THIRD DIVISION

The antecedents of the present case are as follows:

PERKIN ELMER SINGAPORE PTE LTD., G.R. No. 172242
Petitioner, Present:

YNARES-SANTIAGO, J.,Chairperson, Respondent entered into a Distribution Agreement[5] on 1 June 1990 with Perkin-
AUSTRIA-MARTINEZ, Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly organized and existing under
- versus - CHICO-NAZARIO, and
NACHURA, JJ. the laws of Singapore and engaged in the business of manufacturing, producing, selling or

Promulgated: distributing various laboratory/analytical instruments. By virtue of the said agreement, PEIA
DAKILA TRADING CORPORATION, appointed the respondent as the sole distributor of its products in the Philippines. The
Respondent. August 14, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x respondent was likewise granted the right to purchase and sell the products of PEIA subject to

the terms and conditions set forth in the Distribution Agreement. PEIA, on the other hand,

shall give respondent a commission for the sale of its products in the Philippines.
DECISION

Under the same Distribution Agreement, respondent shall order the products of PEIA,
CHICO-NAZARIO, J.:
which it shall sell in the Philippines, either from PEIA itself or from Perkin-Elmer

Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation

The case before this Court is a Petition for Review [1] on Certiorari under Rule 45 of
duly organized and existing under Philippine laws, and involved in the business of wholesale
the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision, [2] dated
trading of all kinds of scientific, biotechnological, and analytical instruments and
4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which affirmed the Orders,
appliances. PEIA allegedly owned 99% of the shares of PEIP.
dated 4 November 2002[3] and 20 June 2003,[4] of the Mandaluyong City Regional Trial Court

(RTC), Branch 212, in Civil Case No. MC99-605, which, in turn, denied the Motion to Dismiss
On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement,
and subsequent Motion for Reconsideration of herein petitioner Perkin Elmer Singapore Pte
prompting respondent to file before the RTC of Mandaluyong City, Branch 212, a
Ltd.
Complaint[6] for Collection of Sum of Money and Damages with Prayer for Issuance of a Writ of

Attachment against PEIA and PEIP, docketed as Civil Case No. MC99-605.
Petitioner is a corporation duly organized and existing under the laws of Singapore. It

is not considered as a foreign corporation doing business in the Philippines. Herein

The RTC issued an Order,[7] dated 26 March 1999, denying respondents prayer for
respondent Dakila Trading Corporation is a corporation organized and existing under
the issuance of a writ of attachment. The respondent moved for the reconsideration of the
Philippine laws, and engaged in the business of selling and leasing out laboratory
said Order but it was denied in another Order, dated 11 January 2000.[8]
instrumentation and process control instrumentation, and trading of laboratory chemicals and

supplies.
 Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to

Court to Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside Dismiss filed by PEIP, compelling the latter to file its Answer to the Amended Complaint.

of the Philippines,[9] which the RTC granted in its Order, dated 27 April 2000.[10] Thus, an Alias

Summons, dated 4 September 2000, was issued by the RTC to PEIA.But the said Alias Petitioner subsequently filed with the RTC a Special Appearance and Motion to

Summons was served on 28 September 2000 and received by Perkinelmer Asia, a Dismiss[20] respondents Amended Complaint on 30 May 2002 based on the following grounds:

Singaporean based sole proprietorship, owned by the petitioner and, allegedly, a separate and (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) the respondent

distinct entity from PEIA. failed to state a cause of action against the petitioner because it is not the real party-in-

interest; (3) even assuming arguendo that the respondent correctly filed the case against the

PEIP moved to dismiss[11] the Complaint filed by respondent on the ground that it petitioner, the Distribution Agreement which was the basis of its claim grants PEIA the right to

states no cause of action. Perkinelmer Asia, on the other hand, through its counsel, sent terminate the contract at any time; and (4) the venue was improperly laid. The RTC in its

letters, dated 12 October 2000[12] and 15 November 2000,[13] to the respondent and to the Order, dated 4 November 2002, denied petitioners Motion to Dismiss, ratiocinating as follows:

RTC, respectively, to inform them of the wrongful service of summons upon Perkinelmer Asia.
Prescinding from the above arguments of both parties, the [RTC] is inclined
to DENY the Motion to Dismiss.
Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint,
A careful scrutiny on (sic) the allegation in the (Amended) Complaint would
together with the Amended Complaint claiming that PEIA had become a sole show that [herein respondent] alleges ownership by the [herein petitioner]
of shares of stocks in the [PEIP]. Such allegation of ownership of shares of
proprietorship[14] owned by the petitioner, and subsequently changed its name to Perkinelmer stocks by the [petitioner] would reveal that there is an allegation of personal
Asia. Being a sole proprietorship of the petitioner, a change in PEIAs name and juridical status property in the Philippines. Shares of stocks represent personal property of
the shareholder. Thus, it follows that even though the Amended Complaint is
did not detract from the fact that all its due and outstanding obligations to third parties were 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,
assumed by the petitioner. Hence, in its Amended Complaint[15]respondent sought to change which will make it fall under one of the requisite (sic) for extraterritorial
the name of PEIA to that of the petitioner. In an Order, dated 24 July 2001,[16] the RTC service under Section 15, Rule 14, of the Rules of Court. Thus, it could be
gainfully said that the summons had been validly served for [RTC] to acquire
admitted the Amended Complaint filed by the respondent.Respondent then filed another jurisdiction over the [petitioner].
Motion[17] for the Issuance of Summons and for Leave of Court to Deputize Respondents
The [petitioner] hinges its dismissal on the failure of the [respondent] to
General Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another 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
Order, dated 4 March 2002,[18] the RTC deputized respondents General Manager to serve complaint.
summons on petitioner in Singapore. The RTC thus issued summons[19] to the
When the ground for dismissal is that the complaint states no cause of
petitioner. Acting on the said Order, respondents General Manager went to Singapore and action, such fact can be determined only from the facts alleged in the
complaint x x x and from no other x x x and the Court cannot consider other
served summons on the petitioner. matters aliunde x x x. This implies that the issue must be passed upon on
the basis of the allegations and declare them to be false, otherwise it would
be a procedural error and a denial of due process to the [respondent] x x x.
 The three (3) essential elements of a cause of action are the
following: This brings us to the present Petition before this Court wherein petitioner raised the

a) The plaintiffs legal rights; following issues.

b) A correlative obligation of the defendant;
c) The omission of the defendant in violation of the legal
rights. I.

A cursory reading of the Amended Complaint would reveal that all WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
of the essential elements of a cause of action are attendant in the Amended ERROR IN NOT RULING THAT THE SERVICE OF SUMMONS ON PETITIONER
Complaint. WAS DEFECTIVE AND THAT THE TRIAL COURT THUS FAILED TO ACQUIRE
JURISDICTION OVER THE PERSON OF THE PETITIONER.
As for the contention that venue was improperly laid, x x x, the [RTC] in its
ultimate desire that the ends of justice could be served in its fullest, cannot II.
rule that venue was improperly laid.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
xxxx ERROR IN RULING THAT THE SOLE ISSUE IN THE PETITION
FOR CERTIORARI FILED BEFORE IT IS THE QUESTION OF WHETHER THE
The stipulation as to the venue of a prospective action does not preclude the TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE
filing of the suit in the residence of the [respondent] under Section 2, Rule PETITIONER THROUGH THE EXTRATERRITORIAL SERVICE OF SUMMONS.
4, Rules of Court, especially where the venue stipulation was imposed by the A.
[petitioner] for its own benefits.
WHETHER OR NOT THE COURT OF APPEALS SHOULD
xxxx HAVE GRANTED THE PETITION FOR CERTIORARI AND
REVERSED THE RTC ORDERS ON THE GROUND THAT
The [RTC] further believes that it is imperative that in order to ferret out the THE AMENDED COMPLAINT FAILED TO STATE A CAUSE
truth, a full-blown trial is necessary for parties to be able to prove or OF ACTION AGAINST PETITIONER.
disprove their allegations.[21]
1. BASED ON THE ALLEGATIONS IN THE EX-
PARTE MOTION TO ADMIT AMENDED COMPLAINT,
AMENDED COMPLAINT, AND ALL DOCUMENTS ATTACHED
Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by AND/OR RELATED THERETO, PETITIONER IS NOT THE
REAL PARTY-IN-INTEREST DEFENDANT IN THE CASE
the RTC in its Order, dated 20 June 2003. BELOW.

2. ASSUMING ARGUENDO THAT RESPONDENT

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 DAKILA FILED THIS CASE AGAINST THE CORRECT
[PARTY], INASMUCH AS THE DISTRIBUTION AGREEMENT
Revised Rules of Civil Procedure with application for temporary restraining order and/or DATED 1 JUNE 1990 GRANTS [PEIA] THE RIGHT TO
preliminary injunction before the Court of Appeals alleging that the RTC committed grave TERMINATE THE CONTRACT AT ANY TIME, RESPONDENT
DAKILA FAILS TO STATE A CAUSE OF ACTION IN THE
abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss the CASE BELOW.
Amended Complaint. The Court of Appeals never issued any temporary restraining order or B.
writ of injunction. On 4 April 2006, the Court of Appeals rendered a Decision affirming the RTC
WHETHER OR NOT THE COURT OF APPEALS SHOULD
Orders of 4 November 2002 and 20 June 2003. HAVE GRANTED THE PETITION FOR CERTIORARI AND
 REVERSED THE RTC ORDERS ON THE GROUND OF
IMPROPER VENUE. property of PEIP, which is 99% owned by petitioner (as the supposed successor of PEIA), did

not convert the action from one in personam to one that is quasi in rem. Also, the petitioner
III.
points out that since the respondents prayer for the issuance of a writ of attachment was
WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY
RESTRAINING ORDER AND/OR WRIT OF INJUNCTION. denied by the RTC in its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-

605 remains in personam, contrary to the ruling of the Court of Appeals that by the

attachment of the petitioners interest in PEIP the action in personam was converted to an
The foregoing issues raised by petitioner essentially requires this Court to make a
action quasi in rem.Resultantly, the extraterritorial service of summons on the petitioner was
determination of the (1) proper service of summons and acquisition of jurisdiction by the RTC
not validly effected, and did not give the RTC jurisdiction over the petitioner.
over the person of the petitioner; (2) existence of a cause of action against petitioner in

respondents Amended Complaint; and (3) proper venue for respondents civil case against
Petitioner further argues that the appellate court should have granted its Petition
petitioner.
for Certiorari on the ground that the RTC committed grave abuse of discretion amounting to

lack or excess of jurisdiction in refusing to dismiss respondents Amended Complaint for failure
Petitioner contends that Civil Case No. MC99-605 involves an action for collection of
to state a cause of action against petitioner which was not the real party-in-interest in Civil
sum of money and damages arising from the alleged breach of the Distribution
Case No. MC99-605. Petitioner claims that it had never used the name PEIA as its corporate
Agreement. The action is one in personam, or an action against a person based on his
name, and neither did it change its name from that of PEIA.Petitioner stresses that PEIA is an
personal liability; and for the court a quo to acquire jurisdiction over the person of the
entirely different corporate entity that is not connected in whatever manner to the
petitioner, personal service of summons, and not extraterritorial service of summons, must be
petitioner. Even assuming arguendo that petitioner is the real party-in-interest in Civil Case No.
made within the state even if the petitioner is a non-resident. Petitioner avers that
MC99-605 or that petitioner and PEIA are one and the same entity, petitioner still avows that
extraterritorial service of summons stated under Section 15, Rule 14 of the 1997 Revised Rules
the respondent failed to state a cause of action against it because the Distribution Agreement
of Civil Procedure, is only proper in in rem and quasi in rem cases; thus, resort to an
expressly grants PEIA the right to terminate the said contract at any time.
extraterritorial service of summons in the case at bar was erroneous. Petitioner asseverates

that the allegations in the respondents Amended Complaint that the petitioner has personal
Lastly, it is the contention of the petitioner that the appellate court should have
properties within the Philippines does not make the present case one that relates to, or the
granted its Petition for Certiorari because the RTC committed grave abuse of discretion
subject of which is, property within the Philippines warranting the extraterritorial service of
amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case No. MC99-605 for
summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner
having been filed in an improper venue. Petitioner asserts that in the Distribution Agreement
states that for an action to be considered as one that relates to, or the subject of which is,
entered into between the respondent and PEIA, both had mutually agreed to the exclusive
property within the Philippines, the main subject matter of the action must be the property
jurisdiction of the courts of Singapore or of the Philippines as elected by PEIA. Absent any
within the Philippines itself, and such was not the situation in this case. Likewise, the prayer in
waiver by PEIA of its right to choose the venue of the dispute, the Complaint filed by the
respondents Amended Complaint for the issuance of a writ of attachment over the personal
respondent before the RTC in the Philippines should have been dismissed on the ground of personal liability; actions in rem are actions against the thing itself instead of against the

improper venue. person; and actions are quasi in rem, where an individual is named as defendant and the

purpose of the proceeding is to subject his or her interest in a property to the obligation or

The Petition is meritorious. loan burdening the property.[26]

Jurisdiction is the power with which courts are invested for administering justice; that Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are

is, for hearing and deciding cases. In order for the court to have authority to dispose of the only four instances wherein a defendant who is a non-resident and is not found in the country

case on the merits, it must acquire jurisdiction over the subject matter and the parties.[22] may be served with summons by extraterritorial service, to wit: (1) when the action affects the

personal status of the plaintiff; (2) when the action relates to, or the subject of which is

Jurisdiction of the court over the subject matter is conferred only by the Constitution property, within the Philippines, in which the defendant claims a lien or an interest, actual or

or by law. It is determinable on the basis of allegations in the complaint.[23] contingent; (3) when the relief demanded in such action consists, wholly or in part, in

excluding the defendant from any interest in property located in the Philippines; and (4) when

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while the defendant non-residents property has been attached within the Philippines. In these

jurisdiction over the defendants in a civil case is acquired either through the service of instances, service of summons may be effected by (a) personal service out of the country,

summons upon them in the manner required by law or through their voluntary appearance in with leave of court; (b) publication, also with leave of court; or (c) any other manner the court

court and their submission to its authority. If the defendants have not been summoned, unless may deem sufficient.[27]

they voluntarily appear in court, the court acquires no jurisdiction over their persons and a

judgment rendered against them is null and void. To be bound by a decision, a party should Undoubtedly, extraterritorial service of summons applies only where the action is in

first be subjected to the courts jurisdiction.[24] rem or quasi in rem, but not if an action is in personam.

Thus, one of the modes of acquiring jurisdiction over the person of the defendant or When the case instituted is an action in rem or quasi in rem, Philippine courts already

respondent in a civil case is through service of summons. It is intended to give notice to the have jurisdiction to hear and decide the case because, in actions in rem and quasi in rem,

defendant or respondent that a civil action has been commenced against him. The defendant jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the

or respondent is thus put on guard as to the demands of the plaintiff or the petitioner.[25] court, provided that the court acquires jurisdiction over the res.[28] Thus, in such instance,

extraterritorial service of summons can be made upon the defendant. The said extraterritorial
The proper service of summons differs depending on the nature of the civil case service of summons is not for the purpose of vesting the court with jurisdiction, but for

instituted by the plaintiff or petitioner: whether it is in personam, in rem, or quasi in complying with the requirements of fair play or due process, so that the defendant will be

rem.Actions in personam, are those actions brought against a person on the basis of his informed of the pendency of the action against him and the possibility that property in the
 essential in order for the court to acquire of (sic) jurisdiction over
Philippines belonging to him or in which he has an interest may be subjected to a judgment in [its person].[32] (Emphasis supplied.)
favor of the plaintiff, and he can thereby take steps to protect his interest if he is so

minded.[29] On the other hand, when the defendant or respondent does not reside and is not
Thus, being an action in personam, personal service of summons within the Philippines is
found in the Philippines,[30] and the action involved is in personam, Philippine courts cannot try
necessary in order for the RTC to validly acquire jurisdiction over the person of the petitioner,
any case against him because of the impossibility of acquiring jurisdiction over his person
and this is not possible in the present case because the petitioner is a non-resident and is not
unless he voluntarily appears in court.[31]
found within the Philippines. Respondents allegation in its Amended Complaint that petitioner

had personal property within the Philippines in the form of shares of stock in PEIP did not
In the case at bar, this Court sustains the contention of the petitioner that there can
make Civil Case No. MC99-605 fall under any of the four instances mentioned in Section 15,
never be a valid extraterritorial service of summons upon it, because the case before the
Rule 14 of the Rules of Court, as to convert the action in personam to an action in
court a quo involving collection of a sum of money and damages is, indeed, an action in
rem or quasi in rem and, subsequently, make the extraterritorial service of summons upon the
personam, as it deals with the personal liability of the petitioner to the respondent by reason
petitioner valid.
of the alleged unilateral termination by the former of the Distribution Agreement. Even the

Court of Appeals, in its Decision dated 4 April 2004, upheld the nature of the instant case as
It is incorrect for the RTC to have ruled that the allegations made by the respondent
an action in personam. In the said Decision the appellate court ruled that:
in its Amended Complaint, which is primarily for collection of a sum of money and damages,

In the instant petition, [respondents] cause of action in Civil Case
No. MC99-605 is anchored on the claim that petitioner unilaterally
terminated the Distribution Agreement. Thus, [respondent] prays in its
[C]omplaint that Upon the filing of the Complaint, issue an Order fixing the
amount of the bond and issue a writ of attachment requiring the sheriff to
attach the properties of [Perkin-Elmer Philippines], which are not exempt
from execution, and as much as may be sufficient to satisfy [respondents]
demands.
The action instituted by [respondent] affects the parties alone, not
the whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded.
that the petitioner owns shares of stock within the Philippines to which the petitioner claims
interest, or an actual or contingent lien, would make the case fall under one of the aforesaid
instances wherein extraterritorial service of summons under Section 15, Rule 14 of the 1997
Revised Rules of Civil Procedure, would be valid. The RTC in arriving at such conclusions relied
on the second instance, mentioned under Section 15, Rule 14 of the 1997 Revised Rules of
Civil Procedure (i.e., when the action relates to, or the subject of which is property, within the
Philippines, in which the defendant claims a lien or interest, actual or contingent), where
extraterritorial service of summons can be properly made. However, the aforesaid second

xxxx instance has no application in the case before this Court. Primarily, the Amended Complaint

The objective sought in [respondents] [C]omplaint was to establish
a claim against petitioner for its alleged unilateral termination of
[D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-605
is an action in personam because it is an action against persons,
namely, herein petitioner, on the basis of its personal liability. As
such, personal service of summons upon the [petitioner] is
filed by the respondent against the petitioner was for the collection of sum of money and
damages. The said case was neither related nor connected to any property of the petitioner to
which it claims a lien or interest. The action for collection of a sum of money and damages
was purely based on the personal liability of the petitioner towards the respondent. The
petitioner is correct in saying that mere allegations of personal property within the Philippines
does not necessarily make the action as one that relates to or the subject of which is, property Hence, it is submitted that one of the instances when exterritorial
within the Philippines as to warrant the extraterritorial service of summons. For the action to service of summons under Section 15, Rule 14 of the Rules of Court is
proper may be considered to have been met.This is because the [C]omplaint
be considered one that relates to, or the subject of which, is the property within for collection of sum of money which is an action in personam was
converted into an action quasi in rem by the attachment of [petitioners]
the Philippines, the main subject matter of the action must be the property itself of the interest in [Perkin-Elmer Philippines].[34] (Emphasis supplied.)
petitioner in the Philippines. By analogy, an action involving title to or possession of real or
personal property -- such as the foreclosure of real estate or chattel mortgage where the
Respondents allegation in its Amended Complaint that petitioner had personal
mortgagor does not reside or is not found in the Philippines -- can be considered as an action
property within the Philippines in the form of shares of stock in PEIP does not convert Civil
which relates to, or the subject of which is, property within the Philippines, in which the
Case No. MC99-605 from an action in personam to one quasi in rem, so as to qualify said case
defendant claims a lien or interest, actual or contingent; and in such instance, judgment will
under the fourth instance mentioned in Section 15, Rule 14 of the 1997 Revised Rules of Civil
be limited to the res.[33]
Procedure (i.e., when the non-resident defendants property has been attached within the

Philippines), wherein extraterritorial service of summons upon the petitioner would have been
Moreover, the allegations made by the respondent that the petitioner has property
valid. It is worthy to note that what is required under the aforesaid provision of the Revised
within the Philippines were in support of its application for the issuance of a writ of
Rules of Civil Procedure is not a mere allegation of the existence of personal property
attachment, which was denied by the RTC. Hence, it is clear from the foregoing that the
belonging to the non-resident defendant within the Philippines but, more precisely, that the
Complaint filed by the respondent against the petitioner does not really relate to, or the
non-resident defendants personal property located within the Philippines must have been
subject of which is, property within the Philippines of the petitioner.
actually attached. This Court in the case of Venturanza v. Court of Appeals[35] ruled that when
the attachment was void from the beginning, the action in personam which required personal
This Court also finds error in the Decision of the Court of Appeals. It is provided for in
service of summons was never converted into an action in rem where service by publication
the said Decision, thus:
would have been valid.Hence, the appellate court erred in declaring that the present case,

However, let it be emphasized that in the [C]omplaint filed before which is an action in personam, was converted to an action quasi in rem because of
the trial court, [respondent] prayed that Upon the filing of the Complaint, respondents allegations in its Amended Complaint that petitioner had personal property within
issue an Order fixing the amount of the bond and issue a writ of attachment
requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], the Philippines.
which are not exempt from execution, and as much as may be sufficient to
satisfy [respondents] demands.
Glaringly, respondents prayer in its Amended Complaint for the issuance of a writ of
In other words, although the [C]omplaint before the trial court does
not involve the personal status of the [respondent], nevertheless, the case attachment over petitioners purported shares of stock in PEIP located within
involves property within the Philippines in which the [petitioner] has or claim
an interest, or which the [respondent] has attached, which is one of the thePhilippines was denied by the court a quo in its Order dated 26 March 1999. Respondents
instances where extraterritorial service of summons is proper. Motion for Reconsideration of the said Order was likewise denied by the RTC in its subsequent

xxxx Order, dated 11 January 2000. Evidently, petitioners alleged personal property within
the Philippines, in the form of shares of stock in PEIP, had not been attached; hence, Civil position that the respondent wrongfully filed a case against it and the RTC erroneously

Case No. MC99-605, for collection of sum of money and damages, remains an action in exercised jurisdiction over its person.

personam. As a result, the extraterritorial service of summons was not validly effected by the
RTC against the petitioner, and the RTC thus failed to acquire jurisdiction over the person of Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC

the petitioner. The RTC is therefore bereft of any authority to act upon the Complaint filed over respondents complaint and over petitioners counterclaim -- while it may have no

before it by the respondent insofar as the petitioner is concerned. jurisdiction over the former, it may exercise jurisdiction over the latter. The compulsory

counterclaim attached to petitioners Answer ad cautelam can be treated as a separate action,

If there was no valid summons served upon petitioner, could RTC have acquired wherein petitioner is the plaintiff while respondent is the defendant. [38] Petitioner could have

jurisdiction over the person of the petitioner by the latters voluntary appearance? As a rule, instituted a separate action for the very same claims but, for the sake of expediency and to

even if the service of summons upon the defendant or respondent in a civil case is defective, avoid multiplicity of suits, it chose to demand the same in Civil Case No. MC99-

the court can still acquire jurisdiction over his person when he voluntary appears in court or 605.[39] Jurisdiction of the RTC over the subject matter and the parties in the counterclaim

submits himself to its authority. Nonetheless, voluntary appearance, as a mode of acquiring must thus be determined separately and independently from the jurisdiction of the same court

jurisdiction over the person of the defendant, is likewise inapplicable in this case. in the same case over the subject matter and the parties in respondents complaint.

It is settled that a party who makes a special appearance in court for the purpose of Moreover, even though the petitioner raised other grounds in its Motion to Dismiss

challenging the jurisdiction of said court, based on the invalidity of the service of summons, aside from lack of jurisdiction over its person, the same is not tantamount to its voluntary

cannot be considered to have voluntarily submitted himself to the jurisdiction of the appearance or submission to the authority of the court a quo. While in De Midgely v.

court.[36] In the present case, petitioner has been consistent in all its pleadings in assailing the Ferandos,[40] it was held that, in a Motion to Dismiss, the allegation of grounds other than lack
service of summons upon it and the jurisdiction of the RTC over its person. Thus, the of jurisdiction over the person of the defendant, including a prayer "for such other reliefs as"

petitioner cannot be declared in estoppel when it filed an Answer ad cautelamwith compulsory may be deemed "appropriate and proper" amounted to voluntary appearance, such ruling

counterclaim before the RTC while the instant Petition was still pending before this Court. The must be deemed superseded by the declaration of this Court in La Naval Drug Corporation v.

petitioner was in a situation wherein it had no other choice but to file an Answer; otherwise, Court of Appeals[41] that estoppel by jurisdiction must be unequivocal and intentional. It would
the RTC would have already declared that petitioner had waived its right to file responsive be absurd to hold that petitioner unequivocally and intentionally submitted itself to the

pleadings.[37] Neither can the compulsory counterclaim contained in petitioners Answer ad jurisdiction of the court by seeking other reliefs to which it might be entitled when the only

cautelam be considered as voluntary appearance of petitioner before the RTC. Petitioner seeks relief that it could properly ask from the trial court is the dismissal of the complaint against
to recover damages and attorneys fees as a consequence of the unfounded suit filed by it.[42] Thus, the allegation of grounds other than lack of jurisdiction with a prayer for such

respondent against it. Thus, petitioners compulsory counterclaim is only consistent with its other reliefs as may be deemed appropriate and proper cannot be considered as unequivocal
and intentional estoppel. Most telling is Section 20, Rule 14 of the Rules of Court, which
expressly provides:
SEC. 20. Voluntary appearance. - The defendants voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds aside from
lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance.[43] (Emphasis supplied.)
In sum, this Court finds that the petitioner did not submit itself voluntarily to the
authority of the court a quo; and in the absence of valid service of summons, the RTC utterly
failed to acquire jurisdiction over the person of the petitioner.
Anent the existence of a cause of action against petitioner and the proper venue of
the case, this Court upholds the findings of the RTC on these issues.
Dismissal of a Complaint for failure to state a cause of action is provided for by the
Rules of Court.[44] When a Motion to Dismiss is grounded on the failure to state a cause of
action, a ruling thereon should be based only on the facts alleged in the complaint. The court
must pass upon this issue based solely on such allegations, assuming them to be true. For it to
do otherwise would be a procedural error and a denial of plaintiffs right to due
process.[45] While, truly, there are well-recognized exceptions[46] to the rule that the allegations
are hypothetically admitted as true and inquiry is confined to the face of the
complaint,[47] none of the exceptions apply in this case. Hence, the general rule applies. The
defense of the petitioner that it is not the real party-in-interest is evidentiary in nature which
must be proven in trial. The appellate court, then, cannot be faulted for not granting
petitioners Motion to Dismiss on the ground of failure to state a cause of action.
In the same way, the appellate court did not err in denying petitioners Motion to
Dismiss Civil Case No. MC99-605 on the ground of improper venue. In arriving at such
conclusion, this Court quotes with approval the following ratiocination of the RTC:
As for the contention that venue was improperly laid, x x x, the
[trial court] in its ultimate desire that the ends of justice could be served in
its fullest, cannot rule that venue was improperly laid.
xxxx
The stipulation as to the venue of a prospective action does not
preclude the filing of the suit in the residence of the [respondent]
under Section 2, Rule 4, Rules of Court, especially where the venue
stipulation was imposed by the [petitioner] for its own
benefits.[48] (Emphasis supplied.)
Despite the venue stipulation found in the Distribution Agreement stipulating that the exclusive
jurisdiction over disputes arising from the same shall lie in the courts of Singapore or of the
Territory (referring to the Philippines), whichever is elected by PEIA (or petitioner, as PEIAs
alleged successor), the RTC of the Philippines cannot be considered as an improper
venue. Truly, the venue stipulation used the word exclusive, however, a closer look on the
Distribution Agreement would reveal that the venue stipulation was really in the
alternative i.e., courts of Singapore or of the Territory, meaning, the Philippines; thus, the
court a quo is not an improper venue for the present case.
Nonetheless, it bears to emphasize that despite our findings that based on the allegations in
respondents Complaint in Civil Case No. MC99-605, respondent appears to have a cause of
action against the petitioner and that the RTC is the proper venue for the said case, Civil
Case No. MC99-605 is still dismissible, for the RTC never acquired jurisdiction over the
person of the petitioner. The extraterritorial service of summons upon the petitioner produces
no effect because it can only be done if the action is in rem or quasi in rem. The case for
collection of sum of money and damages filed by the respondent against the petitioner being
an action in personam, then personal service of summons upon the petitioner within
the Philippines is essential for the RTC to validly acquire jurisdiction over the person of the
petitioner. Having failed to do so, the RTC can never subject petitioner to its jurisdiction. The
mere allegation made by the respondent that the petitioner had shares of stock within the
Philippines was not enough to convert the action from one in personam to one that was quasi
in rem, for petitioners purported personal property was never attached; thus, the
extraterritorial service of summons upon the petitioner remains invalid. In light of the
foregoing findings, this Court concludes that the RTC has no power to hear and decide the
case against the petitioner, because the extraterritorial service of summons was not validly
effected upon the petitioner and the RTC never acquired jurisdiction over its person.
Finally, as regards the petitioners counterclaim, which is purely for damages and attorneys
fees by reason of the unfounded suit filed by the respondent against it, it has long been
settled that the same truly falls under the classification of compulsory counterclaim and it
must be pleaded in the same action, otherwise, it is barred.[49] In the case at bar, this Court
orders the dismissal of the Complaint filed by the respondent against the petitioner
because the court a quo failed to acquire jurisdiction over the person of the
latter.Since the Complaint of the respondent was dismissed, what will happen then to the
counterclaim of the petitioner? Does the dismissal of the complaint carry with it the dismissal
of the counterclaim?
In the cases of Metal Engineering Resources Corp. v. Court of
Appeals,[50] International Container Terminal Services, Inc. v. Court of Appeals,[51] and BA
Finance Corporation v. Co.,[52] the Court ruled that if the court does not have jurisdiction to
entertain the main action of the case and dismisses the same, then the compulsory
counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no
jurisdiction remained for any grant of relief under the counterclaim.[53] If we follow the
aforesaid pronouncement of the Court in the cases mentioned above, the counterclaim of the
herein petitioner being compulsory in nature must also be dismissed together with the
Complaint. However, in the case of Pinga vs. Heirs of German Santiago,[54] the Court explicitly
expressed that:
Similarly, Justice Feria notes that the present rule reaffirms the
right of the defendant to move for the dismissal of the complaint and to
prosecute his counterclaim, as stated in the separate opinion [of Justice
Regalado in BA Finance]. Retired Court of Appeals Justice Hererra
pronounces that the amendment to Section 3, Rule 17 [of the 1997
Revised Rules of Civil Procedure] settles that nagging question
whether the dismissal of the complaint carries with it the dismissal
of the counterclaim, and opines that by reason of the amendments,
the rulings in Metals Engineering, International Container, and BA
Finance may be deemed abandoned. x x x.
x x x, when the Court promulgated the 1997 Rules of Civil
Procedure, including the amended Rule 17, those previous jural doctrines
that were inconsistent with the new rules incorporated in the 1997 Rules of
Civil Procedure were implicitly abandoned insofar as incidents arising
after the effectivity of the new procedural rules on 1 July 1997. BA Finance,
or even the doctrine that a counterclaim may be necessarily dismissed along
with the complaint, clearly conflicts with the 1997 Rules of Civil
Procedure. The abandonment of BA Finance as doctrine extends as far back
as 1997, when the Court adopted the new Rules of Civil Procedure. If, since
then, abandonment has not been affirmed in jurisprudence, it is only
because no proper case has arisen that would warrant express confirmation
of the new rule. That opportunity is here and now, and we thus rule that
the dismissal of a complaint due to fault of the plaintiff is without
prejudice to the right of the defendant to prosecute any pending
counterclaims of whatever nature in the same or separate
action. We confirm that BA Finance and all previous rulings of the
Court that are inconsistent with this present holding are now
abandoned.[55] [Emphasis supplied].
It is true that the aforesaid declaration of the Court refers to instances covered by
Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure [56] on dismissal of the
complaint due to the fault of the plaintiff. Nonetheless, it does not also preclude the
application of the same to the instant case just because the dismissal of respondents
Complaint was upon the instance of the petitioner who correctly argued lack of jurisdiction
over its person.
 Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the It bears to emphasize that petitioners counterclaim against respondent is for

situation wherein the very filing of the complaint by the plaintiff against the defendant caused damages and attorneys fees arising from the unfounded suit. While respondents Complaint

the violation of the latters rights. As to whether the dismissal of such a complaint should also against petitioner is already dismissed, petitioner may have very well already incurred

include the dismissal of the counterclaim, the Court acknowledged that said matter is still damages and litigation expenses such as attorneys fees since it was forced to engage legal

debatable, viz: 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
Whatever the nature of the counterclaim, it bears the same integral
characteristics as a complaint; namely a cause (or causes) of action of action of petitioners counterclaim is not eliminated by the mere dismissal of respondents
constituting an act or omission by which a party violates the right of complaint.
another. The main difference lies in that the cause of action in the
counterclaim is maintained by the defendant against the plaintiff, while the
converse holds true with the complaint. Yet, as with a complaint, a
counterclaim without a cause of action cannot survive. It may also do well to remember that it is this Court which mandated that claims for

damages and attorneys fees based on unfounded suit constitute compulsory

x x x if the dismissal of the complaint somehow eliminates the
cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that counterclaim which must be pleaded in the same action or, otherwise, it shall be barred. It will
hardly is the case, especially as a general rule.More often than not, the
allegations that form the counterclaim are rooted in an act or omission of then be iniquitous and the height of injustice to require the petitioner to make the
the plaintiff other than the plaintiffs very act of filing the counterclaim in the present action, under threat of losing his right to claim the same ever
complaint. Moreover, such acts or omissions imputed to the plaintiff are
often claimed to have occurred prior to the filing of the complaint itself. The again in any other court, yet make his right totally dependent on the fate of the respondents
only apparent exception to this circumstance is if it is alleged in the
complaint.
counterclaim that the very act of the plaintiff in filing the complaint
precisely causes the violation of the defendants rights. Yet even in
such an instance, it remains debatable whether the dismissal or
withdrawal of the complaint is sufficient to obviate the pending If indeed the Court dismisses petitioners counterclaim solely on the basis of the
cause of action maintained by the defendant against the
dismissal of respondents Complaint, then what remedy is left for the petitioner? It can be said
plaintiff.[57]
that he can still file a separate action to recover the damages and attorneys fees based on the
Based on the aforequoted ruling of the Court, if the dismissal of the complaint
unfounded suit for he cannot be barred from doing so since he did file the compulsory
somehow eliminates the cause of the counterclaim, then the counterclaim cannot
counterclaim in the present action, only that it was dismissed when respondents Complaint
survive.Conversely, if the counterclaim itself states sufficient cause of action then
was dismissed. However, this reasoning is highly flawed and irrational considering that
it should stand independently of and survive the dismissal of the complaint. Now, having been
petitioner, already burdened by the damages and attorneys fees it may have incurred in the
directly confronted with the problem of whether the compulsory counterclaim by reason of the
present case, must again incur more damages and attorneys fees in pursuing a separate
unfounded suit may prosper even if the main complaint had been dismissed, we rule in the
action, when, in the first place, it should not have been involved in any case at all.
affirmative.

Since petitioners counterclaim is compulsory in nature and its cause of action survives
that of the dismissal of respondents complaint, then it should be resolved based on its own
merits and evidentiary support.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
Decision of the Court of Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the
Orders, dated 4 November 2002 and 20 June 2003, of
the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-605, is
hereby REVERSED AND SET ASIDE. Respondents Amended Complaint in Civil Case No.
MC99-605 as against the petitioner is hereby ordered DISMISSED, and all the proceedings
against petitioner in the court a quo by virtue thereof are hereby DECLARED NULL AND
VOID. The Regional Trial Court of Mandaluyong City, Branch 212, is DIRECTED to proceed
without further delay with the resolution of respondents Complaint in Civil Case No. MC99-605
as to defendant PEIP, as well as petitioners counterclaim. No costs.
SO ORDERED.
Perkin Elmer vs. Dakila Trading
Doctrine: Rule 14, Section 15 on Extraterritorial service of summons when allowed: (1) when
the action affects the personal status of the plaintiff; (2) when the action relates to, or the
subject of which is property, within the Philippines, in which the defendant claims a lien or an
interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or
in part, in excluding the defendant from any interest in property located in the Philippines; and
(4) when the defendant non-resident’s property has been attached within the Philippines. In
these instances, service of summons may be effected by (a) personal service out of the
country, with leave of court; (b) publication, also with leave of court; or (c) any other manner
the court may deem sufficient.
Facts: Perkin Elmer Asia entered into a distribution agreement with Dakila, a domestic corp.
Under the agreement, Dakila was appointed its sole distributor in the Phils and thus, shall
receive commissions for its sales from Perkin Asia. Dakila was supposed to order the products
either from Perkin Asia or from Perkin Elmer Instruments Philippines (PEIP), an affiliate of
Perkin Asia, 99% of the shares of which is owned by Perkin Asia.
However, Perkin Asia unilaterally terminated the agreement with Dakila. So Dakila sued both
Perkin Asia and PEIP – Dakila filed a Complaint for Collection of Money (an In Personam suit)
with a prayer for a Writ of Attachment (for the properties of PEIP since 99% is owned by
Perkin Asia anyway). The Alias Summons was, however, served upon Perkinelmer Asia, a
Singapore based sole proprietorship owned by Perkin Asia but was allegedly, a separate and
distinct entity from it.
So in response to Dakila’s collection suit, PEIP filed a Motion to Dismiss for lack of cause of
action. Perkinelmer Asia informed the court of the wrongful service of summons upon it. Dakila
then filed an amended complaint saying that Perkin Asia is now Perkinelmer, it became a sole
proprietorship and changed its name but it’s the same people/interest so they should still be
accountable for their obligations. Perkin Asia, herein petitioner and the proper party, on the
other hand, filed a Motion to Dismiss on the ground that the RTC failed to acquire jurisdiction
over its person.
RTC denied petitioner’s Motion to Dismiss stating that since the action is one for damages, it
relates to Perkin Asia’s property and since Dakila alleged in its complaint that Perkin Asia owns
shares in PEIP, the extraterritorial service of summons was sufficient to acquire jurisdiction (
RTC relied on Sec. 15 of Rule 14 - (2) when the action relates to, or the subject of which is
property, within the Philippines, in which the defendant claims a lien or an interest, actual or
contingent). CA affirmed the RTC ruling.
Issue: WON the service was summons was defective/won jurisdiction was validly acquired
Held: No, SC reversed CA (and RTC).
Extraterritorial service of summons applies only in in rem and quasi in rem cases, where only
jurisdiction over the res is required and such extraterritorial service of summons is done not
for the purpose of acquiring jurisdiction over the person of the defendant, but to inform the
defendant that there is a suit involving his property (due process). On the other hand, when
the defendant or respondent does not reside and is not found in the Philippines, and the action
involved is in personam, Philippine courts cannot try any case against him because of the
impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.
The present case is an action in personam – because it deals with Perkin Asia’s personal
liability to Dakila because of its unilateral termination of the distribution agreement. Hence,
there should have been personal service of summons. Dakila’s allegation that Perkin Asia had
properties in the Philippines did not convert the case into an action quasi in rem as to make
the extraterritorial service valid. The RTC was incorrect in relying upon Sec. 15 of Rule 14 –
mere allegations of personal property does not make the action as one that relates to or the
subject of which is, property within the Philippines as to warrant the extraterritorial service of
summons. For the action to be considered one that relates to, or the subject of which, is the
property within the Philippines, the main subject matter of the action must be the property
itself of the petitioner in the Philippines.
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? No. SC said that
petitioner cannot be held estopped by the answer ad cautelam it filed since it was in a
situation where it had no choice but to file an answer and petitioner had been consistent in all
its pleadings in questioning the lack of jurisdiction by virtue of the defective service of
summons.
*On issue of lack of cause of action: DENIED – because when a Motion to Dismiss is grounded
on the failure to state a cause of action, a ruling thereon should be based only on the facts
alleged in the complaint. The court must pass upon this issue based solely on such allegations,
assuming them to be true. Petitioner’s defense that it is not the real party in interest is
evidentiary in nature and must be proven in trial.
*On issue on improper venue (that venue should be Singapore since Distribution Agreement
stated that exclusive jurisdiction is in Singapore): DENIED. Despite the stipulation that Sing
has exclusive jurisdiction, a closer look at the Distribution Agreement would reveal that the
venue stipulation was really in the alternative i.e., courts of Singapore or of the Territory,
meaning, the Philippines; thus, the court a quo is not an improper venue for the present case.
Finally, what happens to petitioner’s compulsory counterclaim for damages and atty’s fees
after the suit against it was dismissed? SC said it should prosper because 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. 100812. June 25, 1999]
FRANCISCO MOTORS CORPORATION, petitioner, vs. COURT OF APPEALS and
SPOUSES GREGORIO and LIBRADA MANUEL, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari, under Rule 45 of the Rules of Court, seeks to annul
the decision[1] of the Court of Appeals in C.A. G.R. CV No. 10014 affirming the decision
rendered by Branch 135, Regional Trial Court of Makati, Metro Manila. The procedural
antecedents of this petition are as follows:
On January 23, 1985, petitioner filed a complaint[2] against private respondents to
recover three thousand four hundred twelve and six centavos (P3,412.06), representing the
balance of the jeep body purchased by the Manuels from petitioner; an additional sum of
twenty thousand four hundred fifty-four and eighty centavos (P20,454.80) representing the
unpaid balance on the cost of repair of the vehicle; and six thousand pesos (P6,000.00) for
cost of suit and attorneys fees.[3] To the original balance on the price of jeep body were added
the costs of repair.[4] In their answer, private respondents interposed a counterclaim for
unpaid legal services by Gregorio Manuel in the amount of fifty thousand pesos (P50,000)
which was not paid by the incorporators, directors and officers of the petitioner. The trial court
decided the case on June 26, 1985, in favor of petitioner in regard to the petitioners claim for
money, but also allowed the counter-claim of private respondents. Both parties appealed. On
April 15, 1991, the Court of Appeals sustained the trial courts decision. [5] Hence, the present
petition.
For our review in particular is the propriety of the permissive counterclaim which private
respondents filed together with their answer to petitioners complaint for a sum of
money. Private respondent Gregorio Manuel alleged as an affirmative defense that, while he
was petitioners Assistant Legal Officer, he represented members of the Francisco family in the
intestate estate proceedings of the late Benita Trinidad. However, even after the termination
of the proceedings, his services were not paid. Said family members, he said, were also
incorporators, directors and officers of petitioner. Hence to counter petitioners collection suit,
he filed a permissive counterclaim for the unpaid attorneys fees.[6]
For failure of petitioner to answer the counterclaim, the trial court declared petitioner in
default on this score, and evidence ex-parte was presented on the counterclaim. The trial
court ruled in favor of private respondents and found that Gregorio Manuel indeed rendered
legal services to the Francisco family in Special Proceedings Number 7803- In the Matter of
Intestate Estate of Benita Trinidad. Said court also found that his legal services were not
compensated despite repeated demands, and thus ordered petitioner to pay him the amount
of fifty thousand (P50,000.00) pesos.[7]
Dissatisfied with the trial courts order, petitioner elevated the matter to the Court of
Appeals, posing the following issues:
I.
WHETHER OR NOT THE DECISION RENDERED BY THE LOWER COURT IS NULL AND VOID AS
IT NEVER ACQUIRED JURISDICTION OVER THE PERSON OF THE DEFENDANT.
II.
WHETHER OR NOT PLAINTIFF-APPELLANT NOT BEING A REAL PARTY IN THE ALLEGED
PERMISSIVE COUNTERCLAIM SHOULD BE HELD LIABLE TO THE CLAIM OF DEFENDANT-
APPELLEES.
III.
WHETHER OR NOT THERE IS FAILURE ON THE PART OF PLAINTIFF-APPELLANT TO ANSWER
THE ALLEGED PERMISSIVE COUNTERCLAIM.[8]
Petitioner contended that the trial court did not acquire jurisdiction over it because no
summons was validly served on it together with the copy of the answer containing the
permissive counterclaim.Further, petitioner questions the propriety of its being made party to
the case because it was not the real party in interest but the individual members of the
Francisco family concerned with the intestate case.
In its assailed decision now before us for review, respondent Court of Appeals held that a
counterclaim must be answered in ten (10) days, pursuant to Section 4, Rule 11, of the Rules
of Court; and nowhere does it state in the Rules that a party still needed to be summoned
anew if a counterclaim was set up against him. Failure to serve summons, said respondent
court, did not effectively negate trial courts jurisdiction over petitioner in the matter of the
counterclaim. It likewise pointed out that there was no reason for petitioner to be excused
from answering the counterclaim. Court records showed that its former counsel, Nicanor G.
Alvarez, received the copy of the answer with counterclaim two (2) days prior to his
withdrawal as counsel for petitioner. Moreover when petitioners new counsel, Jose N. Aquino,
entered his appearance, three (3) days still remained within the period to file an answer to the
counterclaim. Having failed to answer, petitioner was correctly considered in default by the
trial court.[9] Even assuming that the trial court acquired no jurisdiction over petitioner,
respondent court also said, but having filed a motion for reconsideration seeking relief from
the said order of default, petitioner was estopped from further questioning the trial courts
jurisdiction.[10]
On the question of its liability for attorneys fees owing to private respondent Gregorio
Manuel, petitioner argued that being a corporation, it should not be held liable therefor
because these fees were owed by the incorporators, directors and officers of the corporation in
their personal capacity as heirs of Benita Trinidad. Petitioner stressed that the personality of
the corporation, vis--vis the individual persons who hired the services of private respondent, is
separate and distinct,[11] hence, the liability of said individuals did not become an obligation
chargeable against petitioner.
Nevertheless, on the foregoing issue, the Court of Appeals ruled as follows:
However, this distinct and separate personality is merely a fiction created by law for
convenience and to promote justice. Accordingly, this separate personality of the corporation
may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a
cloak or cover for found (sic) illegality, or to work an injustice, or where necessary to achieve
equity or when necessary for the protection of creditors. (Sulo ng Bayan, Inc. vs. Araneta,
Inc., 72 SCRA 347) Corporations are composed of natural persons and the legal fiction of a
separate corporate personality is not a shield for the commission of injustice and
inequity. (Chemplex Philippines, Inc. vs. Pamatian, 57 SCRA 408)
In the instant case, evidence shows that the plaintiff-appellant Francisco Motors Corporation is
composed of the heirs of the late Benita Trinidad as directors and incorporators for whom
defendant Gregorio Manuel rendered legal services in the intestate estate case of their
deceased mother. Considering the aforestated principles and circumstances established in this
case, equity and justice demands plaintiff-appellants veil of corporate identity should be
pierced and the defendant be compensated for legal services rendered to the heirs, who are
directors of the plaintiff-appellant corporation.[12]
Now before us, petitioner assigns the following errors:
I.
THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF PIERCING THE VEIL OF
CORPORATE ENTITY.
II.
THE COURT OF APPEALS ERRED IN AFFIRMING THAT THERE WAS JURISDICTION OVER
PETITIONER WITH RESPECT TO THE COUNTERCLAIM.[13]
Petitioner submits that respondent court should not have resorted to piercing the veil of
corporate fiction because the transaction concerned only respondent Gregorio Manuel and the
heirs of the late Benita Trinidad. According to petitioner, there was no cause of action by said
respondent against petitioner; personal concerns of the heirs should be distinguished from
those involving corporate affairs.Petitioner further contends that the present case does not fall
among the instances wherein the courts may look beyond the distinct personality of a
corporation. According to petitioner, the services for which respondent Gregorio Manuel seeks
to collect fees from petitioner are personal in nature. Hence, it avers the heirs should have
been sued in their personal capacity, and not involve the corporation.[14]
With regard to the permissive counterclaim, petitioner also insists that there was no
proper service of the answer containing the permissive counterclaim. It claims that the
counterclaim is a separate case which can only be properly served upon the opposing party
through summons. Further petitioner states that by nature, a permissive counterclaim is one
which does not arise out of nor is necessarily connected with the subject of the opposing
partys claim. Petitioner avers that since there was no service of summons upon it with regard
to the counterclaim, then the court did not acquire jurisdiction over petitioner.Since a
counterclaim is considered an action independent from the answer, according to petitioner,
then in effect there should be two simultaneous actions between the same parties: each party
is at the same time both plaintiff and defendant with respect to the other, [15] requiring in each
case separate summonses.
In their Comment, private respondents focus on the two questions raised by
petitioner. They defend the propriety of piercing the veil of corporate fiction, but deny the
necessity of serving separate summonses on petitioner in regard to their permissive
counterclaim contained in the answer.
Private respondents maintain both trial and appellate courts found that respondent
Gregorio Manuel was employed as assistant legal officer of petitioner corporation, and that his
services were solicited by the incorporators, directors and members to handle and represent
them in Special Proceedings No. 7803, concerning the Intestate Estate of the late Benita
Trinidad. They assert that the members of petitioner corporation took advantage of their
positions by not compensating respondent Gregorio Manuel after the termination of the estate
proceedings despite his repeated demands for payment of his services. They cite findings of
the appellate court that support piercing the veil of corporate identity in this particular
case. They assert that the corporate veil may be disregarded when it is used to defeat public
convenience, justify wrong, protect fraud, and defend crime. It may also be pierced, according
to them, where the corporate entity is being used as an alter ego, adjunct, or business conduit
for the sole benefit of the stockholders or of another corporate entity. In these instances, they
aver, the corporation should be treated merely as an association of individual persons.[16]
Private respondents dispute petitioners claim that its right to due process was violated
when respondents counterclaim was granted due course, although no summons was served
upon it. They claim that no provision in the Rules of Court requires service of summons upon a
defendant in a counterclaim. Private respondents argue that when the petitioner filed its
complaint before the trial court it voluntarily submitted itself to the jurisdiction of the court. As
a consequence, the issuance of summons on it was no longer necessary. Private respondents
say they served a copy of their answer with affirmative defenses and counterclaim on
petitioners former counsel, Nicanor G. Alvarez. While petitioner would have the Court believe
that respondents served said copy upon Alvarez after he had withdrawn his appearance as
counsel for the petitioner, private respondents assert that this contention is utterly
baseless. Records disclose that the answer was received two (2) days before the former
counsel for petitioner withdrew his appearance, according to private respondents. They
maintain that the present petition is but a form of dilatory appeal, to set off petitioners
obligations to the respondents by running up more interest it could recover from them. Private
respondents therefore claim damages against petitioner.[17]
To resolve the issues in this case, we must first determine the propriety of piercing the
veil of corporate fiction.
Basic in corporation law is the principle that a corporation has a separate personality
distinct from its stockholders and from other corporations to which it may be
connected.[18] However, under the doctrine of piercing the veil of corporate entity, the
corporations separate juridical personality may be disregarded, for example, when the
corporate identity is used to defeat public convenience, justify wrong, protect fraud, or defend
crime. Also, where the corporation is a mere alter ego or business conduit of a person, or
where the corporation is so organized and controlled and its affairs are so conducted as to
make it merely an instrumentality, agency, conduit or adjunct of another corporation, then its
distinct personality may be ignored.[19] In these circumstances, the courts will treat the
corporation as a mere aggrupation of persons and the liability will directly attach to them. The
legal fiction of a separate corporate personality in those cited instances, for reasons of public
policy and in the interest of justice, will be justifiably set aside.
In our view, however, given the facts and circumstances of this case, the doctrine of
piercing the corporate veil has no relevant application here. Respondent court erred in
permitting the trial courts resort to this doctrine. The rationale behind piercing a corporations
identity in a given case is to remove the barrier between the corporation from the persons
comprising it to thwart the fraudulent and illegal schemes of those who use the corporate
personality as a shield for undertaking certain proscribed activities. However, in the case at
bar, instead of holding certain individuals or persons responsible for an alleged corporate act,
the situation has been reversed. It is the petitioner as a corporation which is being ordered to
answer for the personal liability of certain individual directors, officers and incorporators
concerned. Hence, it appears to us that the doctrine has been turned upside down because of
its erroneous invocation. Note that according to private respondent Gregorio Manuel his
services were solicited as counsel for members of the Francisco family to represent them in
the intestate proceedings over Benita Trinidads estate. These estate proceedings did not
involve any business of petitioner.
Note also that he sought to collect legal fees not just from certain Francisco family
members but also from petitioner corporation on the claims that its management had
requested his services and he acceded thereto as an employee of petitioner from whom it
could be deduced he was also receiving a salary. His move to recover unpaid legal fees
through a counterclaim against Francisco Motors Corporation, to offset the unpaid balance of
the purchase and repair of a jeep body could only result from an obvious misapprehension
that petitioners corporate assets could be used to answer for the liabilities of its individual
directors, officers, and incorporators. Such result if permitted could easily prejudice the
corporation, its own creditors, and even other stockholders; hence, clearly inequitous to
petitioner.
Furthermore, considering the nature of the legal services involved, whatever obligation
said incorporators, directors and officers of the corporation had incurred, it was incurred in
their personal capacity.When directors and officers of a corporation are unable to compensate
a party for a personal obligation, it is far-fetched to allege that the corporation is perpetuating
fraud or promoting injustice, and be thereby held liable therefor by piercing its corporate
veil. While there are no hard and fast rules on disregarding separate corporate identity, we
must always be mindful of its function and purpose. A court should be careful in assessing the
milieu where the doctrine of piercing the corporate veil may be applied. Otherwise an injustice,
although unintended, may result from its erroneous application.
The personality of the corporation and those of its incorporators, directors and officers in
their personal capacities ought to be kept separate in this case. The claim for legal fees
against the concerned individual incorporators, officers and directors could not be properly
directed against the corporation without violating basic principles governing corporations.
Moreover, every action including a counterclaim must be prosecuted or defended in the name
of the real party in interest.[20] It is plainly an error to lay the claim for legal fees of private
respondent Gregorio Manuel at the door of petitioner (FMC) rather than individual members of
the Francisco family.
However, with regard to the procedural issue raised by petitioners allegation, that it
needed to be summoned anew in order for the court to acquire jurisdiction over it, we agree
with respondent courts view to the contrary. Section 4, Rule 11 of the Rules of Court provides
that a counterclaim or cross-claim must be answered within ten (10) days from
service. Nothing in the Rules of Court says that summons should first be served on the
defendant before an answer to counterclaim must be made. The purpose of a summons is to
enable the court to acquire jurisdiction over the person of the defendant. Although a
counterclaim is treated as an entirely distinct and independent action, the defendant in the
counterclaim, being the plaintiff in the original complaint, has already submitted to the
jurisdiction of the court. Following Rule 9, Section 3 of the 1997 Rules of Civil Procedure,[21] if
a defendant (herein petitioner) fails to answer the counterclaim, then upon motion of plaintiff,
the defendant may be declared in default.This is what happened to petitioner in this case, and
this Court finds no procedural error in the disposition of the appellate court on this particular
issue. Moreover, as noted by the respondent court, when petitioner filed its motion seeking to
set aside the order of default, in effect it submitted itself to the jurisdiction of the court. As
well said by respondent court:
Further on the lack of jurisdiction as raised by plaintiff-appellant[,] [t]he records show that
upon its request, plaintiff-appellant was granted time to file a motion for reconsideration of the
disputed decision.Plaintiff-appellant did file its motion for reconsideration to set aside the order
of default and the judgment rendered on the counterclaim.
Thus, even if the court acquired no jurisdiction over plaintiff-appellant on the counterclaim, as
it vigorously insists, plaintiff-appellant is considered to have submitted to the courts jurisdiction
when it filed the motion for reconsideration seeking relief from the court. (Soriano vs. Palacio,
12 SCRA 447). A party is estopped from assailing the jurisdiction of a court after voluntarily
submitting himself to its jurisdiction. (Tejones vs. Gironella, 159 SCRA 100). Estoppel is a bar
against any claims of lack of jurisdiction. (Balais vs. Balais, 159 SCRA 37).[22]
WHEREFORE, the petition is hereby GRANTED and the assailed decision is hereby
REVERSED insofar only as it held Francisco Motors Corporation liable for the legal obligation
owing to private respondent Gregorio Manuel; but this decision is without prejudice to his filing
the proper suit against the concerned members of the Francisco family in their personal
capacity. No pronouncement as to costs.
SO ORDERED.
ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA
GUINA, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to
set aside the Decision[1] of the Court of Appeals affirming the Decision[2] of the Regional Trial
Court, Branch 108, Pasay City. The trial court upheld the writ of attachment and the
declaration of default on petitioner while ordering her to pay private respondent P109,376.95
plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit.
The Facts
Petitioner Anita Mangila (petitioner for brevity) is an exporter of sea foods and doing
business under the name and style of Seafoods Products. Private respondent Loreta Guina
(private respondent for brevity) is the President and General Manager of Air Swift
International, a single registered proprietorship engaged in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of
private respondent for shipment of petitioners products, such as crabs, prawns and assorted
fishes, to Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private
respondent cash on delivery. Private respondents invoice stipulates a charge of 18 percent
interest per annum on all overdue accounts. In case of suit, the same invoice stipulates
attorneys fees equivalent to 25 percent of the amount due plus costs of suit.[3]
On the first shipment, petitioner requested for seven days within which to pay private
respondent. However, for the next three shipments, March 17, 24 and 31, 1988, petitioner
failed to pay private respondent shipping charges amounting to P109, 376.95.[4]
Despite several demands, petitioner never paid private respondent. Thus, on June 10,
1988, private respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City
for collection of sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not
served on petitioner. A woman found at petitioners house informed the sheriff that petitioner
transferred her residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that
petitioner had left the Philippines for Guam.[5]
Thus, on September 13, 1988, construing petitioners departure from the Philippines as
done with intent to defraud her creditors, private respondent filed a Motion for Preliminary
Attachment. On September 26, 1988, the trial court issued an Order of Preliminary
Attachment[6] against petitioner. The following day, the trial court issued a Writ of Preliminary
Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in
RTC, Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga
served on petitioners household help in San Fernando, Pampanga, the Notice of Levy with the
Order, Affidavit and Bond.[7]
On November 7, 1988, petitioner filed an Urgent Motion to Discharge
Attachment[8] without submitting herself to the jurisdiction of the trial court. She pointed out
that up to then, she had not been served a copy of the Complaint and the summons. Hence,
petitioner claimed the court had not acquired jurisdiction over her person.[9]
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988,
private respondent sought and was granted a re-setting to December 9, 1988. On that date,
private respondents counsel did not appear, so the Urgent Motion to Discharge Attachment
was deemed submitted for resolution.[10]
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon
filing of petitioners counter-bond. The trial court, however, did not rule on the question of
jurisdiction and on the validity of the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial
court issued on January 19, 1989.[11] It was only on January 26, 1989 that summons was
finally served on petitioner.[12]
 On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of
improper venue. Private respondents invoice for the freight forwarding service stipulates that if
court litigation becomes necessary to enforce collection xxx the agreed venue for such action
is Makati, Metro Manila.[13] Private respondent filed an Opposition asserting that although
Makati appears as the stipulated venue, the same was merely an inadvertence by the printing
press whose general manager executed an affidavit[14] admitting such inadvertence. Moreover,
private respondent claimed that petitioner knew that private respondent was holding office in
Pasay City and not in Makati.[15] The lower court, finding credence in private respondents
assertion, denied the Motion to Dismiss and gave petitioner five days to file her Answer.
Petitioner filed a Motion for Reconsideration but this too was denied.
Petitioner filed her Answer[16] on June 16, 1989, maintaining her contention that the
venue was improperly laid.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision
of the trial court. The Court of Appeals upheld the validity of the issuance of the writ of
attachment and sustained the filing of the action in the RTC of Pasay. The Court of Appeals
also affirmed the declaration of default on petitioner and concluded that the trial court did not
commit any reversible error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals
denied the same in a Resolution dated May 20, 1996.
Hence, this petition.

On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at
8:30 a.m. and requiring the parties to submit their pre-trial briefs. Meanwhile, private
respondent filed a Motion to Sell Attached Properties but the trial court denied the motion. The Issues

On motion of petitioner, the trial court issued an Order resetting the pre-trial from July
18, 1989 to August 24, 1989 at 8:30 a.m.. The issues raised by petitioner may be re-stated as follows:

On August 24, 1989, the day of the pre-trial, the trial court issued an I.
Order[17] terminating the pre-trial and allowing the private respondent to present evidence ex-
parte on September 12, 1989 at 8:30 a.m.. The Order stated that when the case was called WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT
for pre-trial at 8:31 a.m., only the counsel for private respondent appeared. Upon the trial WAS IMPROPERLY ISSUED AND SERVED;
courts second call 20 minutes later, petitioners counsel was still nowhere to be found. Thus,
upon motion of private respondent, the pre-trial was considered terminated.
II.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order
terminating the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
second call, as shown by the transcript of stenographic notes, and was late because of heavy
traffic. Petitioner claims that the lower court erred in allowing private respondent to present
III.
evidence ex-parte since there was no Order considering the petitioner as in default. Petitioner
contends that the Order of August 24, 1989 did not state that petitioner was declared as in
default but still the court allowed private respondent to present evidence ex-parte.[18] WHETHER THERE WAS IMPROPER VENUE.

On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled IV.
the presentation of private respondents evidence ex-parte on October 10, 1989.

On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO
evidence ex-parte should be suspended because there was no declaration of petitioner as in PAY P109, 376.95, PLUS ATTORNEYS FEES.[20]
default and petitioners counsel was not absent, but merely late.

On October 18, 1989, the trial court denied the Omnibus Motion.[19]
The Ruling of the Court
On November 20, 1989, the petitioner received a copy of the Decision of November 10,
1989, ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum,
25 percent attorneys fees and costs of suit. Private respondent filed a Motion for Execution Improper Issuance and Service of Writ of Attachment
Pending Appeal but the trial court denied the same.
 Petitioner ascribes several errors to the issuance and implementation of the writ of
attachment. Among petitioners arguments are: first, there was no ground for the issuance of
the writ since the intent to defraud her creditors had not been established; second, the value
of the properties levied exceeded the value of private respondents claim. However, the crux of
petitioners arguments rests on the question of the validity of the writ of attachment. Because
of failure to serve summons on her before or simultaneously with the writs implementation,
petitioner claims that the trial court had not acquired jurisdiction over her person and thus the
service of the writ is void.
As a preliminary note, a distinction should be made between issuance and
implementation of the writ of attachment. It is necessary to distinguish between the two to
determine when jurisdiction over the person of the defendant should be acquired to validly
implement the writ. This distinction is crucial in resolving whether there is merit in petitioners
argument.
This Court has long settled the issue of when jurisdiction over the person of the
defendant should be acquired in cases where a party resorts to provisional remedies. A party
to a suit may, at any time after filing the complaint, avail of the provisional remedies under the
Rules of Court. Specifically, Rule 57 on preliminary attachment speaks of the grant of the
remedy at the commencement of the action or at any time thereafter.[21] This phrase
refers to the date of filing of the complaint which is the moment that marks the
commencement of the action. The reference plainly is to a time before summons is served on
the defendant, or even before summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,[22] this Court clarified the
actual time when jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant - issuance of summons, order of attachment and
writ of attachment - these do not and cannot bind and affect the defendant until
and unless jurisdiction over his person is eventually obtained by the court, either by
service on him of summons or other coercive process or his voluntary submission to the courts
authority. Hence, when the sheriff or other proper officer commences implementation of the
writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicants affidavit and attachment bond, and of the order of attachment, as explicitly required
by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy
of the complaint xxx. (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves
three stages: first, the court issues the order granting the application; second, the writ of
attachment issues pursuant to the order granting the writ; and third, the writ is
implemented. For the initial two stages, it is not necessary that jurisdiction over the
person of the defendant be first obtained. However, once the implementation of
the writ commences, the court must have acquired jurisdiction over the defendant for
without such jurisdiction, the court has no power and authority to act in any manner against
the defendant. Any order issuing from the Court will not bind the defendant.[23]
In the instant case, the Writ of Preliminary Attachment was issued on September 27,
1988 and implemented on October 28, 1988. However, the alias summons was served
only on January 26, 1989 or almost three months after the implementation of the
writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a
motion for its issuance can be filed at the commencement of the action. However, on the day
the writ was implemented, the trial court should have, previously or simultaneously with the
implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was shown in the
records of the case, the summons was actually served on petitioner several months after the
writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of
summons contemplated in Section 5 of Rule 57 provides for exceptions. Among such
exceptions are where the summons could not be served personally or by substituted service
despite diligent efforts or where the defendant is a resident temporarily absent therefrom x x
x. Private respondent asserts that when she commenced this action, she tried to serve
summons on petitioner but the latter could not be located at her customary address in
Kamuning, Quezon City or at her new address in Guagua, Pampanga.[24] Furthermore,
respondent claims that petitioner was not even in Pampanga; rather, she was in Guam
purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after
her personal service failed. Likewise, if it were true that private respondent could not ascertain
the whereabouts of petitioner after a diligent inquiry, still she had some other recourse under
the Rules of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be
effected on a party. Section 14, Rule 14 of the Rules of Court provides that whenever the
defendants whereabouts are unknown and cannot be ascertained by diligent inquiry, service
may, by leave of court, be effected upon him by publication in a newspaper of general
circulation x x x. Thus, if petitioners whereabouts could not be ascertained after the sheriff
had served the summons at her given address, then respondent could have immediately asked
the court for service of summons by publication on petitioner.[25]
Moreover, as private respondent also claims that petitioner was abroad at the time of the
service of summons, this made petitioner a resident who is temporarily out of the country.
This is the exact situation contemplated in Section 16,[26] Rule 14 of the Rules of Civil
Procedure, providing for service of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be
deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot
enforce such a coercive process on petitioner without first obtaining jurisdiction over her
person. The preliminary writ of attachment must be served after or simultaneous with the
service of summons on the defendant whether by personal service, substituted service or by
publication as warranted by the circumstances of the case. [27] The subsequent service of
summons does not confer a retroactive acquisition of jurisdiction over her person because the
law does not allow for retroactivity of a belated service.
 Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in
private respondents invoice which contains the following:
3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to
25% of the principal amount will be charged. The agreed venue for such action is Makati,
Metro Manila, Philippines.[28]
Based on this provision, petitioner contends that the action should have been instituted
in the RTC of Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason
stated by petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue
on which an action should be brought.[29] However, a mere stipulation on the venue of an
action is not enough to preclude parties from bringing a case in other venues. [30] The parties
must be able to show that such stipulation is exclusive. Thus, absent words that show the
parties intention to restrict the filing of a suit in a particular place, courts will allow the filing of
a case in any venue, as long as jurisdictional requirements are followed. Venue stipulations in
a contract, while considered valid and enforceable, do not as a rule supersede the general rule
set forth in Rule 4 of the Revised Rules of Court.[31] In the absence of qualifying or restrictive
words, they should be considered merely as an agreement on additional forum, not as limiting
venue to the specified place.[32]
In the instant case, the stipulation does not limit the venue exclusively to Makati. There
are no qualifying or restrictive words in the invoice that would evince the intention of the
parties that Makati is the only or exclusive venue where the action could be instituted. We
therefore agree with private respondent that Makati is not the only venue where this case
could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is
where the defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiffs resides, at the election of the plaintiff. [33] The exception to this rule is
when the parties agree on an exclusive venue other than the places mentioned in the rules.
But, as we have discussed, this exception is not applicable in this case. Hence, following the
general rule, the instant case may be brought in the place of residence of the plaintiff or
defendant, at the election of the plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was
not alleged in the complaint. Rather, what was alleged was the postal address of her sole
proprietorship, Air Swift International. It was only when private respondent testified in court,
after petitioner was declared in default, that she mentioned her residence to be in Better
Living Subdivision, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,[34] the reverse happened. The plaintiff
in that case was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti.
The complaint, however, did not allege the office or place of business of the corporation,
which was in Binondo, Manila. What was alleged was the residence of Dominador Ti, who lived
in San Juan, Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The Court
there held that the evident purpose of alleging the address of the corporations president and
manager was to justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court
ruled that there was no question that venue was improperly laid in that case and held that the
place of business of Tyson Enterpises, Inc. is considered as its residence for purposes of
venue. Furthermore, the Court held that the residence of its president is not the residence of
the corporation because a corporation has a personality separate and distinct from that of its
officers and stockholders.
In the instant case, it was established in the lower court that petitioner resides in San
Fernando, Pampanga[35] while private respondent resides in Paraaque City.[36] However, this
case was brought in Pasay City, where the business of private respondent is found. This would
have been permissible had private respondents business been a corporation, just like the case
in Sy v. Tyson Enterprises, Inc. However, as admitted by private respondent in her
Complaint[37] in the lower court, her business is a sole proprietorship, and as such, does not
have a separate juridical personality that could enable it to file a suit in court. [38] In fact, there
is no law authorizing sole proprietorships to file a suit in court.[39]
A sole proprietorship does not possess a juridical personality separate and distinct from
the personality of the owner of the enterprise.[40] The law merely recognizes the existence of a
sole proprietorship as a form of business organization conducted for profit by a single
individual and requires its proprietor or owner to secure licenses and permits, register its
business name, and pay taxes to the national government.[41] The law does not vest a
separate legal personality on the sole proprietorship or empower it to file or defend an action
in court.[42]
Thus, not being vested with legal personality to file this case, the sole proprietorship is
not the plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the
complaint in the lower court acknowledges in its caption that the plaintiff and defendant are
Loreta Guina and Anita Mangila, respectively. The title of the petition before us does not state,
and rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila v. Loreta
Guina. Logically then, it is the residence of private respondent Guina, the proprietor with the
juridical personality, which should be considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San
Fernando, Pampanga (petitioners residence) or Paraaque (private respondents residence).
Since private respondent (complainant below) filed this case in Pasay, we hold that the case
should be dismissed on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court,
petitioner expressly stated that she was filing the motion without submitting to the jurisdiction
of the court. At that time, petitioner had not been served the summons and a copy of the
complaint.[43] Thereafter, petitioner timely filed a Motion to Dismiss[44] on the ground of
improper venue. Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss
may be filed [W]ithin the time for but before filing the answer to the complaint or pleading
asserting a claim. Petitioner even raised the issue of improper venue in his Answer[45] as a
special and affirmative defense. Petitioner also continued to raise the issue of improper venue The trial court granted the request of its sheriff for assistance from their counterparts in RTC,
in her Petition for Review[46] before this Court. We thus hold that the dismissal of this case on Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on
the ground of improper venue is warranted.
petitioner’s household help in San Fernando, Pampanga, the Notice of Levy with the Order,
The rules on venue, like other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and Affidavit and Bond.
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose where to file the complaint or petition.[47]

We find no reason to rule on the other issues raised by petitioner. Petitioner filed a motion to discharge attachment claiming that the court had not acquired

WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity jurisdiction over her person.
of the service of the writ of attachment. The decision of the Court of Appeals and the order of
respondent judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No.
5875 is hereby dismissed without prejudice to refiling it in the proper venue. The attached The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of
properties of petitioner are ordered returned to her immediately.
petitioner’s counter-bond. The trial court, however, did not rule on the question of jurisdiction
SO ORDERED.
and on the validity of the writ of preliminary attachment.

Mangila vs CA
Thereafter private respondent applied for an alias summons which was granted by the court.

G.R. No. 125027 August 12, 2002

ANITA MANGILA, petitioner, ISSUE: W/N the writ was validly implemented

vs. HELD: The grant of the provisional remedy of attachment involves three stages: first, the

COURT OF APPEALS and LORETA GUINA, respondents. court issues the order granting the application; second, the writ of attachment issues pursuant

FACTS: Private respondent filed a complaint for collection of sum of money against herein to the order granting the writ; and third, the writ is implemented. For the initial two stages, it

petitioner. On August 1, 1988, the sheriff filed his Sheriff’s Return showing that summons was is not necessary that jurisdiction over the person of the defendant be first obtained. However,

not served on petitioner. A woman found at petitioner’s house informed the sheriff that once the implementation of the writ commences, the court must have acquired jurisdiction

petitioner transferred her residence to Sto. Niño, Guagua, Pampanga. The sheriff found out over the defendant for without such jurisdiction, the court has no power and authority to act in

further that petitioner had left the Philippines for Guam. any manner against the defendant. Any order issuing from the Court will not bind

Thus, on September 13, 1988, construing petitioner’s departure from the Philippines as done the defendant.23

with intent to defraud her creditors, private respondent filed a Motion for Preliminary In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and

Attachment. On September 26, 1988, the trial court issued an Order of Preliminary implemented on October 28, 1988. However, the alias summons was served only on January

Attachment6 against petitioner. The following day, the trial court issued a Writ of Preliminary 26, 1989 or almost three months after the implementation of the writ of attachment.

Attachment.

The trial court had the authority to issue the Writ of Attachment on September 27 since a
motion for its issuance can be filed “at the commencement of the action.” However, on the
day the writ was implemented, the trial court should have, previously or simultaneously with
the implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was shown in
the records of the case, the summons was actually served on petitioner several months after
the writ had been implemented.
Private respondent never showed that she effected substituted service on petitioner after her
personal service failed. Likewise, if it were true that private respondent could not ascertain the
whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the
Rules of Civil Procedure.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be
deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot
enforce such a coercive process on petitioner without first obtaining jurisdiction over her
person.
The preliminary writ of attachment must be served after or simultaneous with the service of
summons on the defendant whether by personal service, substituted service or by publication
as warranted by the circumstances of the case. The subsequent service of summons does not
confer a retroactive acquisition of jurisdiction over her person because the law does not allow
for retroactivity of a belated service.
G.R. No. L-11390 March 26, 1918
EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,
vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca
Tanquinyeng, defendant-appellant.
Aitken and DeSelms for appellant.
Hartigan and Welch for appellee.
STREET, J.:
This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was executed by the original defendant herein, Engracio
Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon
March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8
per centum per annum, payable at the end of each quarter. It appears that the parties to this
mortgage at that time estimated the value of the property in question at P292,558, which was
about P75,000 in excess of the indebtedness. After the execution of this instrument by the
mortgagor, he returned to China which appears to have been his native country; and he there
died, upon January 29, 1810, without again returning to the Philippine Islands.
As the defendant was a nonresident at the time of the institution of the present action, it was
necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by
publication pursuant to section 399 of the Code of Civil Procedure. An order for publication
was accordingly obtained from the court, and publication was made in due form in a
newspaper of the city of Manila. At the same time that the order of the court should deposit in
the post office in a stamped envelope a copy of the summons and complaint directed to the
defendant at his last place of residence, to wit, the city of Amoy, in the Empire of China. This
order was made pursuant to the following provision contained in section 399 of the Code of
Civil Procedure:
In case of publication, where the residence of a nonresident or absent defendant is
known, the judge must direct a copy of the summons and complaint to be forthwith
deposited by the clerk in the post-office, postage prepaid, directed to the person to
be served, at his place of residence
Whether the clerk complied with this order does not affirmatively appear. There is, however,
among the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo
Chan y Garcia, an employee of the attorneys of the bank, showing that upon that date he had
deposited in the Manila post-office a registered letter, addressed to Engracio Palanca
Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the
summons, and the order of the court directing publication as aforesaid. It appears from the
postmaster's receipt that Bernardo probably used an envelope obtained from the clerk's office,
as the receipt purports to show that the letter emanated from the office.
The cause proceeded in usual course in the Court of First Instance; and the defendant not
having appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3,
1908, a decision was rendered in favor of the plaintiff. In this decision it was recited that
publication had been properly made in a periodical, but nothing was said about this notice
having been given mail. The court, upon this occasion, found that the indebtedness of the
defendant amounted to P249,355. 32, with interest from March 31, 1908. Accordingly it was
ordered that the defendant should, on or before July 6, 1908, deliver said amount to the clerk
of the court to be applied to the satisfaction of the judgment, and it was declared that in case
of the failure of the defendant to satisfy the judgment within such period, the mortgage
property located in the city of Manila should be exposed to public sale. The payment
contemplated in said order was never made; and upon July 8, 1908, the court ordered the sale
of the property. The sale took place upon July 30, 1908, and the property was bought in by
the bank for the sum of P110,200. Upon August 7, 1908, this sale was confirmed by the court.
About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a
motion was made in this cause by Vicente Palanca, as administrator of the estate of the
original defendant, Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant
requested the court to set aside the order of default of July 2, 1908, and the judgment
rendered upon July 3, 1908, and to vacate all the proceedings subsequent thereto. The basis
of this application, as set forth in the motion itself, was that the order of default and the
judgment rendered thereon were void because the court had never acquired jurisdiction over
the defendant or over the subject of the action.
At the hearing in the court below the application to vacate the judgment was denied, and from
this action of the court Vicente Planca, as administrator of the estate of the original defendant,
has appealed. No other feature of the case is here under consideration than such as related to
the action of the court upon said motion.
The case presents several questions of importance, which will be discussed in what appears to
be the sequence of most convenient development. In the first part of this opinion we shall, for
the purpose of argument, assume that the clerk of the Court of First Instance did not obey the
order of the court in the matter of mailing the papers which he was directed to send to the
defendant in Amoy; and in this connection we shall consider, first, whether the court acquired
the necessary jurisdiction to enable it to proceed with the foreclosure of the mortgage and,
secondly, whether those proceedings were conducted in such manner as to constitute due
process of law.
The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several
different, though related, senses since it may have reference (1) to the authority of the court
to entertain a particular kind of action or to administer a particular kind of relief, or it may
refer to the power of the court over the parties, or (2) over the property which is the subject
to the litigation.
The sovereign authority which organizes a court determines the nature and extent of its
powers in general and thus fixes its competency or jurisdiction with reference to the actions
which it may entertain and the relief it may grant.
Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted
over the person.
Jurisdiction over the property which is the subject of the litigation may result either from a
seizure of the property under legal process, whereby it is brought into the actual custody of
the law, or it may result from the institution of legal proceedings wherein, under special
provisions of law, the power of the court over the property is recognized and made effective.
In the latter case the property, though at all times within the potential power of the court, may
never be taken into actual custody at all. An illustration of the jurisdiction acquired by actual
seizure is found in attachment proceedings, where the property is seized at the beginning of
the action, or some subsequent stage of its progress, and held to abide the final event of the
litigation. An illustration of what we term potential jurisdiction over the res, is found in the
proceeding to register the title of land under our system for the registration of land. Here the
court, without taking actual physical control over the property assumes, at the instance of
some person claiming to be owner, to exercise a jurisdiction in rem over the property and to
adjudicate the title in favor of the petitioner against all the world.
In the terminology of American law the action to foreclose a mortgage is said to be a
proceeding quasi in rem, by which is expressed the idea that while it is not strictly speaking an
action in rem yet it partakes of that nature and is substantially such. The expression "action in
rem" is, in its narrow application, used only with reference to certain proceedings in courts of
admiralty wherein the property alone is treated as responsible for the claim or obligation upon
which the proceedings are based. The action quasi rem differs from the true action in rem in
the circumstance that in the former an individual is named as defendant, and the purpose of
the proceeding is to subject his interest therein to the obligation or lien burdening the
property. All proceedings having for their sole object the sale or other disposition of the
property of the defendant, whether by attachment, foreclosure, or other form of remedy, are
in a general way thus designated. The judgment entered in these proceedings is conclusive
only between the parties.
In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has
said:
Though nominally against person, such suits are to vindicate liens; they proceed upon
seizure; they treat property as primarily indebted; and, with the qualification above-
mentioned, they are substantially property actions. In the civil law, they are styled
hypothecary actions, and their sole object is the enforcement of the lien against
the res; in the common law, they would be different in chancery did not treat the
conditional conveyance as a mere hypothecation, and the creditor's right ass an
equitable lien; so, in both, the suit is real action so far as it is against property, and
 seeks the judicial recognition of a property debt, and an order for the sale of
the res. (Waples, Proceedings In Rem. sec. 607.)
It is true that in proceedings of this character, if the defendant for whom publication is made
appears, the action becomes as to him a personal action and is conducted as such. This,
however, does not affect the proposition that where the defendant fails to appear the action
is quasi in rem; and it should therefore be considered with reference to the principles
governing actions in rem.
There is an instructive analogy between the foreclosure proceeding and an action of
attachment, concerning which the Supreme Court of the United States has used the following
language:
If the defendant appears, the cause becomes mainly a suit in personam, with the
added incident, that the property attached remains liable, under the control of the
court, to answer to any demand which may be established against the defendant by
the final judgment of the court. But, if there is no appearance of the defendant, and
no service of process on him, the case becomes, in its essential nature, a
proceeding in rem, the only effect of which is to subject the property attached to the
payment of the defendant which the court may find to be due to the plaintiff. (Cooper
vs. Reynolds, 10 Wall., 308.)
In an ordinary attachment proceeding, if the defendant is not personally served, the
preliminary seizure is to, be considered necessary in order to confer jurisdiction upon the
court. In this case the lien on the property is acquired by the seizure; and the purpose of the
proceedings is to subject the property to that lien. If a lien already exists, whether created by
mortgage, contract, or statute, the preliminary seizure is not necessary; and the court
proceeds to enforce such lien in the manner provided by law precisely as though the property
had been seized upon attachment. (Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It
results that the mere circumstance that in an attachment the property may be seized at the
inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until
the time comes for the sale, does not materially affect the fundamental principle involved in
both cases, which is that the court is here exercising a jurisdiction over the property in a
proceeding directed essentially in rem.
Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its authority to entertain the action primarily
from the statutes organizing the court. The jurisdiction of the court, in this most general
sense, over the cause of action is obvious and requires no comment. Jurisdiction over the
person of the defendant, if acquired at all in such an action, is obtained by the voluntary
submission of the defendant or by the personal service of process upon him within the
territory where the process is valid. If, however, the defendant is a nonresident and, remaining
beyond the range of the personal process of the court, refuses to come in voluntarily, the
court never acquires jurisdiction over the person at all. Here the property itself is in fact the
sole thing which is impleaded and is the responsible object which is the subject of the exercise
of judicial power. It follows that the jurisdiction of the court in such case is based exclusively
on the power which, under the law, it possesses over the property; and any discussion relative
to the jurisdiction of the court over the person of the defendant is entirely apart from the case.
The jurisdiction of the court over the property, considered as the exclusive object of such
action, is evidently based upon the following conditions and considerations, namely: (1) that
the property is located within the district; (2) that the purpose of the litigation is to subject the
property by sale to an obligation fixed upon it by the mortgage; and (3) that the court at a
proper stage of the proceedings takes the property into custody, if necessary, and expose it to
sale for the purpose of satisfying the mortgage debt. An obvious corollary is that no other
relief can be granted in this proceeding than such as can be enforced against the property.
We may then, from what has been stated, formulated the following proposition relative to the
foreclosure proceeding against the property of a nonresident mortgagor who fails to come in
and submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the
court is derived from the power which it possesses over the property; (II) that jurisdiction over
the person is not acquired and is nonessential; (III) that the relief granted by the court must
be limited to such as can be enforced against the property itself.
It is important that the bearing of these propositions be clearly apprehended, for there are
many expressions in the American reports from which it might be inferred that the court
acquires personal jurisdiction over the person of the defendant by publication and notice; but
such is not the case. In truth the proposition that jurisdiction over the person of a nonresident
cannot be acquired by publication and notice was never clearly understood even in the
American courts until after the decision had been rendered by the Supreme Court of the
United States in the leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the
light of that decision, and of other decisions which have subsequently been rendered in that
and other courts, the proposition that jurisdiction over the person cannot be thus acquired by
publication and notice is no longer open to question; and it is now fully established that a
personal judgment upon constructive or substituted service against a nonresident who does
not appear is wholly invalid. This doctrine applies to all kinds of constructive or substituted
process, including service by publication and personal service outside of the jurisdiction in
which the judgment is rendered; and the only exception seems to be found in the case where
the nonresident defendant has expressly or impliedly consented to the mode of service. (Note
to Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312
The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process
from the tribunals of one State cannot run into other States or countries and that due process
of law requires that the defendant shall be brought under the power of the court by service of
process within the State, or by his voluntary appearance, in order to authorize the court to
pass upon the question of his personal liability. The doctrine established by the Supreme Court
of the United States on this point, being based upon the constitutional conception of due
process of law, is binding upon the courts of the Philippine Islands. Involved in this decision is
the principle that in proceedings in rem or quasi in rem against a nonresident who is not
served personally within the state, and who does not appear, the relief must be confined to
the res, and the court cannot lawfully render a personal judgment against him. (Dewey vs.
Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S.,
294; 28 L. ed., 729.) Therefore in an action to foreclose a mortgage against a nonresident,
upon whom service has been effected exclusively by publication, no personal judgment for the
deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)
It is suggested in the brief of the appellant that the judgment entered in the court below
offends against the principle just stated and that this judgment is void because the court in
fact entered a personal judgment against the absent debtor for the full amount of the
indebtedness secured by the mortgage. We do not so interpret the judgment.
In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all
cases of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of
Civil Procedure, and to make an order requiring the defendant to pay the money into court.
This step is a necessary precursor of the order of sale. In the present case the judgment which
was entered contains the following words:
Because it is declared that the said defendant Engracio Palanca Tanquinyeng y
Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the
'Banco Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above
amount etc., etc.
This is not the language of a personal judgment. Instead it is clearly intended merely as a
compliance with the requirement that the amount due shall be ascertained and that the
evidence of this it may be observed that according to the Code of Civil Procedure a personal
judgment against the debtor for the deficiency is not to be rendered until after the property
has been sold and the proceeds applied to the mortgage debt. (sec. 260).
The conclusion upon this phase of the case is that whatever may be the effect in other
respects of the failure of the clerk of the Court of First Instance to mail the proper papers to
the defendant in Amoy, China, such irregularity could in no wise impair or defeat the
jurisdiction of the court, for in our opinion that jurisdiction rest upon a basis much more secure
than would be supplied by any form of notice that could be given to a resident of a foreign
country.
Before leaving this branch of the case, we wish to observe that we are fully aware that many
reported cases can be cited in which it is assumed that the question of the sufficiency of
publication or notice in a case of this kind is a question affecting the jurisdiction of the court,
and the court is sometimes said to acquire jurisdiction by virtue of the publication. This
phraseology was undoubtedly originally adopted by the court because of the analogy between
service by the publication and personal service of process upon the defendant; and, as has
already been suggested, prior to the decision of Pennoyer vs. Neff (supra) the difference
between the legal effects of the two forms of service was obscure. It is accordingly not
surprising that the modes of expression which had already been molded into legal tradition
before that case was decided have been brought down to the present day. But it is clear that
the legal principle here involved is not effected by the peculiar language in which the courts
have expounded their ideas.
We now proceed to a discussion of the question whether the supposed irregularity in the
proceedings was of such gravity as to amount to a denial of that "due process of law" which
was secured by the Act of Congress in force in these Islands at the time this mortgage was
foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of
the constitutional provisions relating to due process of law the Supreme Court of the United
States has refrained from attempting to define with precision the meaning of that expression,
the reason being that the idea expressed therein is applicable under so many diverse
conditions as to make any attempt ay precise definition hazardous and unprofitable. As applied
to a judicial proceeding, however, it may be laid down with certainty that the requirement of
due process is satisfied if the following conditions are present, namely; (1) There must be a
court or tribunal clothed with judicial power to hear and determine the matter before it; (2)
jurisdiction must be lawfully acquired over the person of the defendant or over the property
which is the subject of the proceeding; (3) the defendant must be given an opportunity to be
heard; and (4) judgment must be rendered upon lawful hearing.
Passing at once to the requisite that the defendant shall have an opportunity to be heard, we
observe that in a foreclosure case some notification of the proceedings to the nonresident
owner, prescribing the time within which appearance must be made, is everywhere recognized
as essential. To answer this necessity the statutes generally provide for publication, and
usually in addition thereto, for the mailing of notice to the defendant, if his residence is
known. Though commonly called constructive, or substituted service of process in any true
sense. It is merely a means provided by law whereby the owner may be admonished that his
property is the subject of judicial proceedings and that it is incumbent upon him to take such
steps as he sees fit to protect it. In speaking of notice of this character a distinguish master of
constitutional law has used the following language:
. . . if the owners are named in the proceedings, and personal notice is provided for,
it is rather from tenderness to their interests, and in order to make sure that the
opportunity for a hearing shall not be lost to them, than from any necessity that the
case shall assume that form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs.
Green, 193 U. S., 79, 80.)
It will be observed that this mode of notification does not involve any absolute assurance that
the absent owner shall thereby receive actual notice. The periodical containing the publication
may never in fact come to his hands, and the chances that he should discover the notice may
often be very slight. Even where notice is sent by mail the probability of his receiving it,
though much increased, is dependent upon the correctness of the address to which it is
forwarded as well as upon the regularity and security of the mail service. It will be noted,
furthermore, that the provision of our law relative to the mailing of notice does not absolutely
require the mailing of notice unconditionally and in every event, but only in the case where the
defendant's residence is known. In the light of all these facts, it is evident that actual notice to
the defendant in cases of this kind is not, under the law, to be considered absolutely
necessary.
The idea upon which the law proceeds in recognizing the efficacy of a means of notification
which may fall short of actual notice is apparently this: Property is always assumed to be in
the possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its
condemnation and sale.
It is the duty of the owner of real estate, who is a nonresident, to take measures that
in some way he shall be represented when his property is called into requisition, and
if he fails to do this, and fails to get notice by the ordinary publications which have
usually been required in such cases, it is his misfortune, and he must abide the
consequences. (6 R. C. L., sec. 445 [p. 450]).
It has been well said by an American court:
If property of a nonresident cannot be reached by legal process upon the constructive
notice, then our statutes were passed in vain, and are mere empty legislative
declarations, without either force, or meaning; for if the person is not within the
jurisdiction of the court, no personal judgment can be rendered, and if the judgment
cannot operate upon the property, then no effective judgment at all can be rendered,
so that the result would be that the courts would be powerless to assist a citizen
against a nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett,
102 Ind., 233; 52 Am. Rep., 662, 667.)
It is, of course universally recognized that the statutory provisions relative to publication or
other form of notice against a nonresident owner should be complied with; and in respect to
the publication of notice in the newspaper it may be stated that strict compliance with the
requirements of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green
Cove etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication
was made for 19 weeks, when the statute required 20, the publication was insufficient.
With respect to the provisions of our own statute, relative to the sending of notice by mail, the
requirement is that the judge shall direct that the notice be deposited in the mail by the clerk
of the court, and it is not in terms declared that the notice must be deposited in the mail. We
consider this to be of some significance; and it seems to us that, having due regard to the
principles upon which the giving of such notice is required, the absent owner of the mortgaged
property must, so far as the due process of law is concerned, take the risk incident to the
possible failure of the clerk to perform his duty, somewhat as he takes the risk that the mail
clerk or the mail carrier might possibly lose or destroy the parcel or envelope containing the
notice before it should reach its destination and be delivered to him. This idea seems to be
strengthened by the consideration that placing upon the clerk the duty of sending notice by
mail, the performance of that act is put effectually beyond the control of the plaintiff in the
litigation. At any rate it is obvious that so much of section 399 of the Code of Civil Procedure
as relates to the sending of notice by mail was complied with when the court made the order.
The question as to what may be the consequences of the failure of the record to show the
proof of compliance with that requirement will be discussed by us further on.
The observations which have just been made lead to the conclusion that the failure of the
clerk to mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as
amounts to a denial of due process of law; and hence in our opinion that irregularity, if
proved, would not avoid the judgment in this case. Notice was given by publication in a
newspaper and this is the only form of notice which the law unconditionally requires. This in
our opinion is all that was absolutely necessary to sustain the proceedings.
It will be observed that in considering the effect of this irregularity, it makes a difference
whether it be viewed as a question involving jurisdiction or as a question involving due process
of law. In the matter of jurisdiction there can be no distinction between the much and the
little. The court either has jurisdiction or it has not; and if the requirement as to the mailing of
notice should be considered as a step antecedent to the acquiring of jurisdiction, there could
be no escape from the conclusion that the failure to take that step was fatal to the validity of
the judgment. In the application of the idea of due process of law, on the other hand, it is
clearly unnecessary to be so rigorous. The jurisdiction being once established, all that due
process of law thereafter requires is an opportunity for the defendant to be heard; and as
publication was duly made in the newspaper, it would seem highly unreasonable to hold that
failure to mail the notice was fatal. We think that in applying the requirement of due process
of law, it is permissible to reflect upon the purposes of the provision which is supposed to have
been violated and the principle underlying the exercise of judicial power in these proceedings.
Judge in the light of these conceptions, we think that the provision of Act of Congress
declaring that no person shall be deprived of his property without due process of law has not
been infringed.
In the progress of this discussion we have stated the two conclusions; (1) that the failure of
the clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the
court and (2) that such irregularity did not infringe the requirement of due process of law. As a
consequence of these conclusions the irregularity in question is in some measure shorn of its
potency. It is still necessary, however, to consider its effect considered as a simple irregularity
of procedure; and it would be idle to pretend that even in this aspect the irregularity is not
grave enough. From this point of view, however, it is obvious that any motion to vacate the
judgment on the ground of the irregularity in question must fail unless it shows that the
defendant was prejudiced by that irregularity. The least, therefore, that can be required of the
proponent of such a motion is to show that he had a good defense against the action to
foreclose the mortgage. Nothing of the kind is, however, shown either in the motion or in the
affidavit which accompanies the motion.
An application to open or vacate a judgment because of an irregularity or defect in the
proceedings is usually required to be supported by an affidavit showing the grounds on which
the relief is sought, and in addition to this showing also a meritorious defense to the action. It
is held that a general statement that a party has a good defense to the action is insufficient.
The necessary facts must be averred. Of course if a judgment is void upon its face a showing
of the existence of a meritorious defense is not necessary. (10 R. C. L., 718.)
The lapse of time is also a circumstance deeply affecting this aspect of the case. In this
connection we quote the following passage from the encyclopedic treatise now in course of
publication:
 Where, however, the judgment is not void on its face, and may therefore be enforced
if permitted to stand on the record, courts in many instances refuse to exercise their
quasi equitable powers to vacate a judgement after the lapse of the term ay which it
was entered, except in clear cases, to promote the ends of justice, and where it
appears that the party making the application is himself without fault and has acted
in good faith and with ordinary diligence. Laches on the part of the applicant, if
unexplained, is deemed sufficient ground for refusing the relief to which he might
otherwise be entitled. Something is due to the finality of judgments, and
acquiescence or unnecessary delay is fatal to motions of this character, since courts
are always reluctant to interfere with judgments, and especially where they have
been executed or satisfied. The moving party has the burden of showing diligence,
and unless it is shown affirmatively the court will not ordinarily exercise its discretion
in his favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco,
died January 29, 1910. The mortgage under which the property was sold was executed far
back in 1906; and the proceedings in the foreclosure were closed by the order of court
confirming the sale dated August 7, 1908. It passes the rational bounds of human credulity to
suppose that a man who had placed a mortgage upon property worth nearly P300,000 and
had then gone away from the scene of his life activities to end his days in the city of Amoy,
China, should have long remained in ignorance of the fact that the mortgage had been
foreclosed and the property sold, even supposing that he had no knowledge of those
proceedings while they were being conducted. It is more in keeping with the ordinary course
of things that he should have acquired information as to what was transpiring in his affairs at
Manila; and upon the basis of this rational assumption we are authorized, in the absence of
proof to the contrary, to presume that he did have, or soon acquired, information as to the
sale of his property.
The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things
have happened according to the ordinary habits of life (sec. 334 [26]); and we cannot
conceive of a situation more appropriate than this for applying the presumption thus defined
by the lawgiver. In support of this presumption, as applied to the present case, it is
permissible to consider the probability that the defendant may have received actual notice of
these proceedings from the unofficial notice addressed to him in Manila which was mailed by
an employee of the bank's attorneys. Adopting almost the exact words used by the Supreme
Court of the United States in Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may
say that in view of the well-known skill of postal officials and employees in making proper
delivery of letters defectively addressed, we think the presumption is clear and strong that this
notice reached the defendant, there being no proof that it was ever returned by the postal
officials as undelivered. And if it was delivered in Manila, instead of being forwarded to Amoy,
China, there is a probability that the recipient was a person sufficiently interested in his affairs
to send it or communicate its contents to him.
Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon
the mailing of the notice by the clerk, the reflections in which we are now indulging would be
idle and frivolous; but the considerations mentioned are introduced in order to show the
propriety of applying to this situation the legal presumption to which allusion has been made.
Upon that presumption, supported by the circumstances of this case, ,we do not hesitate to
found the conclusion that the defendant voluntarily abandoned all thought of saving his
property from the obligation which he had placed upon it; that knowledge of the proceedings
should be imputed to him; and that he acquiesced in the consequences of those proceedings
after they had been accomplished. Under these circumstances it is clear that the merit of this
motion is, as we have already stated, adversely affected in a high degree by the delay in
asking for relief. Nor is it an adequate reply to say that the proponent of this motion is an
administrator who only qualified a few months before this motion was made. No disability on
the part of the defendant himself existed from the time when the foreclosure was effected
until his death; and we believe that the delay in the appointment of the administrator and
institution of this action is a circumstance which is imputable to the parties in interest whoever
they may have been. Of course if the minor heirs had instituted an action in their own right to
recover the property, it would have been different.
It is, however, argued that the defendant has suffered prejudice by reason of the fact that the
bank became the purchaser of the property at the foreclosure sale for a price greatly below
that which had been agreed upon in the mortgage as the upset price of the property. In this
connection, it appears that in article nine of the mortgage which was the subject of this
foreclosure, as amended by the notarial document of July 19, 1906, the parties to this
mortgage made a stipulation to the effect that the value therein placed upon the mortgaged
properties should serve as a basis of sale in case the debt should remain unpaid and the bank
should proceed to a foreclosure. The upset price stated in that stipulation for all the parcels
involved in this foreclosure was P286,000. It is said in behalf of the appellant that when the
bank bought in the property for the sum of P110,200 it violated that stipulation.
It has been held by this court that a clause in a mortgage providing for a tipo, or upset price,
does not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure
proceedings. (Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Español
Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the
property was purchased at the foreclosure sale, not by the creditor or mortgagee, but by a
third party. Whether the same rule should be applied in a case where the mortgagee himself
becomes the purchaser has apparently not been decided by this court in any reported
decision, and this question need not here be considered, since it is evident that if any liability
was incurred by the bank by purchasing for a price below that fixed in the stipulation, its
liability was a personal liability derived from the contract of mortgage; and as we have already
demonstrated such a liability could not be the subject of adjudication in an action where the
court had no jurisdiction over the person of the defendant. If the plaintiff bank became liable
to account for the difference between the upset price and the price at which in bought in the
property, that liability remains unaffected by the disposition which the court made of this case;
and the fact that the bank may have violated such an obligation can in no wise affect the
validity of the judgment entered in the Court of First Instance.
In connection with the entire failure of the motion to show either a meritorious defense to the
action or that the defendant had suffered any prejudice of which the law can take notice, we
may be permitted to add that in our opinion a motion of this kind, which proposes to unsettle
judicial proceedings long ago closed, can not be considered with favor, unless based upon
grounds which appeal to the conscience of the court. Public policy requires that judicial
proceedings be upheld. The maximum here applicable is non quieta movere. As was once said
by Judge Brewer, afterwards a member of the Supreme Court of the United States:
Public policy requires that judicial proceedings be upheld, and that titles obtained in
those proceedings be safe from the ruthless hand of collateral attack. If technical
defects are adjudged potent to destroy such titles, a judicial sale will never realize
that value of the property, for no prudent man will risk his money in bidding for and
buying that title which he has reason to fear may years thereafter be swept away
through some occult and not readily discoverable defect. (Martin vs. Pond, 30 Fed.,
15.)
In the case where that language was used an attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon which the order of publication was based
erroneously stated that the State of Kansas, when he was in fact residing in another State. It
was held that this mistake did not affect the validity of the proceedings.
In the preceding discussion we have assumed that the clerk failed to send the notice by post
as required by the order of the court. We now proceed to consider whether this is a proper
assumption; and the proposition which we propose to establish is that there is a legal
presumption that the clerk performed his duty as the ministerial officer of the court, which
presumption is not overcome by any other facts appearing in the cause.
In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a
presumption "that official duty has been regularly performed;" and in subsection 18 it is
declared that there is a presumption "that the ordinary course of business has been followed."
These presumptions are of course in no sense novelties, as they express ideas which have
always been recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in
contrarium. There is therefore clearly a legal presumption that the clerk performed his duty
about mailing this notice; and we think that strong considerations of policy require that this
presumption should be allowed to operate with full force under the circumstances of this case.
A party to an action has no control over the clerk of the court; and has no right to meddle
unduly with the business of the clerk in the performance of his duties. Having no control over
this officer, the litigant must depend upon the court to see that the duties imposed on the
clerk are performed.
Other considerations no less potent contribute to strengthen the conclusion just stated. There
is no principle of law better settled than that after jurisdiction has once been required, every
act of a court of general jurisdiction shall be presumed to have been rightly done. This rule is
applied to every judgment or decree rendered in the various stages of the proceedings from
their initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S.,
449); and if the record is silent with respect to any fact which must have been established
before the court could have rightly acted, it will be presumed that such fact was properly
brought to its knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.)
In making the order of sale [of the real state of a decedent] the court are presumed
to have adjudged every question necessary to justify such order or decree, viz: The
death of the owners; that the petitioners were his administrators; that the personal
estate was insufficient to pay the debts of the deceased; that the private acts of
Assembly, as to the manner of sale, were within the constitutional power of the
Legislature, and that all the provisions of the law as to notices which are directory to
the administrators have been complied with. . . . The court is not bound to enter
upon the record the evidence on which any fact was decided. (Florentine vs. Barton,
2 Wall., 210; 17 L. ed., 785.) Especially does all this apply after long lapse of time.
Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive
discussion in a case analogous to that which is now before us. It there appeared that in order
to foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary
that publication should be made in a newspaper for a specified period of time, also be posted
at the front door of the court house and be published on some Sunday, immediately after
divine service, in such church as the court should direct. In a certain action judgment had
been entered against a nonresident, after publication in pursuance of these provisions. Many
years later the validity of the proceedings was called in question in another action. It was
proved from the files of an ancient periodical that publication had been made in its columns as
required by law; but no proof was offered to show the publication of the order at the church,
or the posting of it at the front door of the court-house. It was insisted by one of the parties
that the judgment of the court was void for lack of jurisdiction. But the Supreme Court of the
United States said:
The court which made the decree . . . was a court of general jurisdiction. Therefore
every presumption not inconsistent with the record is to be indulged in favor of its
jurisdiction. . . . It is to be presumed that the court before making its decree took
care of to see that its order for constructive service, on which its right to make the
decree depended, had been obeyed.
It is true that in this case the former judgment was the subject of collateral , or indirect attack,
while in the case at bar the motion to vacate the judgment is direct proceeding for relief
against it. The same general presumption, however, is indulged in favor of the judgment of a
court of general jurisdiction, whether it is the subject of direct or indirect attack the only
difference being that in case of indirect attack the judgment is conclusively presumed to be
valid unless the record affirmatively shows it to be void, while in case of direct attack the
presumption in favor of its validity may in certain cases be overcome by proof extrinsic to the
record.
The presumption that the clerk performed his duty and that the court made its decree with the
knowledge that the requirements of law had been complied with appear to be amply sufficient
to support the conclusion that the notice was sent by the clerk as required by the order. It is
true that there ought to be found among the papers on file in this cause an affidavit, as
required by section 400 of the Code of Civil Procedure, showing that the order was in fact so
sent by the clerk; and no such affidavit appears. The record is therefore silent where it ought
to speak. But the very purpose of the law in recognizing these presumptions is to enable the
court to sustain a prior judgment in the face of such an omission. If we were to hold that the
judgment in this case is void because the proper affidavit is not present in the file of papers
which we call the record, the result would be that in the future every title in the Islands resting
upon a judgment like that now before us would depend, for its continued security, upon the
presence of such affidavit among the papers and would be liable at any moment to be
destroyed by the disappearance of that piece of paper. We think that no court, with a proper
regard for the security of judicial proceedings and for the interests which have by law been
confided to the courts, would incline to favor such a conclusion. In our opinion the proper
course in a case of this kind is to hold that the legal presumption that the clerk performed his
duty still maintains notwithstanding the absence from the record of the proper proof of that
fact.
In this connection it is important to bear in mind that under the practice prevailing in the
Philippine Islands the word "record" is used in a loose and broad sense, as indicating the
collective mass of papers which contain the history of all the successive steps taken in a case
and which are finally deposited in the archives of the clerk's office as a memorial of the
litigation. It is a matter of general information that no judgment roll, or book of final record, is
commonly kept in our courts for the purpose of recording the pleadings and principal
proceedings in actions which have been terminated; and in particular, no such record is kept in
the Court of First Instance of the city of Manila. There is, indeed, a section of the Code of Civil
Procedure which directs that such a book of final record shall be kept; but this provision has,
as a matter of common knowledge, been generally ignored. The result is that in the present
case we do not have the assistance of the recitals of such a record to enable us to pass upon
the validity of this judgment and as already stated the question must be determined by
examining the papers contained in the entire file.
But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia
showing that upon April 4, 1908, he sent a notification through the mail addressed to the
defendant at Manila, Philippine Islands, should be accepted as affirmative proof that the clerk
of the court failed in his duty and that, instead of himself sending the requisite notice through
the mail, he relied upon Bernardo to send it for him. We do not think that this is by any means
a necessary inference. Of course if it had affirmatively appeared that the clerk himself had
attempted to comply with this order and had directed the notification to Manila when he
should have directed it to Amoy, this would be conclusive that he had failed to comply with the
exact terms of the order; but such is not this case. That the clerk of the attorneys for the
plaintiff erroneously sent a notification to the defendant at a mistaken address affords in our
opinion very slight basis for supposing that the clerk may not have sent notice to the right
address.
There is undoubtedly good authority to support the position that when the record states the
evidence or makes an averment with reference to a jurisdictional fact, it will not be presumed
that there was other or different evidence respecting the fact, or that the fact was otherwise
than stated. If, to give an illustration, it appears from the return of the officer that the
summons was served at a particular place or in a particular manner, it will not be presumed
that service was also made at another place or in a different manner; or if it appears that
service was made upon a person other than the defendant, it will not be presumed, in the
silence of the record, that it was made upon the defendant also (Galpin vs. Page, 18 Wall.,
350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we believe that these propositions
are entirely correct as applied to the case where the person making the return is the officer
who is by law required to make the return, we do not think that it is properly applicable where,
as in the present case, the affidavit was made by a person who, so far as the provisions of law
are concerned, was a mere intermeddler.
The last question of importance which we propose to consider is whether a motion in the
cause is admissible as a proceeding to obtain relief in such a case as this. If the motion
prevails the judgment of July 2, 1908, and all subsequent proceedings will be set aside, and
the litigation will be renewed, proceeding again from the date mentioned as if the progress of
the action had not been interrupted. The proponent of the motion does not ask the favor of
being permitted to interpose a defense. His purpose is merely to annul the effective judgment
of the court, to the end that the litigation may again resume its regular course.
There is only one section of the Code of Civil Procedure which expressly recognizes the
authority of a Court of First Instance to set aside a final judgment and permit a renewal of the
litigation in the same cause. This is as follows:
SEC. 113. Upon such terms as may be just the court may relieve a party or legal
representative from the judgment, order, or other proceeding taken against him
through his mistake, inadvertence, surprise, or excusable neglect; Provided, That
application thereof be made within a reasonable time, but in no case exceeding six
months after such judgment, order, or proceeding was taken.
An additional remedy by petition to the Supreme Court is supplied by section 513 of the same
Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as
follows:
When a judgment is rendered by a Court of First Instance upon default, and a party
thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable
negligence, and the Court of First Instance which rendered the judgment has finally
adjourned so that no adequate remedy exists in that court, the party so deprived of a
hearing may present his petition to the Supreme Court within sixty days after he first
learns of the rendition of such judgment, and not thereafter, setting forth the facts
and praying to have judgment set aside. . . .
It is evident that the proceeding contemplated in this section is intended to supplement the
remedy provided by section 113; and we believe the conclusion irresistible that there is no
other means recognized by law whereby a defeated party can, by a proceeding in the same
cause, procure a judgment to be set aside, with a view to the renewal of the litigation.
The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it
contains provisions describing with much fullness the various steps to be taken in the conduct
of such proceedings. To this end it defines with precision the method of beginning,
conducting, and concluding the civil action of whatever species; and by section 795 of the
same Code it is declared that the procedure in all civil action shall be in accordance with the
provisions of this Code. We are therefore of the opinion that the remedies prescribed in
sections 113 and 513 are exclusive of all others, so far as relates to the opening and
continuation of a litigation which has been once concluded.
The motion in the present case does not conform to the requirements of either of these
provisions; and the consequence is that in our opinion the action of the Court of First Instance
in dismissing the motion was proper.
If the question were admittedly one relating merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken the form of a motion in the cause, since it is
clear that, if based on such an error, the came to late for relief in the Court of First Instance.
But as we have already seen, the motion attacks the judgment of the court as void for want of
jurisdiction over the defendant. The idea underlying the motion therefore is that inasmuch as
the judgment is a nullity it can be attacked in any way and at any time. If the judgment were
in fact void upon its face, that is, if it were shown to be a nullity by virtue of its own recitals,
there might possibly be something in this. Where a judgment or judicial order is void in this
sense it may be said to be a lawless thing, which can be treated as an outlaw and slain at
sight, or ignored wherever and whenever it exhibits its head.
But the judgment in question is not void in any such sense. It is entirely regular in form, and
the alleged defect is one which is not apparent upon its face. It follows that even if the
judgment could be shown to be void for want of jurisdiction, or for lack of due process of law,
the party aggrieved thereby is bound to resort to some appropriate proceeding to obtain relief.
Under accepted principles of law and practice, long recognized in American courts, a proper
remedy in such case, after the time for appeal or review has passed, is for the aggrieved party
to bring an action to enjoin the judgment, if not already carried into effect; or if the property
has already been disposed of he may institute suit to recover it. In every situation of this
character an appropriate remedy is at hand; and if property has been taken without due
process, the law concedes due process to recover it. We accordingly old that, assuming the
judgment to have been void as alleged by the proponent of this motion, the proper remedy
was by an original proceeding and not by motion in the cause. As we have already seen our
Code of Civil Procedure defines the conditions under which relief against a judgment may be
productive of conclusion for this court to recognize such a proceeding as proper under
conditions different from those defined by law. Upon the point of procedure here involved, we
refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will
not lie to vacate a judgment after the lapse of the time limited by statute if the judgment is
not void on its face; and in all cases, after the lapse of the time limited by statute if the
judgment is not void on its face; and all cases, after the lapse of such time, when an attempt
is made to vacate the judgment by a proceeding in court for that purpose an action regularly
brought is preferable, and should be required. It will be noted taken verbatim from the
California Code (sec. 473).
The conclusions stated in this opinion indicate that the judgment appealed from is without
error, and the same is accordingly affirmed, with costs. So ordered.
El Banco Espanol-Filipino vs. Vicente Palanca G.R. No. L-11390, March 26, 1918
El Banco Espanol-Filipino vs. Palanca
G.R. No. L-11390, March 26, 1918
* JURISDICTION, HOW ACQUIRED: Jurisdiction over the property which is the subject of the
litigation may result either from a seizure of the property under legal process, whereby it is
brought into the actual custody of the law, or it may result from the institution of legal
proceedings wherein, under special provisions of law, the power of the court over the property
is recognized and made effective.
* The action to foreclose a mortgage is said to be a proceeding quasi in rem, by which is
expressed the idea that while it is not strictly speaking an action in rem yet it partakes of that
nature and is substantially such.
* DUE PROCESS IN FORECLOSURE PROCEEDINGS: Property is always assumed to be in the
possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its
condemnation and sale.
FACTS:
Engracio Palanca Tanquinyeng y Limquingco mortgaged various parcels of real property in
Manila to El Banco Espanol-Filipino. Afterwards, Engracio returned to China and there he died
on January 29, 1810 without returning again to the Philippines. The mortgagor then instituted
foreclosure proceeding but since defendant is a non-resident, it was necessary to give notice
by publication. The Clerk of Court was also directed to send copy of the summons to the
defendant’s last known address, which is in Amoy, China. It is not shown whether the Clerk
complied with this requirement. Nevertheless, after publication in a newspaper of the City of
Manila, the cause proceeded and judgment by default was rendered. The decision was likewise
published and afterwards sale by public auction was held with the bank as the highest bidder.
On August 7, 1908, this sale was confirmed by the court. However, about seven years after
the confirmation of this sale, a motion was made by Vicente Palanca, as administrator of the
estate of the original defendant, wherein the applicant requested the court to set aside the
order of default and the judgment, and to vacate all the proceedings subsequent thereto. The
basis of this application was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over the subject
of the action.
ISSUE:
* Whether or not the lower court acquired jurisdiction over the defendant and the subject
matter of the action the proceeding is to subject his interest therein to the obligation or lien burdening the
* Whether or not due process of law was observed property. All proceedings having for their sole object the sale or other disposition of the
property of the defendant, whether by attachment, foreclosure, or other form of remedy, are
in a general way thus designated. The judgment entered in these proceedings is conclusive
RULING: only between the parties.

On Jurisdiction
It is true that in proceedings of this character, if the defendant for whom publication is made
The word “jurisdiction” is used in several different, though related, senses since it may have appears, the action becomes as to him a personal action and is conducted as such. This,
reference (1) to the authority of the court to entertain a particular kind of action or to however, does not affect the proposition that where the defendant fails to appear the action is
administer a particular kind of relief, or it may refer to the power of the court over the parties, quasi in rem; and it should therefore be considered with reference to the principles governing
or (2) over the property which is the subject to the litigation. actions in rem.

The sovereign authority which organizes a court determines the nature and extent of its
powers in general and thus fixes its competency or jurisdiction with reference to the actions
which it may entertain and the relief it may grant.

How Jurisdiction is Acquired

Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted
over the person.

Jurisdiction over the property which is the subject of the litigation may result either from a
seizure of the property under legal process, whereby it is brought into the actual custody of
the law, or it may result from the institution of legal proceedings wherein, under special
provisions of law, the power of the court over the property is recognized and made effective.
In the latter case the property, though at all times within the potential power of the court, may
never be taken into actual custody at all. An illustration of the jurisdiction acquired by actual
seizure is found in attachment proceedings, where the property is seized at the beginning of
the action, or some subsequent stage of its progress, and held to abide the final event of the
litigation. An illustration of what we term potential jurisdiction over the res, is found in the
proceeding to register the title of land under our system for the registration of land. Here the
court, without taking actual physical control over the property assumes, at the instance of
some person claiming to be owner, to exercise a jurisdiction in rem over the property and to
adjudicate the title in favor of the petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be a

proceeding quasi in rem, by which is expressed the idea that while it is not strictly speaking an
action in rem yet it partakes of that nature and is substantially such. The expression "action in
rem" is, in its narrow application, used only with reference to certain proceedings in courts of
admiralty wherein the property alone is treated as responsible for the claim or obligation upon
which the proceedings are based. The action quasi rem differs from the true action in rem in
the circumstance that in the former an individual is named as defendant, and the purpose of