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SECONDDIVISION

[G.R.Nos.12157678.June16,2000]

BANCO DO BRASIL, petitioner, vs. THE COURT OF APPEALS, HON. ARSENIO M.

GONONG,andCESARS.URBINO,SR.,respondents.

DECISION

DELEON,JR.,J.:

Before us is a petition for review on certiorari of the Decision1 [Penned by Associate Justice Jainal D. Rasul and
concurredinbyAssociateJusticesSegundinoG.ChuaandConsueloYnaresSantiago,nowAssociateJusticeoftheSupremeCourt,in
CAG.R.S.P.Nos.24669,28387&29317,Rollo,pp.3347.] andtheResolution2[Id.,pp.4953.] oftheCourtofAppeals3
[FormerSpecialEighthDivision.] datedJuly19,1993andAugust15,1995,respectively,whichreinstatedtheentire
Decision4[PennedbyJudgeArsenioM.Gonong,CivilCaseNo.8951451,Records,Vol.2,pp.517528.] datedFebruary18,
1991oftheRegionalTrialCourtofManila,Branch8,holding,amongothers,petitionerBancodoBrasilliable
to privaterespondent Cesar Urbino, Sr. for damages amounting to $300,000.00.5 [The Appellate Court erroneously
declaredinitsdecisionthattheamountofP300,000.00wasawardedbythetrialcourt,Rollo,p.36.]

Attheoutset,letusstatethatthiscaseshouldhavebeenconsolidatedwiththerecentlydecidedcaseofVlason
Enterprises Corporation v. Court of Appeals and Duraproof Services, represented by its General Manager,
CesarUrbinoSr.6[G.R.Nos.12166264,July6,1999,ThirdDivision,pennedbyAssociateJusticeArtemioV.Panganibanand
concurred in by Associate Justices Jose C. Vitug, Fidel P. Purisima, and Minerva P. GonzagaReyes.], for these two (2) cases
involved the same material antecedents, though the main issue proffered in the present petition vary with the
Vlasoncase.

Thematerialantecedents,asquotedfromtheVlason7[DecisioninG.R.Nos.12166264,pp.313.]case,are:

PoroPointShippingServices,thenactingasthelocalagentofOmegaSeaTransportCompanyof
Honduras & Panama, a Panamanian Company (hereafter referred to as Omega), requested
permissionforitsvesselM/VStarAce,whichhadenginetrouble,tounloaditscargoandtostoreit
at the Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting
transhipmenttoHongkong.TherequestwasapprovedbytheBureauofCustoms.8[Records,Vol.1,pp.
2731.]Despitetheapproval,thecustomspersonnelboardedthevesselwhenitdockedonJanuary7,
1989,onsuspicionthatitwasthehijackedM/VSilverMedownedbyMedLinePhilippinesCo.,
and that its cargo would be smuggled into the country.9 [Records, Vol. 1, p. 32.] Thedistrictcustoms
collector seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code. A
noticeofhearingofSFLUSeizureIdentificationNo.389wasservedonitsconsignee,Singkong
TradingCo.ofHongkong,anditsshipper,DusitInternationalCo.,Ltd.ofThailand.

Whileseizureproceedingswereongoing,LaUnionwashitbythreetyphoons,andthevesselran
agroundandwasabandoned.OnJune8,1989,itsauthorizedrepresentative,FrankCadacio,entered
into salvage agreement with private respondent to secure and repair the vessel at the agreed
consideration of $1 million and "fifty percent (50%) [of] the cargo after all expenses, cost and
taxes."10[Records,Vol.1,pp.3639.]

Findingthatnofraudwascommitted,theDistrictCollectorofCustoms,AurelioM.Quiray,lifted
thewarrantofseizureonJuly1989.11[DecisiondatedJuly17,1989,inSFLUSeizureIdentificationNo.389
Records,Vol.1,pp.5468.]However,inaSecondIndorsementdatedNovember11,1989,thenCustoms
CommissionerSalvadorM.MisondeclinedtoissueaclearanceforQuiraysDecisioninstead,he
forfeitedthevesselanditscargoinaccordancewithSection2530oftheTariffandCustomsCode.12
[2ndIndorsementdatedNovember1989Records,Vol.1,pp.7071.]Accordingly,actingDistrictCollectorof

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CustomsJohnS.SyissuedaDecisiondecreeingtheforfeitureandthesaleofthecargoinfavorof
thegovernment.13[DecisiondatedNovember17,1989,Records,Vol.1,pp.7486.]

Toenforceitspreferredsalvorslien,hereinPrivateRespondentDuraproofServicesfiledwiththe
RegionalTrialCourtofManilaaPetitionforCertiorari, Prohibition and Mandamus14 [Docketed as
Civil Case No. 8951451 and raffled to Branch 8 Records, Vol. 1, pp. 126.] assailing the actions of
Commissioner Mison and District Collector Sy. Also impleaded as respondents were PPA
RepresentativeSilverioMangaoangandMedLinePhilippines,Inc.

OnJanuary10,1989,privaterespondentamendeditsPetition15[Ibid.,pp.122145.] toincludeformer
District Collector Quiray PPA Port Manager Adolfo Ll. Amor, Jr. x Vlason Enterprises as
represented by its president, Vicente Angliongto Singkong Trading Company as represented by
Atty.EddieTamondongBancoDuBrasilDusitInternationalCo.ThaiNanEnterprisesLtd.,and
ThaiUnitedTradingCo.,Ltd.16[AmendedPetition,id.,pp.122&128129.]xxx

Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med Line
Philippines:Anglionto(throughhissecretary,BettyBebero),Atty.TamondongandCommissioner
Mison.17[SheriffsReturn,id.,pp.160164&171.] Uponmotionoftheprivaterespondent,thetrialcourt
allowedsummonsbypublicationtobeservedupondefendantswhowerenotresidentsandhadno
directrepresentativeinthecountry.18[Id.,pp.153156.]

OnJanuary29,1990,privaterespondentmovedtodeclarerespondentsindefault,butthetrialcourt
deniedthemotioninitsFebruary23,1990Order19[Id.,pp.214215.],becauseMangaoangandAmor
had jointly filed a Motion to Dismiss, while Mison and Med Line had moved separately for an
extension to file a similar motion.20 [Eventually, both separately filed their motions to dismiss.] Later it
rendered an Order dated July 2, 1990, giving due course to the motions to dismiss filed by
Mangaoang and Amor on the ground of litis pendentia, and by the commissioner and district
collector of customs on the ground of lack of jurisdiction.21 [Records, Vol. 1, pp. 325326.] In another
Order, the trial court dismissed the action against Med Line Philippines on the ground of litis
pendentia.22[OrderdatedSeptember10,1990Records,Vol.2,p.359.]

On two other occasions, private respondent again moved to declare the following in default:
[Vlason], Quiray, Sy and Mison on March 26, 199023 [Records, Vol. 1, pp. 237238.] and Banco [do]
Bra[s]il,DusitInternationalCo.,Inc.,ThaiNanEnterprisesLtd.andThaiUnitedTradingCo.,Ltd.
onAugust24,1990.24[Ibid.,pp.351352.]Thereisnorecord,however,thatthetrialcourtactedupon
themotions.OnSeptember18,1990,[privaterespondent]filedanotherMotionforleavetoamend
thepetition,25[Records,Vol.2,pp.370371.]allegingthatitscounselfailedtoinclude"necessaryand/or
indispensable parties": Omega represented by Cadacio and M/V Star Ace represented by Capt.
NahonRada,reliefcaptain.Asidefromimpleadingtheseadditionalrespondents,privaterespondent
also alleged in the Second (actually, third) Amended Petition26 [Motion for Leave to Admit Second
Amended Petition and Supplemental Petition, ibid., p. 370 Second Amended Petition with Supplemental Petition,
ibid., pp. 372398.] that the owners of the vessel intended to transfer and alienate their rights and
interestoverthevesselanditscargo,tothedetrimentoftheprivaterespondent.

The trial court granted leave to private respondent to amend its Petition, but only to exclude the
customscommissionerandthedistrictcollector.27[OrderdatedSeptember28,1990,Records,Vol.2,p.407.]
Instead,privaterespondentfiledthe"SecondAmendedPetitionwithSupplementalPetition"against
SingkongTradingCompanyandOmegaandM/VStarAce,28[Records,Vol.2,pp.414415.] towhich
CadacioandRadafiledaJointAnswer.29[Ibid.,pp.425288.]

DeclaredindefaultinanOrderissuedbythetrialcourtonJanuary23,1991,werethefollowing:
Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega.30 [Id., p. 506.] Private
respondent filed, and the trial court granted, an ex parte Motion to present evidence against the
defaulting respondents.31 [Order dated December 10, 1990, id., p. 492.] Only private respondent, Atty.
Tamondong,CommissionerMison,OmegaandM/VStarAceappearedinthenextpretrialhearing
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thus, the trial court declared the other respondents in default and allowed private respondent to
presentevidenceagainstthem.32[OrderdatedJanuary23,1991,Records,Vol.2,p.506.Therecords(pp.493
495),however,showthatonlyDuraproofService,SingkongTradingandM/VStarAcewereservedsummons.]Cesar
Urbino, general manager of private respondent, testified and adduced evidence against the other
respondents,xxx.33[RTCDecision,p.7Rollo,p.92pennedbyJudgeArsenioM.Gonong.]

On December 29, 1990, private respondent and Rada, representing Omega, entered into a
Memorandum of Agreement stipulating that Rada would write and notify Omega regarding the
demandforsalvagefeesofprivaterespondentandthatifRadadidnotreceiveanyinstructionfrom
hisprincipal,hewouldassignthevesselinfavorofthesalvor.34[MemorandumofAgreement,id.,pp.511
512.]

OnFebruary18,1991,thetrialcourtdisposedasfollows:

"WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and

evidence adduced, both testimonial and documentary, the Court is convinced, that, indeed,
defendants/respondentsareliableto[privaterespondent]intheamountasprayedforinthe
petitionforwhichitrendersjudgmentasfollows:

1.RespondentM/VStarAce,representedbyCapt.NahumRada,[r]elief[c]aptainofthevesseland
Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is ordered to refrain from
alienatingor[transferring]thevesselM/VStarAcetoanythirdparties

2.SingkongTradingCompanytopaythefollowing:

a.Taxesduethegovernment

b.Salvagefeesonthevesselintheamountof$1,000,000.00basedonxxxLloydsStandardFormof
SalvageAgreement

c.Preservation,securingandguardingfeesonthevesselintheamountof$225,000.00

d.MaintenancefeesintheamountofP2,685,000.00

e.SalariesofthecrewfromAugust16,1989toDecember1989intheamountof$43,000.00and
unpaidsalariesfromJanuary1990uptothepresent

f.AttorneysfeesintheamountofP656,000.00

3.[Vlason]Enterprisestopay[privaterespondent]intheamountofP3,000,000.00fordamages

4.Banco[Du]Brasiltopay[privaterespondent]intheamountof$300,000.00indamages35[Italics
supplied.]andfinally,

5.Costsof[s]uit."

Subsequently,uponthemotionofOmega,SingkongTradingCo.,andprivaterespondent,thetrial
courtapprovedaCompromiseAgreement36[Records,Vol.2,pp.535538.]amongthemovants,reducing
by20percenttheamountsadjudged.Fortheirpart,respondentsmovantsagreednottoappealthe
Decision.37[OrderdatedMarch6,1991,ibid.,pp.539541.Privaterespondententeredintotwoseparatecompromise
agreementswithSingkongTradingCo.(id.,pp.535536)andanotherwithOmega(id.,pp.537538).Bothagreements
weredatedMarch4,1991.]OnMarch8,1991,privaterespondentmovedfortheexecutionofjudgment,
claiming that the trial court Decision had already become final and executory. The Motion was
granted and a Writ of Execution was issued. To satisfy the Decision, Sheriffs Jorge Victorino,
AmadoSevillaandDionisioCamagonweredeputizedonMarch13,1991tolevyandtosellon
executionthedefendantsvesselandpersonalproperty.
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xxx

OnMarch18,1991,theBureauofCustomsalsofiledanexparteMotiontorecalltheexecution,
andtoquashthenoticeoflevyandthesaleonexecution.DespitethisMotion,theauctionsalewas
conducted on March 21, 1991 by Sheriff Camagon, with private respondent submitting the
winningbid.Thetrialcourtorderedthedeputysheriffstoceaseanddesistfromimplementingthe
Writ of Execution and from levying on the personal property of the defendants. Nevertheless,
SheriffCamagonissuedthecorrespondingCertificateofSaleonMarch27,1991.

On April 10, 1991, petitioner Banco do Brasil filed, by special appearance, an Urgent Motion to Vacate
JudgementandtoDismissCase38[Rollo,pp.6773.]onthegroundthattheFebruary18,1991Decisionofthetrial
courtisvoidwithrespecttoitforhavingbeenrenderedwithoutvalidlyacquiringjurisdictionoverthepersonof
Banco do Brasil. Petitioner subsequently amended its petition39 [Rollo, pp. 7480.] to specifically aver that its
specialappearanceissolelyforthepurposeofquestioningtheCourtsexerciseofpersonaljurisdiction.

OnMay20,1991,thetrialcourtissuedanOrder40[Rollo,pp.8182.]actingfavorablyonpetitionersmotionandset
asideasagainstpetitionerthedecisiondatedFebruary18,1991forhavingbeenrenderedwithoutjurisdiction
over Banco do Brasils person. Private respondent sought reconsideration41 [Records, Vol. 3, pp. 103105.] of the
OrderdatedMay20,1991.However,thetrialcourtinanOrder42[Rollo,p.83.] datedJune21,1991deniedsaid
motion.

Meanwhile,acertioraripetition43[DocketedasCAG.R.SPNo.24669.]wasfiledbyprivaterespondentbeforepublic
respondentCourtofAppealsseekingtonullifytheceaseanddesistOrderdatedApril5,1991issuedbyJudge
Arsenio M. Gonong. Two (2) more separate petitions for certiorari were subsequently filed by private
respondent.Thesecondpetition44[DocketedasCAG.R.SPNo.28387.] soughttonullifytheOrder45[PennedbyJudge
BernardoP.Pardo,thenExecutiveJudge,andnowAssociateJusticeoftheSupremeCourt.] datedJune26,1992settingaside
the Deputy Sheriffs return dated April 1, 1991 as well as the certificate of sale issued by Deputy Sheriff
Camagon. The third petition46 [Docketed as CAG.R. SP No. 29317.] sought to nullify the Order dated October 5,
1992oftheCourtofTaxAppealsdirectingtheCommissionerofCustomstoplaceBureauofCustomsandPNP
officers and guards to secure the M/V Star Ace and its cargoes, make inventory of the goods stored in the
premisesasindicatedtobelongtotheprivaterespondent.LikewisechallengedwastheOrderdatedAugust17,
1992authorizingthesaleofM/VStarAceanditscargoes.

Thesethree(3)petitionswereconsolidatedandonJuly19,1993,theappellatecourtrendereditsDecision47[See
Note1,supra.]grantingprivaterespondentspetitions,therebynullifyingandsettingasidethedisputedordersand
effectively "giving way to the entire [decision dated February 18, 1991 of the x x x Regional Trial Court of
Manila, Branch 8, in Civil Case No. 8951451 which remains valid, final and executory, if not yet wholly
executed."48[Rollo,p.46.]

Private respondent Urbino, Vlason Enterprises and petitioner Banco do Brasil filed separate motions for
reconsideration. For its part, petitioner Banco do Brasil sought reconsideration, insofar as its liability for
damages, on the ground that there was no valid service of summons as service was on the wrong party the
ambassador of Brazil. Hence, it argued, the trial court did not acquire jurisdiction over petitioner Banco do
Brasil.49[Rollo,pp.107.]Nonetheless,theappellatecourtdeniedthemotionsforreconsiderationinitsResolution50
[SeeNote2,supra.]datedAugust15,1995.

Hence,theinstantpetition.

PetitionerBancodoBrasiltakesexceptiontotheappellatecourtsdeclarationthatthesuitbelowisinrem,notin
personam,51 [Rollo, pp. 1921.] thus, service of summons by publication was sufficient for the court to acquire
jurisdictionoverthepersonofpetitionerBancodoBrasil,andtherebyliabletoprivaterespondentCesarUrbino
fordamagesclaimed,amountingto$300,000.00.PetitionerfurtherchallengesthefindingthattheFebruary18,
1991decisionofthetrialcourtwasalreadyfinalandthus,cannotbemodifiedorassailed.52[Rollo,p.2223.]

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Petitioneraversthattheactionfiledagainstitisanactionfordamages,assuchitisanactioninpersonamwhich
requires personal service of summons be made upon it for the court to acquire jurisdiction over it. However,
inasmuch as petitioner Banco do Brasil is a nonresident foreign corporation, not engaged in business in the
Philippines,unlessithaspropertylocatedinthePhilippineswhichmaybeattachedtoconverttheactionintoan
actioninrem,thecourtcannotacquirejurisdictionoveritinrespectofanactioninpersonam.

Thepetitionbearsmerit,thusthesameshouldbeasitisherebygranted.

First. When the defendant is a nonresident and he is not found in the country, summons may be served
extraterritoriallyinaccordancewithRule14,Section1753[Section17.ExtraterritorialserviceWhenthedefendantdoesnot
resideandisnotfoundinthePhilippinesandtheactionaffectsthepersonalstatusoftheplaintifforrelatesto,orthesubjectofwhich,
is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which relief
demandedconsists,whollyorinpart,inexcludingthedefendantfromanyinteresttherein,orthepropertyofthedefendanthasbeen
attachedinthePhilippines,servicemay,byleaveofcourt,beeffectedoutofthePhilippinesbypersonalserviceasundersection7or
bypublicationinanewspaperofgeneralcirculationinsuchplacesandforsuchtimeasthecourtmayorder,inwhichcaseacopyof
thesummonsandorderofthecourtshallbesentbyregisteredmailtothelastknownaddressofthedefendant,orinanyothermanner
thecourtmaydeemsufficient.Anyordergrantingsuchleaveshallspecifyareasonabletime,whichshallnotbelessthansixty(60)
daysafternotice,withinwhichthedefendantmustanswer.]oftheRulesofCourt.Underthisprovision,thereareonlyfour
(4) instances when extraterritorial service of summons is proper, namely: "(1) when the action affects the
personal status of the plaintiffs (2) when the action relates to, or the subject of which is property, within the
Philippines,inwhichthedefendantclaimsalienorinterest,actualorcontingent(3)whenthereliefdemanded
insuchactionconsists,whollyorinpart,inexcludingthedefendantfromanyinterestinpropertylocatedinthe
Philippinesand(4)whenthedefendantnonresidentspropertyhasbeenattachedwithinthePhilippines."54[Ibid.,
now Sec. 15 of the 1997 Rules of Civil Procedure.] In these instances, service of summons may be effected by (a)
personalserviceoutofthecountry,withleaveofcourt(b)publication,alsowithleaveofcourtor(c)anyother
mannerthecourtmaydeemsufficient.55[Ibid..]

Clear from the foregoing, extrajudicial service of summons apply only where the action is in rem, an action
againstthethingitselfinsteadofagainsttheperson,orinanactionquasiinrem,whereanindividualisnamed
as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or loan
burdeningtheproperty.Thisissoinasmuchas,ininremandquasiinremactions,jurisdictionovertheperson
of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires
jurisdictionovertheres.56[AsiavestLimitedv.CourtofAppeals,296SCRA539,552554[1998]Valmontev.CourtofAppeals,
252SCRA92,99102[1996].]

However,wheretheactionisinpersonam,onebroughtagainstapersononthebasisofhispersonalliability,
jurisdictionoverthepersonofthedefendantisnecessaryforthecourttovalidlytryanddecidethecase.When
thedefendantisanonresident,personalserviceofsummonswithinthestateisessentialtotheacquisitionof
jurisdictionovertheperson.57[TheDialCorporationv.Soriano,161SCRA737,743[1988]citingBoudardv.Tait,67Phil170,
174[1939].]Thiscannotbedone,however,ifthedefendantisnotphysicallypresentinthecountry,andthus,the
court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against
him.58[AsiavestLimitedv.CourtofAppeals,supra.at554.]

In the instant case, private respondents suit against petitioner is premised on petitioners being one of the
claimants of the subject vessel M/V Star Ace.59 [Records, Vol. 1, pp. 128129.] Thus, it can be said that private
respondent initially sought only to exclude petitioner from claiming interest over the subject vessel M/V Star
Ace. However, private respondent testified during the presentation of evidence that, for being a nuisance
defendant,petitionercausedirreparabledamagetoprivaterespondentintheamountof$300,000.00.60[Records,
Vol.2,p.567.] Therefore,whiletheactionisinrem,byclaimingdamages,thereliefdemandedwentbeyondthe
resandsoughtarelieftotallyalientotheaction.

Itmustbestressedthatanyreliefgrantedinremorquasiinremactionsmustbeconfinedtotheres,andthe
courtcannotlawfullyrenderapersonaljudgmentagainstthedefendant.61[Villarealv.CourtofAppeals,295SCRA511,
525[1998].]Clearly,thepublicationofsummonseffectedbyprivaterespondentisinvalidandineffectiveforthe
trial court to acquire jurisdiction over the person of petitioner, since by seeking to recover damages from

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petitionerfortheallegedcommissionofaninjurytohispersonorproperty62[TheDialCorporationv.Soriano,supra.at
742 citing Hernandez v. Development Bank of the Phil., 71 SCRA 290, 292293 [1976].] caused by petitioners being a
nuisancedefendant,privaterespondentsactionbecameinpersonam.Bearinginmindtheinpersonamnatureof
the action, personal or, if not possible, substituted service of summons on petitioner, and not extraterritorial
service, is necessary to confer jurisdiction over the person of petitioner and validly hold it liable to private
respondentfordamages.Thus,thetrialcourthadnojurisdictiontoawarddamagesamountingto$300,000.00in
favorofprivaterespondentandasagainsthereinpetitioner.

Second.WesettledtheissueoffinalityofthetrialcourtsdecisiondatedFebruary18,1991intheVlasoncase,
wherein we stated that, considering the admiralty case involved multiple defendants, "each defendant had a
different period within which to appeal, depending on the date of receipt of decision."63 [Decision in G.R. Nos.
12166264,p.27.]Onlyuponthelapseofthereglementaryperiodtoappeal,withnoappealperfectedwithinsuch
period,doesthedecisionbecomefinalandexecutory.64[Ibid.]

Inthecaseofpetitioner,itsMotiontoVacateJudgmentandtoDismissCasewasfiledonApril10,1991,only
six(6)daysafteritlearnedoftheexistenceofthecaseuponbeinginformedbytheEmbassyoftheFederative
Republic of Brazil in the Philippines, on April 4, 1991, of the February 18, 1991 decision.65 [Rollo, pp. 6780.]
Thus,intheabsenceofanyevidenceonthedateofreceiptofdecision,otherthantheallegedApril4,1991date
whenpetitionerlearnedofthedecision,theFebruary18,1991decisionofthetrialcourtcannotbesaidtohave
attainedfinalityasregardsthepetitioner.

WHEREFORE, the subject petition is hereby GRANTED. The Decision and the Resolution of the Court of
AppealsdatedJuly19,1993andAugust15,1995,respectively,inCAG.R.SPNos.24669,28387and29317
areherebyREVERSEDandSETASIDEinsofarastheyaffectpetitionerBancodoBrasil.TheOrderdatedMay
20,1991oftheRegionalTrialCourtofManila,Branch8inCivilCaseNo.8951451isREINSTATED.

SOORDERED.

Bellosillo,(Chairman),Mendoza,Quisumbing,andBuena,JJ.,concur.

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