Emphasis supplied)
adequate remedy at law.11 There is "grave abuse of discretion"
when public respondent acts in a capricious or whimsical manner
The preceding section referred to in the above provision is
in the exercise of its judgment as to be equivalent to lack of
Section 15, which speaks of extraterritorial service, thus:
jurisdiction.

SEC. 15. Extraterritorial service. ─ When the defendant does not


Section 1, Rule 41 of the 1997 Rules of Civil Procedure states
reside and is not found in the Philippines, and the action affects
that an appeal may be taken only from a final order that
the personal status of the plaintiff or relates to, or the subject of
completely disposes of the case; that no appeal may be taken
which is, property within the Philippines, in which the defendant
from (a) an order denying a motion for new trial or
has or claims a lien or interest, actual or contingent, or in which
reconsideration; (b) an order denying a petition for relief or any
the relief demanded consists, wholly or in part, in excluding the
similar motion seeking relief from judgment; (c) an interlocutory
defendant from any interest therein, or the property of the
order; (d) an order disallowing or dismissing an appeal; (e) an
defendant has been attached within the Philippines, service may,
order denying a motion to set aside a judgment by consent,
by leave of court, be effected out of the Philippines by personal
confession or compromise on the ground of fraud, mistake or
service as under section 6; or by publication in a newspaper of
duress, or any other ground vitiating consent; (f) an order of
general circulation in such places and for such time as the court
execution; (g) a judgment or final order for or against one or more
may order, in which case a copy of the summons and order of the
of several parties or in separate claims, counterclaims, cross-
court shall be sent by registered mail to the last known address of
claims and third-party complaints, while the main case is pending,
the defendant, or in any other manner the court may deem
unless the court allows an appeal therefrom; or (h) an order
sufficient. Any order granting such leave shall specify a
dismissing an action without prejudice. In all the above instances
reasonable time, which shall not be less than sixty (60) days after
where the judgment or final order is not appealable, the aggrieved
notice, within which the defendant must answer.
party may file an appropriate special civil action for certiorari
under Rule 65.
The RTC found that since private respondent was abroad at the
time of the service of summons, she was a resident who was
In this case, the RTC Order granting the motion to dismiss filed by
temporarily out of the country; thus, service of summons may be
private respondent is a final order because it terminates the
made only by publication.
proceedings against her, but it falls within exception (g) of the
Rule since the case involves several defendants, and the
complaint for damages against these defendants is still We do not agree.
pending.12 Since there is no appeal, or any plain, speedy, and
adequate remedy in law, the remedy of a special civil action for
certiorari is proper as there is a need to promptly relieve the In Montefalcon v. Vasquez,17 we said that because Section 16 of
Rule 14 uses the words "may" and "also," it is not mandatory.
aggrieved party from the injurious effects of the acts of an inferior
court or tribunal.13 Other methods of service of summons allowed under the Rules
may also be availed of by the serving officer on a defendant-
resident who is temporarily out of the Philippines. Thus, if a
Anent private respondent's allegation that the petition was not resident defendant is temporarily out of the country, any of the
properly verified, we find the same to be devoid of merit. The following modes of service may be resorted to: (1) substituted
purpose of requiring a verification is to secure an assurance that service set forth in section 7 ( formerly Section 8), Rule 14; (2)
the allegations of the petition have been made in good faith, or personal service outside the country, with leave of court; (3)
are true and correct, not merely speculative.14 In this instance, service by publication, also with leave of court; or (4) in any other
petitioner attached a verification to her petition although dated manner the court may deem sufficient.18
earlier than the filing of her petition. Petitioner explains that since
a draft of the petition and the verification were earlier sent to her
in New York for her signature, the verification was earlier dated In Montalban v. Maximo,19 we held that substituted service of
summons under the present Section 7, Rule 14 of the Rules of
than the petition for certiorari filed with us. We accept such
Court in a suit in personam against residents of the Philippines therefore, was competent to receive the summons on private
temporarily absent therefrom is the normal method of service of respondent's behalf.
summons that will confer jurisdiction on the court over such
defendant. In the same case, we expounded on the rationale in
Notably, private respondent makes no issue as to the fact that the
providing for substituted service as the normal mode of service for
place where the summons was served was her residence, though
residents temporarily out of the Philippines.
she was temporarily out of the country at that time, and that
Alfredo is her husband. In fact, in the notice of appearance and
x x x A man temporarily absent from this country leaves a definite motion for extension of time to file answer submitted by private
place of residence, a dwelling where he lives, a local base, so to respondent's counsel, he confirmed the Sheriff's Return by stating
speak, to which any inquiry about him may be directed and where that private respondent was out of the country and that his service
he is bound to return. Where one temporarily absents himself, he was engaged by respondent's husband. In his motion for another
leaves his affairs in the hands of one who may be reasonably extension of time to file answer, private respondent's counsel
expected to act in his place and stead; to do all that is necessary stated that a draft of the answer had already been prepared,
to protect his interests; and to communicate with him from time to which would be submitted to private respondent, who was in
time any incident of importance that may affect him or his Ireland for her clarification and/or verification before the Philippine
business or his affairs. It is usual for such a man to leave at his Consulate there. These statements establish the fact that private
home or with his business associates information as to where he respondent had knowledge of the case filed against her, and that
may be contacted in the event a question that affects him crops her husband had told her about the case as Alfredo even
up. If he does not do what is expected of him, and a case comes engaged the services of her counsel.
up in court against him, he cannot just raise his voice and say that
he is not subject to the processes of our courts. He cannot stop a
In addition, we agree with petitioner that the RTC had indeed
suit from being filed against him upon a claim that he cannot be
acquired jurisdiction over the person of private respondent when
summoned at his dwelling house or residence or his office or
the latter's counsel entered his appearance on private
regular place of business.
respondent's behalf, without qualification and without questioning
the propriety of the service of summons, and even filed two
Not that he cannot be reached within a reasonable time to enable Motions for Extension of Time to File Answer. In effect, private
him to contest a suit against him. There are now advanced respondent, through counsel, had already invoked the RTC’s
facilities of communication. Long distance telephone calls and jurisdiction over her person by praying that the motions for
cablegrams make it easy for one he left behind to communicate extension of time to file answer be granted. We have held that the
with him.20 filing of motions seeking affirmative relief, such as, to admit
answer, for additional time to file answer, for reconsideration of a
default judgment, and to lift order of default with motion for
Considering that private respondent was temporarily out of the
reconsideration, are considered voluntary submission to the
country, the summons and complaint may be validly served on
jurisdiction of the court.24 When private respondent earlier invoked
her through substituted service under Section 7, Rule 14 of the
the jurisdiction of the RTC to secure affirmative relief in her
Rules of Court which reads:
motions for additional time to file answer, she voluntarily
submitted to the jurisdiction of the RTC and is thereby estopped
SEC. 7. Substituted service. — If, for justifiable causes, the from asserting otherwise.25
defendant cannot be served within a reasonable time as provided
in the preceding section, service may be effected (a) by leaving
Considering the foregoing, we find that the RTC committed a
copies of the summons at the defendant’s residence with some
grave abuse of discretion amounting to excess of jurisdiction in
person of suitable age and discretion then residing therein, or (b)
issuing its assailed Orders.
by leaving the copies at defendant’s office or regular place of
business with some competent person in charge thereof.
WHEREFORE, the petition is GRANTED. The Orders dated May
7, 2004 and July 21, 2004 of the Regional Trial Court of Iloilo City,
We have held that a dwelling, house or residence refers to the
Branch 24, are hereby SET ASIDE. Private respondent
place where the person named in the summons is living at the
is DIRECTED to file her Answer within the reglementary period
time when the service is made, even though he may be
from receipt of this decision.
temporarily out of the country at the time.21 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 SO ORDERED.
the defendant. Compliance with the rules regarding the service of
summons is as important as the issue of due process as that of
jurisdiction.221avvphi1

Section 7 also designates the persons with 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 will
deliver the process to defendant or in some way give him notice
thereof.23

In this case, the Sheriff's Return stated that private respondent


was out of the country; thus, the service of summons was made
at her residence with her husband, Alfredo P. Agudo,
acknowledging receipt thereof. Alfredo was presumably of
suitable age and discretion, who was residing in that place and,
G.R. No. 175799 November 28, 2011 On September 8, 2006, the Court of Appeals rendered the
assailed Decision dismissing the Petition for Certiorari. The Court
of Appeals ruled that since the denial of a Motion to Dismiss is an
NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, Petitioner,
interlocutory order, it cannot be the subject of a Petition for
vs.
Certiorari, and may only be reviewed in the ordinary course of law
LEPANTO CONSOLIDATED MINING COMPANY, Respondent.
by an appeal from the judgment after trial. On December 12,
2006, the Court of Appeals rendered the assailed Resolution
DECISION denying the petitioner’s Motion for Reconsideration.

LEONARDO-DE CASTRO, J.: Meanwhile, on December 28, 2006, the trial court issued an Order
directing respondent to answer some of the questions in
petitioner’s Interrogatories to Plaintiff dated September 7, 2006.
This is a Petition for Review on Certiorari assailing the
Decision1 of the Court of Appeals dated September 8, 2006 in
CA-G.R. SP No. 94382 and its Resolution2 dated December 12, Notwithstanding the foregoing, petitioner filed the present petition
2006, denying the Motion for Reconsideration. assailing the September 8, 2006 Decision and the December 12,
2006 Resolution of the Court of Appeals. Arguing against the
ruling of the appellate court, petitioner insists that (a) an order
On August 30, 2005, respondent Lepanto Consolidated Mining denying a motion to dismiss may be the proper subject of a
Company filed with the Regional Trial Court (RTC) of Makati City petition for certiorari; and (b) the trial court committed grave
a Complaint3 against petitioner NM Rothschild & Sons (Australia)
abuse of discretion in not finding that it had not validly acquired
Limited praying for a judgment declaring the loan and hedging jurisdiction over petitioner and that the plaintiff had no cause of
contracts between the parties void for being contrary to Article action.
20184 of the Civil Code of the Philippines and for damages. The
Complaint was docketed as Civil Case No. 05-782, and was
raffled to Branch 150. Upon respondent’s (plaintiff’s) motion, the Respondent, on the other hand, posits that: (a) the present
trial court authorized respondent’s counsel to personally bring the Petition should be dismissed for not being filed by a real party in
summons and Complaint to the Philippine Consulate General in interest and for lack of a proper verification and certificate of non-
Sydney, Australia for the latter office to effect service of summons forum shopping; (b) the Court of Appeals correctly ruled that
on petitioner (defendant). certiorari was not the proper remedy; and (c) the trial court
correctly denied petitioner’s motion to dismiss.
On October 20, 2005, petitioner filed a Special Appearance With
Motion to Dismiss5 praying for the dismissal of the Complaint on Our discussion of the issues raised by the parties follows:
the following grounds: (a) the court has not acquired jurisdiction
over the person of petitioner due to the defective and improper
Whether petitioner is a real party in interest
service of summons; (b) the Complaint failed to state a cause of
action and respondent does not have any against petitioner; (c)
the action is barred by estoppel; and (d) respondent did not come Respondent argues that the present Petition should be dismissed
to court with clean hands. on the ground that petitioner no longer existed as a corporation at
the time said Petition was filed on February 1, 2007. Respondent
points out that as of the date of the filing of the Petition, there is
On November 29, 2005, petitioner filed two Motions: (1) a Motion
no such corporation that goes by the name NM Rothschild and
for Leave to take the deposition of Mr. Paul Murray (Director, Risk
Sons (Australia) Limited. Thus, according to respondent, the
Management of petitioner) before the Philippine Consul General;
present Petition was not filed by a real party in interest, citing our
and (2) a Motion for Leave to Serve Interrogatories on
ruling in Philips Export B.V. v. Court of Appeals,10 wherein we
respondent.
held:

On December 9, 2005, the trial court issued an Order6 denying


A name is peculiarly important as necessary to the very existence
the Motion to Dismiss. According to the trial court, there was a
of a corporation (American Steel Foundries vs. Robertson, 269
proper service of summons through the Department of Foreign
US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R.
Affairs (DFA) on account of the fact that the defendant has neither
Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co.,
applied for a license to do business in the Philippines, nor filed
40 W Va 530, 23 SE 792). Its name is one of its attributes, an
with the Securities and Exchange Commission (SEC) a Written
element of its existence, and essential to its identity (6 Fletcher
Power of Attorney designating some person on whom summons
[Perm Ed], pp. 3-4). The general rule as to corporations is that
and other legal processes maybe served. The trial court also held
each corporation must have a name by which it is to sue and be
that the Complaint sufficiently stated a cause of action. The other
sued and do all legal acts. The name of a corporation in this
allegations in the Motion to Dismiss were brushed aside as
respect designates the corporation in the same manner as the
matters of defense which can best be ventilated during the trial.
name of an individual designates the person (Cincinnati
Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport
On December 27, 2005, petitioner filed a Motion for Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use
Reconsideration.7 On March 6, 2006, the trial court issued an its corporate name is as much a part of the corporate franchise as
Order denying the December 27, 2005 Motion for any other privilege granted (Federal Secur. Co. vs. Federal Secur.
Reconsideration and disallowed the twin Motions for Leave to Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs.
take deposition and serve written interrogatories.8 Portuguese Beneficial Association, 18 RI 165, 26 A 36).11

On April 3, 2006, petitioner sought redress via a Petition for In its Memorandum12 before this Court, petitioner started to refer
Certiorari9 with the Court of Appeals, alleging that the trial court to itself as Investec Australia Limited (formerly "NM Rothschild &
committed grave abuse of discretion in denying its Motion to Sons [Australia] Limited") and captioned said Memorandum
Dismiss. The Petition was docketed as CA-G.R. SP No. 94382. accordingly. Petitioner claims that NM Rothschild and Sons
(Australia) Limited still exists as a corporation under the laws of estoppel; and (d) respondent did not come to court with clean
Australia under said new name. It presented before us documents hands.
evidencing the process in the Australian Securities & Investment
Commission on the change of petitioner’s company name from
As correctly ruled by both the trial court and the Court of Appeals,
NM Rothschild and Sons (Australia) Limited to Investec Australia
the alleged absence of a cause of action (as opposed to the
Limited.13
failure to state a cause of action), the alleged estoppel on the part
of petitioner, and the argument that respondent is in pari delicto in
We find the submissions of petitioner on the change of its the execution of the challenged contracts, are not grounds in a
corporate name satisfactory and resolve not to dismiss the Motion to Dismiss as enumerated in Section 1, Rule 1617 of the
present Petition for Review on the ground of not being prosecuted Rules of Court. Rather, such defenses raise evidentiary issues
under the name of the real party in interest. While we stand by our closely related to the validity and/or existence of respondent’s
pronouncement in Philips Export on the importance of the alleged cause of action and should therefore be threshed out
corporate name to the very existence of corporations and the during the trial.
significance thereof in the corporation’s right to sue, we shall not
go so far as to dismiss a case filed by the proper party using its
As regards the allegation of failure to state a cause of action,
former name when adequate identification is presented. A real
while the same is usually available as a ground in a Motion to
party in interest is the party who stands to be benefited or injured
Dismiss, said ground cannot be ruled upon in the present Petition
by the judgment in the suit, or the party entitled to the avails of the
without going into the very merits of the main case.
suit.14 There is no doubt in our minds that the party who filed the
present Petition, having presented sufficient evidence of its
identity and being represented by the same counsel as that of the It is basic that "[a] cause of action is the act or omission by which
defendant in the case sought to be dismissed, is the entity that a party violates a right of another."18 Its elements are the
will be benefited if this Court grants the dismissal prayed for. following: (1) a right existing in favor of the plaintiff, (2) a duty on
the part of the defendant to respect the plaintiff's right, and (3) an
act or omission of the defendant in violation of such right.19 We
Since the main objection of respondent to the verification and
have held that to sustain a Motion to Dismiss for lack of cause of
certification against forum shopping likewise depends on the
action, the complaint must show that the claim for relief does not
supposed inexistence of the corporation named therein, we give
exist and not only that the claim was defectively stated or is
no credit to said objection in light of the foregoing discussion.
ambiguous, indefinite or uncertain.20

Propriety of the Resort to a Petition for Certiorari with the


The trial court held that the Complaint in the case at bar contains
Court of Appeals
all the three elements of a cause of action, i.e., it alleges that: (1)
plaintiff has the right to ask for the declaration of nullity of the
We have held time and again that an order denying a Motion to Hedging Contracts for being null and void and contrary to Article
Dismiss is an interlocutory order which neither terminates nor 2018 of the Civil Code of the Philippines; (2) defendant has the
finally disposes of a case as it leaves something to be done by corresponding obligation not to enforce the Hedging Contracts
the court before the case is finally decided on the merits. The because they are in the nature of wagering or gambling
general rule, therefore, is that the denial of a Motion to Dismiss agreements and therefore the transactions implementing those
cannot be questioned in a special civil action for Certiorari which contracts are null and void under Philippine laws; and (3)
is a remedy designed to correct errors of jurisdiction and not defendant ignored the advice and intends to enforce the Hedging
errors of judgment.15 However, we have likewise held that when Contracts by demanding financial payments due therefrom. 21
the denial of the Motion to Dismiss is tainted with grave abuse of
discretion, the grant of the extraordinary remedy of Certiorari may
The rule is that in a Motion to Dismiss, a defendant hypothetically
be justified. By "grave abuse of discretion" is meant:
admits the truth of the material allegations of the ultimate facts
contained in the plaintiff's complaint.22 However, this principle of
[S]uch capricious and whimsical exercise of judgment that is hypothetical admission admits of exceptions. Thus, in Tan v.
equivalent to lack of jurisdiction. The abuse of discretion must be Court of Appeals, 23 we held:
grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so
The flaw in this conclusion is that, while conveniently echoing the
patent and gross as to amount to an evasion of positive duty or to
general rule that averments in the complaint are deemed
a virtual refusal to perform the duty enjoined by or to act all in
hypothetically admitted upon the filing of a motion to dismiss
contemplation of law.16
grounded on the failure to state a cause of action, it did not take
into account the equally established limitations to such rule, i.e.,
The resolution of the present Petition therefore entails an inquiry that a motion to dismiss does not admit the truth of mere
into whether the Court of Appeals correctly ruled that the trial epithets of fraud; nor allegations of legal conclusions; nor an
court did not commit grave abuse of discretion in its denial of erroneous statement of law; nor mere inferences or conclusions
petitioner’s Motion to Dismiss. A mere error in judgment on the from facts not stated; nor mere conclusions of law; nor
part of the trial court would undeniably be inadequate for us to allegations of fact the falsity of which is subject to judicial notice;
reverse the disposition by the Court of Appeals. nor matters of evidence; nor surplusage and irrelevant matter; nor
scandalous matter inserted merely to insult the opposing party;
nor to legally impossible facts; nor to facts which appear
Issues more properly ventilated during the trial of the case
unfounded by a record incorporated in the pleading, or by a
document referred to; and, nor to general averments contradicted
As previously stated, petitioner seeks the dismissal of Civil Case by more specific averments. A more judicious resolution of a
No. 05-782 on the following grounds: (a) lack of jurisdiction over motion to dismiss, therefore, necessitates that the court be not
the person of petitioner due to the defective and improper service restricted to the consideration of the facts alleged in the complaint
of summons; (b) failure of the Complaint to state a cause of action and inferences fairly deducible therefrom. Courts may consider
and absence of a cause of action; (c) the action is barred by other facts within the range of judicial notice as well as relevant
laws and jurisprudence which the courts are bound to take into completely irrelevant in the case at bar, for two
account, and they are also fairly entitled to examine reasons. Firstly, since the Complaint was filed on August 30,
records/documents duly incorporated into the complaint by 2005, the provisions of the 1997 Rules of Civil Procedure govern
the pleader himself in ruling on the demurrer to the the service of summons. Section 12, Rule 14 of said rules
complaint.24 (Emphases supplied.) provides:

In the case at bar, respondent asserts in the Complaint that the Sec. 12. Service upon foreign private juridical entity. – When the
Hedging Contracts are void for being contrary to Article 201825 of defendant is a foreign private juridical entity which has
the Civil Code. Respondent claims that under the Hedging transacted business in the Philippines, service may be made
Contracts, despite the express stipulation for deliveries of gold, on its resident agent designated in accordance with law for that
the intention of the parties was allegedly merely to compel each purpose, or, if there be no such agent, on the government official
other to pay the difference between the value of the gold at the designated by law to that effect, or on any of its officers or agents
forward price stated in the contract and its market price at the within the Philippines. (Emphasis supplied.)
supposed time of delivery.
This is a significant amendment of the former Section 14 of said
Whether such an agreement is void is a mere allegation of a rule which previously provided:
conclusion of law, which therefore cannot be hypothetically
admitted. Quite properly, the relevant portions of the contracts
Sec. 14. Service upon private foreign corporations. — If the
sought to be nullified, as well as a copy of the contract itself, are
defendant is a foreign corporation, or a nonresident joint stock
incorporated in the Complaint. The determination of whether or
company or association, doing business in the Philippines,
not the Complaint stated a cause of action would therefore involve
service may be made on its resident agent designated in
an inquiry into whether or not the assailed contracts are void
accordance with law for that purpose, or if there be no such
under Philippine laws. This is, precisely, the very issue to be
agent, on the government official designated by law to that effect,
determined in Civil Case No. 05-782. Indeed, petitioner’s defense
or on any of its officers or agents within the Philippines.
against the charge of nullity of the Hedging Contracts is the
(Emphasis supplied.)
purported intent of the parties that actual deliveries of gold be
made pursuant thereto. Such a defense requires the presentation
of evidence on the merits of the case. An issue that "requires the The coverage of the present rule is thus broader. 30 Secondly, the
contravention of the allegations of the complaint, as well as the service of summons to petitioner through the DFA by the
full ventilation, in effect, of the main merits of the case, should not conveyance of the summons to the Philippine Consulate General
be within the province of a mere Motion to Dismiss."26 The trial in Sydney, Australia was clearly made not through the above-
court, therefore, correctly denied the Motion to Dismiss on this quoted Section 12, but pursuant to Section 15 of the same rule
ground. which provides:

It is also settled in jurisprudence that allegations of estoppel and Sec. 15. Extraterritorial service. – When the defendant does not
bad faith require proof. Thus, in Parañaque Kings Enterprises, reside and is not found in the Philippines, and the action affects
Inc. v. Court of Appeals,27 we ruled: the personal status of the plaintiff or relates to, or the subject of
which is property within the Philippines, in which the defendant
has or claims a lien or interest, actual or contingent, or in which
Having come to the conclusion that the complaint states a valid
the relief demanded consists, wholly or in part, in excluding the
cause of action for breach of the right of first refusal and that the
defendant from any interest therein, or the property of the
trial court should thus not have dismissed the complaint, we find
defendant has been attached within the Philippines, service may,
no more need to pass upon the question of whether the complaint
by leave of court, be effected out of the Philippines by personal
states a cause of action for damages or whether the complaint
service as under section 6; or by publication in a newspaper of
is barred by estoppel or laches. As these matters require
general circulation in such places and for such time as the court
presentation and/or determination of facts, they can be best
may order, in which case a copy of the summons and order of the
resolved after trial on the merits.28 (Emphases supplied.)
court shall be sent by registered mail to the last known address of
the defendant, or in any other manner the court may deem
On the proposition in the Motion to Dismiss that respondent has sufficient. Any order granting such leave shall specify a
come to court with unclean hands, suffice it to state that the reasonable time, which shall not be less than sixty (60) days after
determination of whether one acted in bad faith and whether notice, within which the defendant must answer.
damages may be awarded is evidentiary in nature. Thus, we have
previously held that "[a]s a matter of defense, it can be best
Respondent argues31 that extraterritorial service of summons
passed upon after a full-blown trial on the merits."29
upon foreign private juridical entities is not proscribed under the
Rules of Court, and is in fact within the authority of the trial court
Jurisdiction over the person of petitioner to adopt, in accordance with Section 6, Rule 135:

Petitioner alleges that the RTC has not acquired jurisdiction over Sec. 6. Means to carry jurisdiction into effect. – When by law
its person on account of the improper service of summons. jurisdiction is conferred on a court or judicial officer, all auxiliary
Summons was served on petitioner through the DFA, with writs, processes and other means necessary to carry it into effect
respondent’s counsel personally bringing the summons and may be employed by such court or officer; and if the procedure to
Complaint to the Philippine Consulate General in Sydney, be followed in the exercise of such jurisdiction is not specifically
Australia. pointed out by law or by these rules, any suitable process or
mode of proceeding may be adopted which appears comformable
to the spirit of said law or rules.
In the pleadings filed by the parties before this Court, the parties
entered into a lengthy debate as to whether or not petitioner is
doing business in the Philippines. However, such discussion is
Section 15, Rule 14, however, is the specific provision dealing It is likewise settled that "[a]n action in personam is lodged
precisely with the service of summons on a defendant which does against a person based on personal liability; an action in rem is
not reside and is not found in the Philippines, while Rule 135 directed against the thing itself instead of the person; while an
(which is in Part V of the Rules of Court entitled Legal Ethics) action quasi in rem names a person as defendant, but its object is
concerns the general powers and duties of courts and judicial to subject that person’s interest in a property to a corresponding
officers. lien or obligation."37

Breaking down Section 15, Rule 14, it is apparent that there are The Complaint in the case at bar is an action to declare the loan
only four instances wherein a defendant who is a non-resident and Hedging Contracts between the parties void with a
and is not found in the country may be served with summons by prayer for damages. It is a suit in which the plaintiff seeks to be
extraterritorial service, to wit: (1) when the action affects the freed from its obligations to the defendant under a contract and to
personal status of the plaintiffs; (2) when the action relates to, or hold said defendant pecuniarily liable to the plaintiff for entering
the subject of which is property, within the Philippines, in which into such contract. It is therefore an action in personam, unless
the defendant claims a lien or an interest, actual or contingent; (3) and until the plaintiff attaches a property within the Philippines
when the relief demanded in such action consists, wholly or in belonging to the defendant, in which case the action will be
part, in excluding the defendant from any interest in property converted to one quasi in rem.
located in the Philippines; and (4) when the defendant non-
resident's property has been attached within the Philippines. In
Since the action involved in the case at bar is in personam and
these instances, service of summons may be effected by (a)
since the defendant, petitioner Rothschild/Investec, does not
personal service out of the country, with leave of court; (b)
reside and is not found in the Philippines, the Philippine courts
publication, also with leave of court; or (c) any other manner the
cannot try any case against it because of the impossibility of
court may deem sufficient.32
acquiring jurisdiction over its person unless it voluntarily appears
in court.38
Proceeding from this enumeration, we held in Perkin Elmer
Singapore Pte Ltd. v. Dakila Trading Corporation33 that:
In this regard, respondent vigorously argues that petitioner should
be held to have voluntarily appeared before the trial court when it
Undoubtedly, extraterritorial service of summons applies prayed for, and was actually afforded, specific reliefs from the trial
only where the action is in rem or quasi in rem, but not if an court.39 Respondent points out that while petitioner’s Motion to
action is in personam. Dismiss was still pending, petitioner prayed for and was able to
avail of modes of discovery against respondent, such as written
interrogatories, requests for admission, deposition, and motions
When the case instituted is an action in rem or quasi in rem,
for production of documents.40
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 Petitioner counters that under this Court’s ruling in the leading
jurisdiction on the court, provided that the court acquires case of La Naval Drug Corporation v. Court of Appeals, 41 a party
jurisdiction over the res. Thus, in such instance, extraterritorial may file a Motion to Dismiss on the ground of lack of jurisdiction
service of summons can be made upon the defendant. The said over its person, and at the same time raise affirmative defenses
extraterritorial service of summons is not for the purpose of and pray for affirmative relief, without waiving its objection to the
vesting the court with jurisdiction, but for complying with the acquisition of jurisdiction over its person.42
requirements of fair play or due process, so that the defendant will
be informed of the pendency of the action against him and the
It appears, however, that petitioner misunderstood our ruling in La
possibility that property in the Philippines belonging to him or in
Naval. A close reading of La Naval reveals that the Court
which he has an interest may be subjected to a judgment in favor
intended a distinction between the raising of affirmative defenses
of the plaintiff, and he can thereby take steps to protect his
in an Answer (which would not amount to acceptance of the
interest if he is so minded. On the other hand, when the
jurisdiction of the court) and the prayer for affirmative reliefs
defendant or respondent does not reside and is not found in
(which would be considered acquiescence to the jurisdiction of
the Philippines, and the action involved is in personam,
the court):
Philippine courts cannot try any case against him because of
the impossibility of acquiring jurisdiction over his person
unless he voluntarily appears in court.34 (Emphases supplied.) In the same manner that a plaintiff may assert two or more
causes of action in a court suit, a defendant is likewise
expressly allowed, under Section 2, Rule 8, of the Rules of
In Domagas v. Jensen,35 we held that:
Court, to put up his own defenses alternatively or even
hypothetically. Indeed, under Section 2, Rule 9, of the Rules of
[T]he aim and object of an action determine its character. Court, defenses and objections not pleaded either in a motion to
Whether a proceeding is in rem, or in personam, or quasi in rem dismiss or in an answer, except for the failure to state a cause of
for that matter, is determined by its nature and purpose, and by action, are deemed waived. We take this to mean that a
these only. A proceeding in personam is a proceeding to enforce defendant may, in fact, feel enjoined to set up, along with his
personal rights and obligations brought against the person and is objection to the court's jurisdiction over his person, all other
based on the jurisdiction of the person, although it may involve his possible defenses. It thus appears that it is not the invocation of
right to, or the exercise of ownership of, specific property, or seek any of such defenses, but the failure to so raise them, that can
to compel him to control or dispose of it in accordance with the result in waiver or estoppel. By defenses, of course, we refer to
mandate of the court. The purpose of a proceeding in personam the grounds provided for in Rule 16 of the Rules of Court that
is to impose, through the judgment of a court, some responsibility must be asserted in a motion to dismiss or by way of
or liability directly upon the person of the defendant. Of this affirmative defenses in an answer.
character are suits to compel a defendant to specifically perform
some act or actions to fasten a pecuniary liability on him. 36
Mindful of the foregoing, in Signetics Corporation vs. Court In view of the above, we therefore rule that petitioner, by seeking
of Appeals and Freuhauf Electronics Phils., Inc. (225 SCRA affirmative reliefs from the trial court, is deemed to have
737, 738), we lately ruled: voluntarily submitted to the jurisdiction of said court. A party
cannot invoke the jurisdiction of a court to secure affirmative relief
against his opponent and after obtaining or failing to obtain such
"This is not to say, however, that the petitioner's right to
relief, repudiate or question that same
question the jurisdiction of the court over its person is now
jurisdiction.48 Consequently, the trial court cannot be considered
to be deemed a foreclosed matter. If it is true, as Signetics
to have committed grave abuse of discretion amounting to lack or
claims, that its only involvement in the Philippines was through a
excess of jurisdiction in the denial of the Motion to Dismiss on
passive investment in Sigfil, which it even later disposed of, and
account of failure to acquire jurisdiction over the person of the
that TEAM Pacific is not its agent, then it cannot really be said to
defendant.
be doing business in the Philippines. It is a defense, however, that
requires the contravention of the allegations of the complaint, as
well as a full ventilation, in effect, of the main merits of the case, WHEREFORE, the Petition for Review on Certiorari is DENIED.
which should not thus be within the province of a mere motion to The Decision of the Court of Appeals dated September 8, 2006
dismiss. So, also, the issue posed by the petitioner as to whether and its Resolution dated December 12, 2006 in CA-G.R. SP No.
a foreign corporation which has done business in the country, but 94382 are hereby AFFIRMED.
which has ceased to do business at the time of the filing of a
complaint, can still be made to answer for a cause of action which
No pronouncement as to costs.
accrued while it was doing business, is another matter that would
yet have to await the reception and admission of evidence. Since
these points have seasonably been raised by the petitioner, SO ORDERED.
there should be no real cause for what may understandably
be its apprehension, i.e., that by its participation during the
trial on the merits, it may, absent an invocation of separate or
independent reliefs of its own, be considered to have
voluntarily submitted itself to the court's
jurisdiction."43 (Emphases supplied.)

In order to conform to the ruling in La Naval, which was decided


by this Court in 1994, the former Section 23, Rule 1444 concerning
voluntary appearance was amended to include a second
sentence in its equivalent provision in the 1997 Rules of Civil
Procedure:

SEC. 20. Voluntary appearance. – The defendant's 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.
(Emphasis supplied.)

The new second sentence, it can be observed, merely mentions


other grounds in a Motion to Dismiss aside from lack of
jurisdiction over the person of the defendant. This clearly refers to
affirmative defenses, rather than affirmative reliefs.

Thus, while mindful of our ruling in La Naval and the new Section
20, Rule 20, this Court, in several cases, ruled that seeking
affirmative relief in a court is tantamount to voluntary appearance
therein.45 Thus, in Philippine Commercial International Bank v. Dy
Hong Pi,46 wherein defendants filed a "Motion for Inhibition
without submitting themselves to the jurisdiction of this Honorable
Court" subsequent to their filing of a "Motion to Dismiss (for Lack
of Jurisdiction)," we held:

Besides, any lingering doubts on the issue of voluntary


appearance dissipate when the respondents' motion for inhibition
is considered. This motion seeks a sole relief: inhibition of Judge
Napoleon Inoturan from further hearing the case. Evidently, by
seeking affirmative relief other than dismissal of the case,
respondents manifested their voluntary submission to the
court's jurisdiction. It is well-settled that the active participation
of a party in the proceedings is tantamount to an invocation of the
court's jurisdiction and a willingness to abide by the resolution of
the case, and will bar said party from later on impugning the
court's jurisdiction.47 (Emphasis supplied.)1âwphi1
G.R. No. 202505 the DFA to cancel or restrict Ocampo's Philippine passport and
not to allow its renewal until she has served her sentence. 12
EXPRESS PADALA (ITALIA) S.P.A., now BDO REMITTANCE
(ITALIA) S.P.A., Petitioner On February 11, 2010, Ocampo's mother, Laureana Macahia,
vs. received a copy of the RTC Decision and forwarded it to
HELEN M. OCAMPO, Respondent Ocampo.13 Not having been represented by counsel a quo, the
period of appeal lapsed. Ocampo was later able to engage the
services of counsel who filed a petition for certiorari under Rule 65
DECISION
with the CA on April 12, 2010.14Ocampo principally argued that
the RTC acted in grave abuse of discretion in recognizing and
JARDELEZA, J.: ordering the enforcement of the Court of Turin Decision.15

This is a petition for review on certiorari1 challenging the In its now assailed Decision,16 the CA set aside the RTC Decision
Decision2 dated January 5, 2012 and Resolution3 dated June 27, and revoked the order to cancel or restrict Ocampo's Philippine
2012 of the Court of Appeals (CA) in CA-G.R. SP No. 113475. passport (CA Decision). The CA first settled the issue of
The CA granted the petition for certiorarifiled by respondent Helen procedural due process, particularly whether Ocampo was
M. Ocampo (Ocampo) and set aside the Decision4 dated properly served with summons. It held that since Ocampo's
September 14, 2009 of the Regional Trial Court (RTC) in Civil whereabouts were unknown, summons should have been served
Case No. MC08-3775 which granted BDO Remittance (Italia) in accordance with Section 14, Rule 14 of the Rules of Civil
S.P.A. 's (BDO Remittance) petition for recognition of foreign Procedure. The sheriff however, erroneously effected the
judgment. substituted service of summons under Section 7 of Rule 14. Thus,
the CA concluded that the RTC did not acquire jurisdiction over
Ocampo, and the RTC Decision against her is null and void. It
The core issue being raised is whether service of summons was also found that the RTC acted in grave abuse of discretion when it
validly effected upon respondent, who lives in Italy, through recognized a foreign judgment of a criminal case and ordered the
substituted service.
DFA to restrict or cancel Ocampo's passport.17

BDO Remittance, a corporation with principal office in Italy, hired After the CA denied its motion for reconsideration, BDO
respondent Ocampo as a remittance processor in September
Remittance filed the present petition for review under Rule 45
2002. She was dismissed in February 2004 for misappropriating arguing that: (1) Ocampo availed of the wrong remedy; and (2)
the sum of €24,035.60 by falsifying invoices of money payments the RTC did not gravely abuse its discretion in granting the
relating to customers' money transfer orders from February to petition for recognition of foreign judgment and ordering the DFA
December 2003.5 to restrict or cancel Ocampo's passport.18

Accordingly, BDO Remittance filed a criminal complaint against In her comment,19 Ocampo explained that BDO Remittance's
Ocampo for the same acts before the Court of Turin, Italy. insistence on the enforcement of Court of Turin Decision is
Ocampo pleaded guilty to the offense charged. On April 13, 2005,
misleading because, by availing of the benefit of suspension of
the Honorable Court of Turin convicted and sentenced her to the enforcement, the penalty of confinement will not be enforced
suffer imprisonment of six months and a penalty of €300.00, but upon her. She also presented a decree20 from the High Court of
granted her the benefit of suspension of the enforcement of
Turin dated June 29, 2010 which stated that her criminal liability
sentence on account of her guilty plea (the Court of Turin has been extinguished.
Decision).6

We deny the petition.


On September 22, 2008, BDO Remittance filed a petition for
recognition of foreign judgment7 with the RTC of Mandaluyong
City. BDO Remittance prayed for the recognition of the Court of The general rule in this jurisdiction is that summons must be
Turin Decision and the cancellation or restriction of Ocampo' s served personally on the defendant. Section 6, Rule 14 of the
Philippine passport by the Department of Foreign Affairs (DFA). 8 Rules of Court provides:

On November 21, 2008, the sheriff attempted to personally serve Sec. 6. Service in person on defendant. - Whenever practicable,
the summons on Ocampo in her local address alleged in the the summons shall be served by handing a copy thereof to the
petition located in San Bernardo Village, Darasa, Tanauan, defendant in person, or, if he refuses to receive and sign for it, by
Batangas. However, since the address was incomplete, the sheriff tendering it to him.
sought the help of barangay officials, who pointed him to the
house belonging to Ocampo's father, Nicasio Ocampo, Victor P.
For justifiable reasons, however, other modes of serving
Macahia (Macahia), uncle of Ocampo and present occupant,
summons may be resorted to. When the defendant cannot be
informed the sheriff that Ocampo and her family were already in
served personally within a reasonable time after efforts to locate
Italy, and that he was only a caretaker of the house. The sheriff
him have failed, the rules allow summons to be served by
then proceeded to serve the summons upon Macahia.9 After
substituted service. Substituted service is effected by leaving
Ocampo failed to file an answer, BDO Remittance filed a motion
copies of the summons at the defendant's residence with some
to declare Ocampo in default. The RTC granted the motion and
person of suitable age and discretion then residing therein, or by
allowed BDO Remittance to present evidence ex parte.10
leaving the copies at defendant's office or regular place of
business with some competent person in charge thereof. 21
On September 14, 2009, the RTC rendered a Decision11 in favor
of BDO Remittance (RTC Decision). It recognized as valid and
When the defendant's whereabouts are unknown, the rules allow
binding in the Philippines the Court of Turin Decision and ordered
service of summons by publication.22 As an exception to the
preferred mode of service, service of summons by publication however, Ocampo's sojourn in Italy cannot be classified as
may only be resorted to when the whereabouts of the defendant temporary considering that she already resides there, albeit her
are not only unknown, but cannot be ascertained by diligent precise address was not known. Modes of service of summons
inquiry. The diligence requirement means that there must be prior must be strictly followed in order that the court may acquire
resort to personal service under Section 7 and substituted service jurisdiction over the person of the defendant. The purpose of this
under Section 8, and proof that these modes were ineffective is to afford the defendant an opportunity to be heard on the claim
before summons by publication may be allowed.23 This mode also against him.32 BDO Remittance is not totally without recourse, as
requires the plaintiff to file a written motion for leave of court to the rules allow summons by publication and extraterritorial
effect service of summons by publication, supported by affidavit of service.33 Unlike substituted service, however, these are
the plaintiff or some person on his behalf, setting forth the extraordinary modes which require leave of court.
grounds for the application.24
The service of summons is a vital and indispensable ingredient of
In the present case, the sheriff resorted to substituted service a defendant's constitutional right to due process. As a rule, if a
upon Ocampo through her uncle, who was the caretaker of defendant has not been validly summoned, the court acquires no
Ocampo's old family residence in Tanauan, Batangas. The CA jurisdiction over his person, and a judgment rendered against him
held that substituted service was improperly resorted to. It found is void.34 Since the RTC never acquired jurisdiction over the
that since Ocampo' s "whereabouts are unknown and cannot be person of Ocampo, the judgment rendered by the court could not
ascertained by diligent inquiry x x x service may be effected only be considered binding upon her.
by publication in a newspaper of general circulation."25
Consequently, it is no longer necessary to delve into the other
We agree with the CA that substituted service is improper under issues raised in the petition. These issues can be resolved by the
the facts of this case. Substituted service presupposes that the trial court upon acquiring jurisdiction over Ocampo and giving her
place where the summons is being served is the an opportunity to be heard. It is in a better position to receive and
defendant's current residence or office/regular place of assess the evidence that may be presented by Ocampo, including
business. Thus, where the defendant neither resides nor holds the decree dated June 29, 2010 issued by the High Court of
office in the address stated in the summons, substituted service Turin, to the effect that her liability has been extinguished. While
cannot be resorted to. As we explained in Keister v. Navarro: 26 such claim would tend to render the case moot, we refuse to
consider the argument at the first instance on two grounds: first,
we are not a trier of facts; and second, the document submitted
Under the Rules, substituted service may be effect[ed] (a) by
has not been authenticated in accordance with the rules on
leaving copies of the summons at the defendant's dwelling house
evidence.
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 WHEREFORE, the petition is DENIED. The Decision dated
some competent person in charge thereof. The terms "dwelling January 5, 2012 and Resolution dated June 27, 2012 of the Court
house" or "residence" are generally held to refer to the time of of Appeals in CA-G.R. SP No. 113475 are AFFIRMED insofar as
service, hence it is not sufficient "to leave the copy at defendant's there was no valid service of summons. The Decision dated
former dwelling house, residence, or place of abode, as the case September 14, 2009 of the Regional Trial Court, Branch 212,
may be, after his removal therefrom." They refer to the place Mandaluyong City in Civil Case No. MCOS-3775 is declared
where the person named in the summons is living at the time VOID.
when the service is made, even though he may be temporarily out
of the country at the time. Similarly, the terms "office" or "regular
SO ORDERED.
place of business" refer to the office or place of business of
defendant at the time of service. Note that the 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 will deliver the process to
defendant or in some way give him notice thereof. 27 (Italics in the
original, citations omitted.)

Based on the sheriffs report, it is clear that Ocampo no longer


resides in San Bernardo Village, Darasa, Tanauan, Batangas.
The report categorically stated that "defendant Helen M. Ocampo
and her family were already in Italy,"28without, however,
identifying any specific address. Even BDO Remittance itself
admitted in its petition for recognition that Ocampo' s
"whereabouts in Italy are no longer certain."29 This, we note, is the
reason why in alleging the two addresses of Ocampo, one in Italy
and one in the Philippines, BDO Remittance used the phrase "last
known [address ]"30 instead of the usual "resident of." Not being a
resident of the address where the summons was served, the
substituted service of summons is ineffective. Accordingly, the
RTC did not acquire jurisdiction over the person of Ocampo.

BDO Remittance's reliance on Palma v. Galvez31 is misplaced for


the simple reason that the case involved service of summons to a
person who is temporarily out of the country. In this case,

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